4:05pm: Selling pressure fadwes
US stocks ended on a positive note as selling pressure faded and commodity prices held steady in a quiet trading day.
By the closing bell, the S&P 500 climbed 0.3% after the benchmark index fell for three straight sessions, closing at 4,141 points. The Dow Jones Industrial Average added 60 points, or about 0.2%, to finish at 32,969 and the Nasdaq Composite gained 0.4% to close at 12,432.
12:05pm: Dollar moves higher
The major US indices remained in green territory at midday, although today’s session had been off to a slow start due to US durable goods for July coming in below expectations.
At midday, the Dow Jones Industrial Average was up 0.5% to 33,083, the S&P 500 was up by 0.6% at 4,154, while the Nasdaq Composite was up by 0.9% at 12,492.
Michael Hewson, chief market analyst at CMC Markets UK, said the US Census Bureau’s durable goods report for July came in below expectations of a 0.8% rise.
“If the US consumer is as resilient as the retail sales numbers suggest it is, it’s not necessarily being reflected in the performance of US retailers,” Hewson said in a statement.
He also noted that yesterday, Nordstrom became the latest US retailer to warn of downgrading its full year sales outlook from 8% growth, to 5% to 7%. Profit expectations were also slashed to a mid-US$2.60 from $3.53.
Hewson expects Williams-Sonoma to be next.
“As a purveyor of these types of items, the owner of Pottery Barn may well start to see early signs of this trend towards essential goods at the expense of higher value items, he said, adding the company’s gross margins are currently at 43.8%, rising 80bps in 1Q, while operating margins came in at 17.8%.
“At the time the company kept its full year guidance of mid to high single digital annual net revenue growth unchanged, with the goal of increasing annual revenues to US$10bn by 2024. This seems ambitious, especially when you consider that at the end of the last fiscal year annual revenues came in at $8.25bn and are expected to come in at $8.6bn for this year,” he said.
The US dollar has continued to move higher with rising natural gas prices in Europe exerting downward pressure on the likes of the euro and the pound, Hewson said.
At midday, the major movers included Norwegian Cruise Lines, up 9% on news of the company dropping its pre-cruise COVID test mandate, plus Illumina was up by 7.4%, and Salesforce was up by 2.5%.
On the downside, Advance Auto Parts was down over 10% on news of the company lowering its outlook, and Walgreens-Boots Alliance was down just over 1%.
10.30am: Recovery after home sales data
The day's other US data shows that pending home sales fell 1.0% in July, although that was better than the consensus for a 2.8% decline and helped Wall Street perk up slightly.
Pantheon Macroeconomics chief economist Ian Shepherdson commented: "Pending home sales have now fallen 27% from the recent peak in October, tracking the collapse in mortgage demand caused by higher rates. That said, mortgage demand appears to be stabilising now that rates are no longer rising; our August estimate based on the available weekly data is broadly unchanged.
"Accordingly, home sales likely will reach a floor before the end of the year, but no recovery is in sight. In the past two months, existing home sales have fallen below the level implied by pending sales, presumably because a larger proportion of buyers than usual have pulled out of transactions. If this continues, existing home sales will dip a bit further in August. But whatever happens to sales, home prices have much further to fall."
After around an hour of trading in New York, the Dow Jones Industrial Average had reversed early falls to add 49 points, or 0.2% at 32,959, while the S&P 500 index gained 0.3%, and the Nasdaq Composite took on 0.5%.
10.00am: Proactive North America headlines:
BetterLife Pharma says new study on LSD confirms the cognitive effects of its analog drug BETR-001
Nextleaf Solutions launches first THC-free CBD drops under the Glacial Gold brand
Star Royalties sees record 2Q revenue as Elk Gold Mine turns into producing royalty asset; gains $18.6M on deconsolidation of Green Star
NEXE Innovations adds two new faces to executive team
Nevada Silver fields near-surface high-grade silver from drilling at its Belmont project in Nevada
Kenorland Minerals kicks off exploration and reveals 2022 budget for its Tanacross project in Alaska
Fobi AI (TSX-V:FOBI, OTCQB:FOBIF) says Qples by Fobi launches new affiliate & social influencer marketing platform
Snowline Gold reports encouraging early drill results from Valley discovery at Rogue project, Yukon
Wishpond Technologies achieves record revenue for 2Q, returns to positive net cash position
DRDGOLD says it 'held its own' in fiscal 2022 as it unveils 15th consecutive annual dividend payment
American Manganese says RecycLiCo Battery Materials achieves over 99% lithium recovery from lithium iron phosphate battery cathode material
Nextech AR says its real world metaverse spatial mapping platform ARway adopts LiDAR technology
Mednow says it is officially open to serve patients in Quebec, with its newest location serving as its pharmacy distribution center
Mountain Boy Minerals increases non-brokered private placement to $626,000
QC Copper and Gold reports new assay results from its current drill program on the Opemiska Copper-Gold Property
EverGen Infrastructure ends 2Q with $17M cash, says it is poised for catalyst-rich second half
9.35am: Durable goods orders flat in July
US stocks were steady at the open on Wednesday as investors remained cautious ahead of the Fed’s highly anticipated Jackson Hole symposium which begins tomorrow.
