On Wednesday, the S&P 500 made progress, marking a streak of four consecutive days of gains, as investors evaluated fresh economic data from the United States.
The broad stock market gauge increased by 0.38%, surpassing the 4,500 threshold and concluding the day at 4,514.87. Meanwhile, the Dow Jones Industrial Average saw a modest rise of 37.57 points or 0.11%, reaching a session close of 34,890.24. The Nasdaq Composite, which is weighted towards technology companies, experienced a gain of 0.54%, reaching 14,019.31. The S&P 500’s accumulation of gains over four days contributed to a reduction in losses for the current month, bringing them down to approximately 1.6%.
The S&P 500’s technology sector also saw an increase, driven by a nearly 1% surge in the stock of chipmaker Nvidia. Additionally, Apple’s shares went up by almost 2%, following the company’s issuance of invitations for a September 12th launch event, during which the unveiling of the iPhone 15 is anticipated.
Wednesday’s developments occur as traders closely examine discouraging payroll data. ADP reported that private employers added 177,000 jobs in August, a figure significantly lower than the revised July count of 371,000 jobs. This also fell short of the Dow Jones’ projection of 200,000 jobs.
Simultaneously, the yearly growth rate of the gross domestic product (GDP) was revised downward on Wednesday, now standing at 2.1%, down from the prior forecast of 2.4%.
For the second consecutive day, investors seem to interpret weaker-than-anticipated economic data as positive news for the stock market.
Quincy Krosby, Chief Global Strategist at LPL Financial, remarked, “Both traders and investors are hoping for continued positive market performance today, which would help validate that the recent uptick in market activity is a sustainable trend as the market moves into September.”
On Tuesday, the major stock indices in the United States experienced a rally following the release of disappointing figures related to consumer confidence and a larger-than-expected reduction in job openings for July. This occurrence ignited optimism among traders that the Federal Reserve might consider easing its policy stance in the near future.
Stocks close higher, S&P 500 notches fourth-straight winning session
Wednesday saw stocks finishing on an upward note, with the S&P 500 securing its fourth consecutive session of gains.
The primary benchmark rose by 0.38%, concluding the day at 4,514.87. Simultaneously, the Dow Jones Industrial Average recorded an increase of 37.57 points or 0.11%, settling at 34,890.24. The Nasdaq Composite also experienced an ascent, climbing by 0.54% to reach 14,019.31.
4-day rally in S&P 500 pares month-to-date loss to -1.6% from -5.5%
The most recent four-day surge in U.S. equities has significantly reduced the S&P 500’s August decline to just 1.6%, a substantial improvement from the earlier loss of -5.53%. This steep drop was observed on August 18, when the benchmark index reached its monthly low at 4,335.31.
Over the last four trading sessions, the S&P 500 has risen by as much as 3.32%, reaching its highest point on Wednesday at 4,521.65.
Among the 11 major sectors of the S&P, only energy (+1.1%) and health care (+0.5%) have posted gains in August. As yields have risen throughout the month, utilities have emerged as the weakest-performing group, experiencing a decline of -6%.
APA, Marathon Petroleum lead S&P 500 energy names in August
The energy sector of the S&P 500 is set to conclude the month as the top performer, partially driven by strong rallies in APA and Marathon Petroleum.
During this month, the energy sector has achieved a 1.1% increase. Health care is the only other sector among the 11 sectors of the broad index that is poised to see gains in August, with a rise of 0.6%. However, the overall S&P 500 index is projected to end August with a 1.6% decrease.
The energy sector’s advancement has been propelled by notable gains of 8.2% for APA and 7.9% for Marathon Petroleum. On the other hand, Devon Energy and EOG Resources have dampened the sector’s progress, experiencing declines of approximately 6% and 3.6%, respectively.
In fact, the energy sector has also been the most successful performer within the S&P 500 in terms of quarter-to-date performance.
Texas Instruments falls 1%
The chip manufacturer’s shares experienced a 1% decline following Bernstein’s decision to downgrade the shares from “market perform” to “underperform.” Analyst Stacy Rasgon highlighted concerns related to the company’s long-term strategy.
In a note on Wednesday, Rasgon expressed, “If only we all had a 15-year investment perspective.” He further praised Texas Instruments for their transparency in outlining their capital expenditure and inventory strategies for the coming years, as they actively increase spending to enhance capacity for supporting future revenue growth spanning the next 10 to 15 years.
However, Rasgon pointed out that current market expectations fail to fully consider the potential outcomes of TXN’s plans. Additionally, he highlighted that projected gross margin figures appear overly optimistic from his perspective.
