4:18pm: Investors hope weaker-than-expected economic data means no more rate hikes
The Dow closed Wednesday up 38 points, 0.1%, at 34,890, the Nasdaq Composite added 76 points, 0.5%, to 14,019 and the S&P 500 improved 17 points, 0.4%, to 4,515. The small-cap Russell 2000 index gained 8 points, 0.4%, to 1,903.
The S&P 500 clinched its fourth-straight winning session, narrowing its August loss down to 1.6%.
“Traders and investors alike want to see ‘follow through’ in today’s market action, helping to confirm that the uptick in market performance is a more viable move as the market heads into September,” said Quincy Krosby, chief global strategist at LPL Financial.
Investors seemed to treat softer-than-expected ADP data as good news, likely reasoning that it makes the Fed less inclined to hike interest rates again at its next meeting.
12:00pm: Tech stocks lead the way on hopes rates have peaked
US stocks advanced once more led by tech stocks as weak economic data added to hopes that interest rates may have peaked.
At midday, the Dow Jones Industrial Average was 0.15% at 34,905.51, the S&P 500 was 0.4%, at 4,514.85 and the Nasdaq Composite was up 0.6%, at 14,021.20.
Chris Beauchamp at online trading platform IG said: "Yesterday’s solid gains have given way to a more muted atmosphere today, but the sense of a slowing US jobs picture has been given a boost by the ADP report’s miss this afternoon."
"With GDP data also softer there has been a further strengthening of hopes that the Fed won’t be too keen to hike again this year, though any cuts in rates are still far off.”
Jack Daniel’s maker Brown-Forman slipped 4.1% after missing Wall Street expectations for its first quarter of fiscal 2024, plagued by lagging whiskey sales, supply challenges and a significant inventory rebuild.
Net sales for whisky products decreased by 1%, led by the brands Woodford Reserve and Gentleman Jack, although demand for tequila rose.
9:45am: Steady start as investors digest economic updates
US stocks made cautious early progress on Wednesday as investors mulled weaker-than-expected jobs and GDP figures.
Shortly after the opening bell, the Dow Jones Industrial Average was up 74.70 points, 0.2%, at 34,927.37, the S&P 500 was up 5.46 points, 0.1%, at 4,503.09 and the Nasdaq Composite was up 8.38 points, 0.1%, at 13,952.13.
The weaker data fuels hopes that US interest rates may have peaked as investors continue to look for an economic soft landing.
Ian Shepherdson at Pantheon Macroeconomics noted the ADP payroll figures are in line with the recent trend in private payrolls although he believes the ADP number "is not a reliable indicator."
HP Inc shares tumbled 11.6% after last night’s quarterly earnings report revealed sluggish demand for PCs and printers.
Quarterly financial metrics showed revenue of $13.2 billion, down 10% year-over-year and short of the $13.4 billion expected by analysts. Adjusted earnings were $0.86 per share, in line with Street expectations.
8:40am: Jobs growth slows, GDP revised down
Job growth in the US private sector slowed significantly in August, according to the ADP National Employment Report.
Private sector employment increased by 177,000 jobs in August, below the FXStreet consensus of 195,000 jobs, and well below July's figure of 371,000 jobs.
"This month's numbers are consistent with the pace of job creation before the pandemic. After two years of exceptional gains tied to the recovery, we're moving toward more sustainable growth in pay and employment as the economic effects of the pandemic recede," said Nela Richardson, chief economist at ADP.
The slowdown was driven heavily by leisure and hospitality where job creation by hotels, restaurants and other employers in the sector fell to 30,000 in August after months of strong hiring.
Meanwhile, separate figures showed real gross domestic product (GDP) increased at an annual rate of 2.1% in the second quarter of 2023, according to the “second” estimate.This was below the 2.4% reported in the "first estimate" and less than Street expectations of remaining unchanged.
US GDP Annualised (Q/Q) Q2 S: 2.1% (est 2.4%; prev 2.4%)
- US GDP Price Index Q2 S: 2.0% (est 2.2%; prev 2.2%)
- US Core PCE Price Index (Q/Q) Q2 S: 3.7% (est 3.8%; prev 3.8%)
- US Personal Consumption Q2 S: 1.7% (est 1.8%; prev 1.6%)
— LiveSquawk (@LiveSquawk) August 30, 2023
In the first quarter, real GDP increased 2.0%.
7:00am: Wall Street seen little changed ahead of jobs and GDP figures
US futures are pointing to a flat start on Wall Street, although data released ahead of the opening bell should provide direction.
In pre-market trading, futures for the Dow Jones Industrial Average were little changed, while those for the S&P 500 eased 0.1%, and contracts for the Nasdaq 100 futures were down 0.2%.