Just after the open, the Dow Jones Industrial Average had shed 44 points or 0.1% at 32,865 points, the S&P 500 was down 3 points at 4,126 points, and the Nasdaq Composite was flat at 12,381 points.
Embattled meme stock Bed Bath & Beyond Inc soared about 25% after the Wall Street Journal reported that the company had found a financing source to shore up its liquidity.
The home goods retailer’s stock tanked last week following the news that high-profile investor Ryan Cohen had exited his 11.8% stake in the company.
Nordstrom Inc, on the other hand, had plunged about 17% at the open after the department store chain reported disappointing quarterly results, including cutting its full-year forecast off the back of slowing customer demand.
Exinity Group chief market analyst Han Tan noted that markets had clearly been anxious in the lead-up to Jackson Hole, as investors and traders awaited the next policy clues out of Fed chair Powell later this week.
He said the declines in equities and bonds of late suggested that Powell would strike a hawkish tone to fight rampant inflation at the expense of economic growth.
“If Powell’s commentary forces markets to further price in more supersized Fed rate hikes, that might trigger more declines for equities and gold, while king dollar would continue to exert its dominance across the FX universe,” Tan said.
“If Powell appears more dovish than envisaged, perhaps adopting a more cautious tone over the US economic outlook, that could reassert the narrative that the Fed will back off from larger rate hikes and potentially allow risk assets to resume their summer rally.”
Meanwhile, US durable goods orders came in virtually unchanged for the month of July, according to a new report from the US Census Bureau.
New orders decreased by less than $0.1 billion to $273.5 billion – the first decrease following four consecutive monthly increases, including a 2.2% increase in June.
Pantheon Macroeconomics chief economist Ian Shepherdson noted that headline orders were depressed by a huge drop in orders for defence aircraft, more than reversing the June leap.
“The most important number in the report, nondefense capital goods orders ex-aircraft, rose a modest 0.4%, but the May and June orders were revised up, by a total of 0.4%,” he said. “The trend is still rising at a decent pace, though it has slowed since the turn of the year.”
He added that domestic inflation in capital goods prices was now about 9%, but this had peaked and would fall sharply over the next year.
“In the meantime, real spending on business equipment probably will fall a bit in 3Q, as it did in 2Q, but we hope for a return to the black in 4Q and a much stronger rebound in 2023,” Shepherdson said.
6:30am: Fresh gloom
US stocks were expected to open slightly lower as investors revisit worries over a slide into recession, with a data-heavy week bringing a new note of gloom ahead of the Federal Reserve’s much-anticipated annual symposium at Jackson Hole starting on Friday.
Futures for the Dow Jones Industrial Average were trading 0.1% lower pre-market, while those for the broader S&P 500 index and contracts for the tech-laden Nasdaq-100 were also both down 0.1%, seen extending the previous session's falls.
“US equity indices fell for the third day, as investors continued scaling back their long positions into the Jackson Hole meeting, where the Fed officials may not sound as dovish as many investors wish they would,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank, explaining the pressure on stock prices.
The keynote address at the Jackson Hole symposium, by US Fed chairman Jerome Powell on Friday, will be eagerly awaited for clues on the path for interest rates which have been raised steadily and aggressively throughout the year. Investors are starting to believe that those hoping for Powell to signal an end to the rate hikes in this cycle are likely to be disappointed.
In the meantime, US economic data out yesterday proved weak, suggesting that activity is starting to stutter under the weight of inflation and higher interest rates. New home sales slowed along with the manufacturing sector while the services sector PMI sank further.
Today, the focus will be on US durable goods figures for July which are expected to register a significant slowdown, moving on to the second estimate of 2Q GDP data on Thursday where a small downward revision may be likely.
A spike in oil prices added to the headwinds facing equity markets and wider the economy as it threatens another surge in already elevated levels of inflation.
Energy prices spiked higher after the cartel of oil producers, OPEC, said it may cut oil production given that prices have retreated over recent weeks. Benchmark WTI futures were up 1.03% at $94.71 a barrel, while Brent crude futures rose 1.07% at $101.29.
Contact the author at jon.hopkins@proactiveinvestors.com