Guggenheim maintains sell rating on Tesla shares
Tesla is in the process of recovering from a challenging August, as its shares have surged by over 7% throughout this week. Despite this recent upward movement, Guggenheim maintains a pessimistic outlook on the stock.
In a note issued on Wednesday, analyst Ronald Jewsikow stated, “Observations of U.S. inventory patterns imply that supply is outpacing demand.” He went on to elaborate, “Although temporary production pauses during the summer might mitigate the immediate necessity for price reductions (the extent of these interruptions remains uncertain), we are of the belief that the current accumulation of U.S. inventory this quarter indicates that, given the ongoing production rate, demand in the U.S. lags behind production output.”
Jewsikow upheld his sell recommendation for the stock.
What analysts expect from Apple’s September event
Financial experts on Wall Street are preparing themselves for a substantial overhaul of the iPhone as Apple gears up for its annual September launch event.
In the realm of significant upgrades, Atif Malik, an analyst from Citi, envisions an array of enhancements for the Pro models, including a fresh chip, an upgraded camera, improved storage and memory capabilities, and a transition to a USB-C port.
In addition to these notable cosmetic adjustments, analysts are also bracing for the possibility of price increases. Malik, for instance, is forecasting a rise in the range of $100 to $200 for Pro models.
Pricing is anticipated to be a central point of interest for investors, and it could exert pressure on the projected 10% year-over-year growth in unit sales for the 2024 fiscal year. As highlighted by Wamsi Mohan, an analyst at Bank of America, this growth projection might be dampened. Mohan’s estimates indicate 216 million iPhones sold in the 2023 fiscal year, which translates to an 11% annual decrease.
Furthermore, analysts are anticipating the unveiling of a potential new Apple Watch during the event.
Blackstone could join S&P 500 at next rebalance
In the upcoming rebalance of the S&P 500, a notable development might occur as an alternative asset manager could potentially find its way into the index for the first time. This projection is put forth by Bank of America.
According to a note addressed to clients by analyst Craig Siegenthaler on Wednesday, it appears quite likely that Blackstone will be included in the index during its forthcoming rebalance. The official announcement regarding quarterly adjustments is anticipated to be disclosed on Friday.
With a market capitalization exceeding $120 billion, Blackstone’s size surpasses that of numerous stocks currently featured in the index. Notably, S&P Dow Jones has recently modified certain rules pertaining to companies with multiple classes of shares, a change that could render Blackstone eligible for inclusion in the index.
The shares of Blackstone have surged by over 40% since the beginning of the year.
Siegenthaler pointed out in his client note, “The omission of BX from the S&P 500 has had a negative impact on the index’s performance, given that alternative investments have been the most lucrative segment within the financial services industry over the past 5 years. Furthermore, Blackstone also offers a dividend that is approximately twice the average dividend of companies within the S&P 500.”
Lyft shares jump 5% after insider buying
Lyft, the ride-sharing firm, experienced a 5% surge in its shares on Wednesday, contributing to its weekly growth of more than 10%. This notable upswing followed the revelation in a recent regulatory filing that director Prashant Aggarwal acquired nearly 100,000 shares.
Despite this recent positive momentum, the stock has only registered approximately a 2% increase this year. Meanwhile, its competitor Uber has maintained its leadership in the North American ride-sharing sector. Lyft had previously announced its intention earlier this month to intensify its efforts in competitive pricing as a strategy to narrow the gap with Uber.
KeyBanc says it expects Salesforce to outperform in near-term
Ahead of Salesforce’s impending market-close report, Keybanc analyst Michael Turits has reaffirmed his overweight rating on the company’s stock and maintained a price target of $256.
In a note issued on Tuesday, Turits emphasized the enduring factors that position Salesforce as a market leader in front-office digital transformation, predicting that the company stands to capitalize on the potential of artificial intelligence (AI) due to its extensive application portfolio and customer data. He stated, “In the near term, we anticipate that Salesforce will outperform in a more cautious investment climate, driven by the expansion of profit margins and an appealing valuation.”
Regarding the second-quarter earnings, the analyst anticipates results to align closely with expectations, and he envisions the possibility of a modest increase in earnings before interest and taxes (EBIT) for the fiscal year 2024, as outlined in the note. As of Wednesday, the stock has shown a 0.9% increase, further extending its remarkable 61% surge over the course of this year.
Stocks making the biggest moves midday
Here are the stocks experiencing the most significant shifts during midday trading:
HP – HP experienced a 7% decline in midday trading following a fiscal third-quarter revenue that fell short of expectations.
