- Dow, S&P, Nasdaq all lower
- Fed's Christopher Waller fails to rule out more rate rises
- Goldman Sachs (NYSE:GS) thinks US recession less likely
4:18pm Oil stocks gain but broad market falls
The Dow closed Tuesday 196 points, 0.6%, at 34,642, the Nasdaq Composite declined 11 points, less than 0.1%, to 14,021 and the S&P 500 slid 19 points, 0.4%, to 4,497. The small-cap Russell 2000 index lost 40 points, 2.1%, to 1,881.
Energy stocks gained ground on news that Saudi Arabia extended its production cuts until the end of the year. However, that may have spooked the broader market, according to Keith Lerner, co-chief investment officer at Truist Advisory Services.
“If you have oil prices moving up that could be inflationary,” Lerner said. “That just makes the Fed’s job harder. There’s already a fine line between the Fed landing the soft landing that people are hoping for [and a recession].”
12:00pm: US stocks lower but steady
US stocks nursed modest losses at midday in the absence of any new catalysts for direction.
At midday, the Dow Jones Industrial Average was down 0.2%, at 34,778.66, the S&P 500 was down 0.2% at 4,505.06 and the Nasdaq Composite was 0.2%, at 14,007.40.
Oil stocks remain in favor after the oil price jumped following news that Saudi Arabia has extended its production cuts until the end of the year.
Manchester United shares have fallen sharply on reports that the Glazer family have pulled plans to sell the club while Nikola shares have dropped as well on reports that another of its trucks caught fire on Monday, the third such incident in the last few months.
9:44am: Stocks ease as Fed official says too early to call peak in rates
US stocks opened lower on Tuesday after a top Federal Reserve official said it was too early to call a peak in US interest rates.
Shortly after the opening bell, the Dow Jones Industrial Average was down 22.25 points, 0.1%, at 34,815.46, the S&P 500 was 10.18 points, 0.2%, at 4,505.59 and the Nasdaq Composite was down 41.64 points, 0.3%, at 13,990.18.
Christopher Waller, among the most hawkish members of the rate-setting Federal Open Market Committee said that the Fed is well-positioned to proceed “carefully” in terms of further monetary tightening following what he described as a “helluva good week of data”.
But although he confirmed the US central bank is preparing to hold its benchmark interest rate steady at its September policy meeting, he said he would need more data to say the Fed is done raising rates.
Waller was speaking to CNBC and added: "There’s nothing that is saying we need to do anything imminent anytime soon, so we can just sit there, wait for the data and see if things continue.”
Shares of the vacation rental company Airbnb rose 4.2% after the announcement on Friday that it will join the S&P 500 later this month.
Elsewhere, shares in oil majors, Chevron and Exxon Mobil rose 1.3% and 1.5% respectively as the oil price rose following news Saudi Arabia is extending its 1-million-barrels-per-day voluntary oil production cut until the end of the year, reported by the state-owned Saudi Press Agency.
Stryker Corp was another stock on the move, up 2.4%, after Bank of America upgraded to buy from neutral with a $315 price target.
7:00am: Subdued start expected; Goldman sees lower chance of recession
US stocks are expected to make a subdued return to trading after the extended weekend following the Labour Day holiday.
In pre-market trading, futures for the Dow Jones Industrial Average were flat, while those for the S&P 500 fell 0.1%, and contracts for the Nasdaq 100 futures were down 0.2%.
In China, the Caixin services purchasing managers’ index fell to an eight month-low of 51.8 in August from 54.4 in July, reminding investors of the issues the world’s second largest economy still faces, after a brief bout of optimism on Monday.
Economists had expected a figure of 53.6 and the news contributed to falls in the Shanghai Composite and Hang Seng.
Susannah Streeter head of money and markets, Hargreaves Lansdown said: "’Sentiment has turned downbeat again on China as fresh brushstrokes are painted on the picture of its slowing economy."
"Services had been a brighter spot in the economy, with hopes that consumers would continue to spend on trips out and education, but demand is turning more sluggish with any stimulus efforts to spur spending not hitting the mark," she explained.
Investors will also be mulling the fall-out from Friday’s mixed US employment report which saw strong August payrolls, downward revisions to July and June’s figure, a rise in the unemployment rate and a weaker than expected rise in average hourly earnings.
Better news is that Goldman Sachs (NYSE:GS) said continued positive inflation and labour market news has led it to “cut our estimated 12-month US recession probability further to 15%, down 5pp from our prior estimate.”
Jan Hatzius at the US investment bank said the change reflects continued encouraging inflation news, a favourable real income outlook, and the decline in the jobs-workers gap to just above its pre-pandemic level.
“First, real disposable income looks set to reaccelerate in 2024 on the back of continued solid job growth and rising real wages,” he said.
“Second, we still strongly disagree with the notion that a growing drag from the “long and variable lags” of monetary policy will push the economy toward recession—in fact, we think that the drag from monetary policy tightening will continue to diminish before vanishing entirely by early 2024.”