In a data heavy week, ADP will release its US employment report for July, which will give insight into the labour market before the official government figures on Friday.
Private payrolls are expected to have added 195,000 jobs in August, a slowdown compared with the 324,000 jobs added in July.
On Tuesday, data from the US Bureau of Labor Statistics showed there were 8.827 million job vacancies in July, down from 9.165 million in June, and below a FXStreet-cited consensus of 9.465 million.
It was the smallest number of openings since March 2021.
Deutsche Bank’s Jim Reid said the US figures “put an abrupt stop to the growing narrative that the Fed would still deliver another rate hike in the current cycle.”
“Indeed, the chance of another rate hike by November fell from 71% immediately before the JOLTS report to 51% by yesterday’s close,” he pointed out.
Elsewhere, there will be a health check on the US economy with a second quarter GDP reading.
Economists expect the second estimate for second-quarter economic growth to come in at 2.4%, unchanged from the advance figure, and up from a 2% rise in the first quarter.
In company, Salesforce.com reports numbers after the closing bell, while Jack Daniel’s maker Brown Forman is expected to report earnings before the open.
Stocks to look out for include HP Inc (NYSE:HPQ) where shares are down around 9% in pre-market, after last night’s quarterly earnings report revealed sluggish demand for PCs and printers.
6.00am: Early premarket movers
HP shares were down around 9%, at $28.57, after last night’s quarterly earnings report revealed sluggish demand for PCs and printers.
Quarterly financial metrics showed revenue of $13.2 billion, down 10% year-over-year and short of the $13.4 billion expected by analysts. Adjusted earnings were $0.86 per share, in line with Street expectations.
Separately, the business-to-business spin-off Hewlett Packard Enterprise Co (NYSE:HPE) slipped just 1.1% lower, to $16.65, despite a broadly positive albeit not spectacular financial performance in its third quarter. Quarterly revenue rose 1% to $7 billion, while earnings increased to $0.35 per share from $0.32 a year earlier – on an adjusted basis it was marked at $0.49, beating forecasts for $0.47.
NVIDIA Corporation (NASDAQ:NVDA) stock was trading just below the chipmaker’s all-time high in Wednesday’s early deals, after the announcement of an AI partnership with Google triggered a strong close to yesterday’s session. In premarket deals, Nvidia was priced at $484.46 – after gaining 4% to set a ‘record close’ on Tuesday. The intraday high was set last week at $502.66, following its bumper quarterly earnings.
Calvin Klein and Tommy Hilfiger parent PVH Corp. (NYSE:PVH) saw its shares rise 2.2%, at $82.60 in premarket deals, on better-than-expected second-quarter earnings and sales. PVH posted revenue of $2.21 billion, up 4% year-over-year and above Street expectations of $2.19 billion.
Both the Calvin Klein and Tommy Hilfiger brands saw sales growth, the company said. Adjusted earnings came in at $1.98 per share, beating analyst expectations of $1.76.
Box Inc (NYSE:BOX) shares were down 8.4%, tumbling to $28.21 in early deals, after the cloud content management firm gave investors weaker-than-expected full-year guidance.
The company, after Tuesday's market close, posted adjusted earnings of $0.36 in its second quarter, just above Street expectations of $0.35 per share. Revenue amounted to $261.4 million, up 6% year-over-year, in line with expectations of $261 million. Full-year revenue however was projected between $1.04 billion and $1.044 billion, beneath analyst expectations of $1.05 billion.
ZTO Express (NYSE:ZTO) stock dropped 4.8% in early trading on softer second quarter results, with revenues shy of Wall Street analyst forecasts.
Revenue came in at $1.34 billion, up from $1.29 billion a year ago but short of expectations of $1.39 billion. The Chinese express delivery firm reported adjusted earnings of $0.42 per share, above Street expectations of $0.39.
5.00am: The Day Ahead
Salesforce.com, Inc. (NYSE:CRM) will be watched closely on Wednesday with its results scheduled to come out after the closing bell. The software company is expected to report earnings of $1.90 per share on revenue of $8.52 billion.
Analysts at Wedbush expect the “Comeback Kid” Salesforce to share positive news and deliver headline results that modestly beat Street expectations.
They believe Salesforce is in a balanced position of growth and profitability, noting that the company was finally starting to build on its key acquisition of productivity and communication platform Slack.
Meanwhile, Victoria's Secret & Co shareholders will be hoping for a better set of financials on Wednesday, after June’s disappointment.
Earnings announcements expected: Brown-Forman, Mastercraft Boat, Patterson Companies, CrowdStrike, Chewy
Economic data: ADP employment, pending home sales, GDP revision, balance of trade, crude oil inventories, MBA mortgage applications