Box – The cloud storage company’s stock plummeted by nearly 9%, a day after providing a discouraging outlook for the ongoing quarter.
Ambarella – The semiconductor stock saw a notable drop of 17% due to weak guidance for the third quarter.
Growth could outperform value over the next month, Credit Suisse’ technical analyst says
Credit Suisse suggests that growth stocks might surpass value stocks in performance over the upcoming month.
Technical analyst David Sneddon stated in a note on Wednesday, “The breakout in US Growth from its recent range compared to Value, along with the completion of a positive continuation pattern, is evident. This reinforces the preexisting substantial foundation, and our outlook remains that Growth will likely continue to outshine Value over the next 2 to 4 weeks.”
On Tuesday, the S&P 500 concluded a third consecutive day of increases, driven by investor interest in technology stocks following their recent downturn. The broader index aimed to prolong these advances on Wednesday.
Sneddon further noted, “The S&P 500 has upheld its upward trajectory since March and invalidated its recent bearish ‘reversal day.’ However, a breach beyond 4503 is deemed necessary to sustain an immediate favorable sentiment.”
Silver moves positive on month
In Wednesday’s trading session, the price of silver turned positive for the month.
As of now, silver has risen approximately 1.8% since the beginning of the month. Should this trend persist, it would signify the second consecutive month of gains for the metal.
During Wednesday’s session, the metal reached a peak of $25.04, which is its highest point since July 27 when it reached $25.325.
In tandem with this development, the Global X Silver Miners ETF (SIL) experienced an increase of over 1% during Wednesday’s session. This rise was aided by the upward movement of stocks such as Hecla and Coeur. If this upward trajectory remains until the close, it would mark the third successive winning session for the fund. Nevertheless, despite this gain, the fund remains down by more than 2% for the month.
August pullback was more due to ‘buyer’s strike,’ Barclays says
The month of August witnessed a subdued performance for stocks, and according to Barclays, this might primarily be attributed to a reduction in purchasing by traders rather than an overall reduction in risk exposure.
In a note on Wednesday, Barclays’ Emmanuel Cau explained, “The downturn experienced in August can be attributed more to a phenomenon of traders abstaining from buying, rather than a widespread strategy of reducing risk exposure.”
Cau elaborated further, stating, “Market sentiment and technical indicators retraced from their elevated levels in July, which was accompanied by lower trading volumes characteristic of the summer months. While the exposure of active managers has reverted to average levels, the decline in the market and the irregularity in price movements were more a result of a scarcity of buyers than a comprehensive risk reduction strategy.”
Furthermore, Cau pointed out that a shift towards holding cash, bonds, and other defensive assets could potentially indicate a sense of caution moving forward.
Stocks open slightly higher
Wednesday’s trading session commenced with an upward trajectory in stocks, as investors sought to extend the positive momentum from the three previous sessions across major indices.
The Dow Jones Industrial Average initiated the day by increasing by 67 points, equivalent to a 0.2% rise. Similarly, the S&P 500 and the technology-focused Nasdaq Composite both registered gains of 0.2%.
Second-quarter gross domestic product growth revised down
The government’s announcement on Wednesday revealed that economic growth in the second quarter expanded at an annual rate of 2.1%. This figure represents a minor adjustment from the initial estimate of 2.4%.
Additionally, there were further revisions, notably in personal consumption, which saw a slight increase, now standing at 1.7%.
ADP report shows slower-than-expected job growth
The August ADP private payrolls report revealed a deceleration in job growth that fell short of expectations.
ADP reported an addition of 177,000 jobs by private employers in August, significantly below the revised figure of 371,000 jobs added in July. Economists surveyed by Dow Jones had projected an addition of 200,000 jobs for August.
Furthermore, the report indicated a slowdown in wage growth for both individuals who switched jobs and those who remained in their existing positions.
‘Dare we say Nvidia is now cheap?’ says Melius Research
Nvidia’s shares have recently achieved a record high closing, and Melius Research suggests that the upward momentum is set to continue.
Analyst Ben Reitzes conveyed in a note on Tuesday, “One aspect that caused us (pleasant) frustration prior to the F2Q24 earnings call was the perception of Nvidia’s excessively high valuation. However, this perception has been revised post F2Q24, especially when accounting for its growth.”
He further remarked, “We encompass a diverse range of AI-related stocks in our analysis, and presently, Nvidia is trading at a relatively moderate premium in comparison to this group, assessed through a PE (price-to-earnings) perspective.” According to Reitzes, Nvidia’s current valuation is even more economical than the valuations of Alphabet, Microsoft, and Apple, when considering enterprise value-to-sales ratios.
