4:17pm: All eyes remain on the Fed
The Dow Jones Industrial Average closed Tuesday down 154 points, 0.5%, at 32,910, the Nasdaq Composite stayed nearly perfectly flat at 12,381 and the S&P 500 dipped 9 points, 0.2%, to 4,129.
The Dow and S&P are now both on three-day losing streaks after Monday was the benchmarks' worst session since June.
“This bear in our view has one last act,” Lisa Shalett, head of the global investment committee at Morgan Stanley (NYSE:MS) Wealth Management, said in a note to clients, according to CNBC.
Such a last act could come if the Federal Reserve is hawkish on raising interest rates to counteract inflation, and traders are awaiting remarks from Jerome Powell at the Fed's annual meeting at Jackson Hole in Wyoming.
12.05pm: Stocks choppy at midday
The major US indices were mixed midday, although the Nasdaq Composite bucked the trend, helped by technology stock growth.
At noon, the Dow Jones Industrial Average was down 0.4% to 32,921, the S&P 500 was down by 0.09% at 4,134, while the Nasdaq Composite was up by 0.1% at 12,400.
Michael Hewson, chief market analyst at CMC Markets UK, said after two days of declines and the biggest one-day decline since June, US markets opened cautiously before edging modestly higher on the back of a couple of below par economic reports showing the US economy is struggling from the effect of higher prices.
“A bigger than expected contraction on services Purchasing Manager’s Index (PMI) in July was followed by a big 12.6% slide in new home sales, which in turn prompted some US dollar weakness and a rebound in tech stocks,” Hewson said in a statement.
Hewson noted the US dollar’s movement today has been prompted by a combination of the poor services PMI number which saw economic activity slip to 44.1 in August from 47.3 in July, and new home sales which slid 12.6% in July.
“The PMI readings were even weaker than the ones we saw out of Europe earlier in the day, and has prompted a little bit of US dollar selling, pulling the euro back above parity,” he said.
At midday, the major movers included Palo Alto Network, up over 11% after it surpassed analyst expectations on 4Q earnings, plus Halliburton was up by 8.2%, and Chevron was up by 3%.
On the downside, Zoom Video dropped over 15% on news of weak 2Q revenue and outlook, Twitter was down 5.4%, and Home Depot shed 2%.
10.40am: Homes sales drop
Wall Street remained mixed after an hour or so of trading after data showed US new home sales fell sharply in July as persistently high mortgage rates and house prices further eroded affordability.
US new home sales tumbled 12.6% to a seasonally adjusted annual rate of 511,000 units last month, according to the US Commerce Department, while June's sales pace was revised down to 585,000 units from the previously reported 590,000 units. Economists had forecast new home sales decreasing to 575,000 units.
Around 10.40am, the Dow Jones Industrial Average was 46.94 points, or 0.1% lower at 33,016.67, but the broader S&P 500 index added 0.2% and the tech-laden Nasdaq Composite recovered 0.4%.
9.35am: Little movement at the open
US stocks opened mixed but largely unchanged on Tuesday as investors awaited the release of key economic data and the outcome of the Fed’s pivotal annual meeting at Jackson Hole later this week.
Just after the open, the Dow Jones Industrial Average was down 16 points or 0.05% at 33,048 points.
The S&P 500 was up 3 points or 0.06% at 4,140 points, while the Nasdaq Composite had added 28 points or 0.2% at 12,409 points.
All eyes this week are on the Fed’s Jackson Hole symposium which runs from Thursday to Saturday, titled “Reassessing Constraints on the Economy and Policy.”
Charles Stanley (LSE:CAY) chief investment commentator Garry White noted that the true agenda of this meeting between leading central bankers and other experts is likely to consider whether they had done enough to get on top of inflation they were not expecting and how far they should go in raising rates and reversing the massive bond-buying most of them undertook over the last two years.
“Some introspection and retrospection are called for,” White said. “What was a necessary and major response to lockdown in 2020 became an extended experiment with large monetary stimulus which some think helped fuel the subsequent inflation.”
6:30am: More caution
US stocks were expected to open little changed to a touch higher on Tuesday as investors look cautiously ahead to upcoming economic data and the Federal Reserve’s annual symposium at Jackson Hole in Wyoming late this week.
Futures for the Dow Jones Industrial Average were trading 0.1% higher pre-market, while those for the broader S&P 500 index and contracts for the tech-laden Nasdaq-100 were also both up 0.1%.
On Monday US stocks tumbled on fears that a recession is looming and interest rates will continue to rise in the world’s biggest economy. As things stand, those concerns are here to stay.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank said Monday’s drop had a lot to do with changing interest rate expectations.
“Monday blues kicked in following a $7 trillion rally since July, which was mainly fueled by the expectation that the recession rhetoric would convince the Federal Reserve to stop raising the rates and even start thinking about cutting the rates. Now that the Jackson Hole meeting approaches, those bets are vanishing, as there is no way the Fed will soften its tone while inflation still hangs around the 8.5% level,” she noted.
Fed chairman Jerome Powell will deliver a much-anticipated keynote speech at Jackson Hole on Friday which is expected to be wide-ranging and to include his expectations for inflation, keeping investors wary ahead of the event.
Ozkardeskaya added: “Plus, the US jobs market has been giving signs that it’s resilient to the policy tightening – with monthly NFP (non-farm payrolls) prints coming in way better than expectations each month. And the earnings season has been better than feared as well."
Against that backdrop, upcoming economic data will also be key for market direction. Up for release today are US new home sales figures for July and manufacturing sector PMIs. Both will give an indication of how rising interest rates and elevated levels of inflation are affecting economic activity.
Investors will also be closely watching US durable goods figures, due on Wednesday, and GDP data, due on Thursday, for direction.
Contact the author at jon.hopkins@proactiveinvestors.com