4:10pm: Banks struggle on credit rating downgrade fears
The Dow closed Tuesday down 361 points, 1%, at 34,946, the Nasdaq Composite tumbled 157 points, 1.1%, to 13,631 and the S&P 500 slipped 52 points, 1.2%, to 4,438. The small-cap Russell 2000 declined 24 points, 1.2%, to 1,897.
The DJIA snapped a three-session winning streak after big bank stocks fell after rating agency Fitch warned it may downgrade the credit rating of dozens institutions. JPMorgan Chase, Wells Fargo and Bank of America shares each lost more than 2%.
Investors, as ever, also have one eye on the Fed.
“Right now it seems like things are quite stable,” Minneapolis Federal Reserve President Neel Kashkari said in a Tuesday town hall meeting. “The risk is that if inflation is not completely under control, and that we have to raise rates further from here, to bring it down, that they might face more losses than they currently face today. And these pressures could flare up again in the future.”
12:05pm: Stocks struggle on strong retail sales and weaker China industrial data
US stocks were lower in noon trading after industrial production in China rose less than expected and domestic retail sales for July exceeded expectations.
At midday, the Dow fell 242 points to 35,067 while the S&P 500 eased 29 points at 4,461 and the tech-heavy Nasdaq slipped 68 points to 13,721.
“The China trade this year has been about trying to front run government policy and government stimulus, [but] at some point, you just stop believing that policymakers will succeed at boosting economic growth,” Horizon Investments chief investment officer Scott Ladner said.
Notable movers included shares of DR Horton Inc, which rose more than 2% after a securities filing revealed that Warren Buffett’s Berkshire Hathaway has acquired more than $700 million worth of the company’s stock.
09:40am: Home Depot and Nvidia buck the weaker market
US stocks opened lower as concerns over a slowdown in economic growth in China weighed on global markets.
Shortly after the opening bell, the Dow Jones Industrial Average was down 154.93 points, 0.4%, at 35,152.70, the S&P 500 was down 18.34 points, 0.4%, at 4,471.38 and the Nasdaq Composite was down 27.52 points, 0.2%, at 13,760.81.
There were signs that consumer spending was remaining resilient in the face of interest rates rises as July’s retail sales figures showed a 0.7% month-on-month rise, ahead of forecasts for growth of 0.4%. Online sales were given a boost by Amazon Prime Day.
Andrew Hunter at Capital Economics said: “The 0.7% m/m jump in retail sales in July suggests that tighter monetary policy is still having remarkably little impact on real economic activity, but that isn’t necessarily a problem for the Fed when the evidence continues to suggest that inflationary pressures are fading rapidly.”
“Admittedly, there was some evidence of renewed weakness in spending on consumer durables, with motor vehicle sales falling by 0.3% m/m, furniture and homeware sales down by 1.8% and spending at electronics and appliance stores falling by 1.3%.”
“But that was more than offset by broad based strength in other sectors, led by a 1.5% rise in sales of sporting goods and a 1.9% gain for online retailers,” he added.
Sticking to the retail theme and Home Depot Inc (NYSE:HD) rose 2.2% after reporting better-than-expected second quarter sales and earnings.
However, sales were still 2% lower than the year before and the retailer said consumers were still wary picking up big-ticket items.
Nvidia rose 3.0% after UBS raised its price target to $540 from $475 and reiterated a buy rating.
The broker notes that expectations are already sky-high but advises investors to stick with it despite the recent pullback in the stock over the past month.
08:50am: US retail sales boosted by Amazon Prime day
Consumer spending held up well in July latest figures showed,with retail sales turning in a stronger than expected showing for the month, the Commerce Department reported Tuesday.
The advanced retail sales report showed a seasonally adjusted increase of 0.7% for the month, better than the 0.4% FXStreet compiled consensus. Excluding autos, sales rose a robust 1%, also against a 0.4% forecast.
July’s numbers were boosted by a 1.9% jump in spending at online retailers, boosted by Amazon Prime day, while sporting goods and related stores increased 1.5% and food service and drinking places rose 1.4%.
On the downside, furniture sales slumped 1.8% and electronics and appliance stores reported a 1.3% drop. Gas station sales rose just 0.4% on the month despite rising prices at the pump.
US stock futures remain firmly in negative after the report with Dow futures now down 0.7% although futures for the Nasdaq have improved marginally, now down 0.6%.
07:00am: China's woes set to trigger falls on Wall Street
US markets are expected to nurse heavy losses when trading starts on Tuesday after fresh data from China showed growth in the world's second largest economy was fading.
In pre-market trading, futures for the Dow Jones Industrial Average were 0.6% lower, while those for the S&P 500 fell 0.6%, and contracts for the Nasdaq 100 futures were down 0.7%.
China’s central bank unexpectedly cut the rate on its one-year loans in a move to shore up the country’s stagnant economy as figures released by the National Bureau of Statistics, showed retail sales, industrial output and investment all growing at a slower than expected pace.
The figures come on top of a raft of weak indicators from last week.
Duncan Wrigley, chief China economist, at Pantheom Macroeconomics noted “today’s data add to evidence that China’s economy is stalling, despite the gradual ramp up of policy support.”
He felt the central bank’s move was an “an attempt to shore up confidence, both in the financial markets and the broader economy.”
But he remains sceptical “that interest rate cuts alone will turn around economic growth, given poor household and business sentiment.”
In the US, the resilience, or otherwise of the consumer will be in focus with retail sales figures released at 0830 EST.
Figures for July are expected to show retail sales rose 0.4%, up from June’s 0.2% increase, according to a FXStreet compiled consensus.
Ahead of that Home Depot released better-than-expected second quarter results with both sales and earnings ahead of expectations although it did caution consumers remain wary of big ticket purchases. Sales edged lower in pre-market trading reflecting the weaker market.