US Stock Market Key Points:
- The S&P 500, Dow Jones and Nasdaq 100 finished with gains despite further hawkish comments by Fed Officials.
- Corporate earnings remain a notable driver for equities and upcoming Jackson Hole Economic Symposium will bring considerable focus on rates.
US equity indices were range-bound through today’s session. This comes after the S&P 500 tested the 200 Day Moving Average earlier this week, which is currently helping to mark three-month-high for the index. A batch of data released early in the morning showed more positive signs for the US economy, with a strong showing from the Philadelphia Fed Manufacturing survey. That helped to spark a move of USD-strength which led to a breakout to fresh August highs.
There was also a chorus of Fed-speak today, as various members from the FOMC opined on rate policy moving-forward. This should remain in-focus over the next week, ahead of the Jackson Hole Economic Symposium.
The Dow Jones closed with a minimal gain of 0.06%. Meanwhile, the S&P 500 continued to hold below the 200 day moving average that we discussed on Tuesday, and ended with a marginal gain of 0.23%, driven by the Energy Sector which soared 2.53% after yesterday’s US government datapointed to robust US fuel consumption.
Regarding earnings: Retail companiesKohl’sand BJ’ Wholesale reported today. Kohl’s fell7.72 % after it cut its 2022 financial forecast due to weaker sales amid inflationary pressures. Meanwhile, the warehouse retailer, BJ’s Wholesale, managed to beat analyst expectations and finished with a gain of 7.22%.
Notably, meme stocks continue to garner attention, such as Bed Bath and Beyond. Earlier this week, we noted that retail traders were driving the price of the stock higher in an apparent short squeeze. Today, Ryan Cohen of Gamestop fame, announced the sale of his stake in the BBBYthat led to a sharp decline.
Regarding tech stocks, the Nasdaq 100 index finished 0.26% higher at 13,505.99 points. Cisco Systems and Semiconductor developer, Wolfspeed Inc, both reported better than anticipated results, which contributed to the index’s rise.
On the data front, mixed signals continued to add pieces to the already confusing economic puzzle. Earlier this week, the NY Empire State Manufacturing Index surprised to the downside, dropping to the weakest level since May 2020. Today, the Philadelphia Fed Manufacturing Index showed expansion for the first time in three months. Growth in shipments, as delivery times improve, helped to turn the current conditions gauge to positive territory after two previously negative readings. But what is noteworthy is that both surveys show, while still elevated, a decline in Prices Paid (likely as a reflection of lower energy costs), and a pickup (albeit still weak) of the six months general activity expectations.
On the other hand, and in line with recent data, Existing Home Sales in July showed that weakness in the Housing Sector is becoming more evident. For the sixth consecutive month, sales of previously owned homes fell as rising prices and higher interest rates are weighing on the buyers’ decisions.
However, on the employment side of today’s data, unemployment claims remained steady and continue to highlight strength in the labor market. The latest data for the week ending on August 13th showed seasonally adjusted initial claims at 250K, down 2K from the previous week’s revised figure (252K).
Given that the economy continues to show resilience, I’m surprised to see how disconnected markets are from the Fed’s rhetoric. Yesterday’s FOMC minutes and today’s comments from Fed officials (San Francisco, St Louis, Minneapolis, and Kansas City) all seem to echo a hawkish tone that markets are seemingly ignoring.
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—Written by Cecilia Sanchez-Corona, Research Team, DailyFX