Align has a big market share opportunity, says HSBC
HSBC believes that Align Technology, the manufacturer of Invisalign, has a significant opportunity to capture a larger market share due to its robust brand recognition, even in the face of increasing competition. The company has been given an initial buy rating on its shares by HSBC.
“We are favorable towards Align’s involvement in the orthodontic case starts segment, which is projected to experience growth at a compound annual rate of 15-20%,” mentioned Sahoo in a note on Wednesday. “We believe that Align has the potential to further expand its market share from the current approximately 10% of the annual orthodontic case starts, which amount to around 21 million cases.”
Before the market opened on Wednesday, the shares experienced a rise of 2.5%.
History points to more gains from here for stocks
Although September has typically been a challenging month for stock markets, investors might need to prepare for further advancements leading up to the end of the year. Bank of America has highlighted that, “going back to 1950, instances where the S&P 500 exhibited robust performance within the initial seven months of the year (>15%) have been succeeded by average returns of 5% extending into December.”
From January to the conclusion of July, the S&P 500 demonstrated a notable surge of 19.5%. Over the course of the year, it has recorded an increase of 17%.
Treasury yields rise as investors digest economic data
On Wednesday, U.S. Treasury yields experienced an increase, rebounding from the losses incurred on Tuesday. Investors were carefully assessing the state of the economy in light of the latest data releases, including the consumer confidence index, which unexpectedly registered at a significantly lower figure of 106.1 on Tuesday.
As of 4:23 am ET, the 10-year Treasury yield had risen by slightly more than one basis point, reaching 4.1374%. This followed a drop of as much as 10 basis points on Tuesday. The 2-year Treasury yield was presently at 4.9129% after climbing by over two basis points. On the previous day, it had fallen by as much as 16 basis points.
It’s important to note that yields and prices move inversely, with one basis point equivalent to 0.01%.
European equity markets open higher
At the start of Wednesday’s trading session, European stock markets exhibited upward movement, mirroring the trends observed on Wall Street during the previous night.
The pan-European Stoxx 600 index initiated the day with a 0.2% rise, with the majority of sectors displaying a cautiously optimistic performance. Mining stocks led the gains with a notable increase of 0.9%, followed by insurance sector stocks, which were up by 0.6%. However, utility stocks experienced a decline of 0.4% in the early trading hours.
Country Garden to issue HK$270 million worth of new shares to repay loans
Chinese property company Country Garden Holdings has revealed its intention to issue approximately 270 million Hong Kong dollars ($34.4 million) worth of new shares as a means to repay a portion of its outstanding loans.
These fresh shares will be offered at 77 Hong Kong cents each, representing a discount of 15.38% in comparison to the closing price of 91 cents on Tuesday.
The subscriber of these newly issued shares is Ever Credit, an investment holding firm that is entirely owned by laminates manufacturer Kingboard Holdings. As a result of this transaction, Kingboard Holdings will secure a 1.25% ownership stake in Country Garden through its subsidiary Ever Credit.
Country Garden had initially entered into a term loan facility amounting to HK$1.88 billion with Ever Credit in December 2021. This new share issuance will effectively reduce the outstanding loan balance to just under HK$1.6 billion.
The rationale provided by Country Garden for this share issuance is to safeguard its available cash resources, lower its leverage, and fortify its overall financial position.
Nio shares plunge 8.3% after EV maker posts wider net loss
Nio’s shares, listed in Hong Kong, experienced a notable decline of 8.30% on Wednesday, following the announcement of a net loss amounting to 6.06 billion yuan ($831.65 million) in the second quarter.
This loss represents a wider deficit compared to the net loss of 2.76 billion yuan reported in the same period of the previous year.
During the second quarter, the Chinese electric vehicle (EV) manufacturer managed to deliver 23,520 vehicles, largely attributed to the clearance of its previous models at significant markdowns. However, the introduction of an updated product lineup has already begun yielding improved outcomes, with 20,462 vehicles being delivered in July.
Experts suggest that Nio could witness a “more than double” surge in deliveries during the third quarter. John Zeng, the director of China forecasting at Globaldata, stated, “In Q3, we anticipate a significant rise in quarterly deliveries, more than doubling the previous numbers. This trend will contribute to an enhancement in their overall revenue.”
Nevertheless, the strategy of implementing price reductions could exert pressure on Nio’s profitability in the forthcoming quarters, as cautioned by Zeng.
Australia inflation softens to 4.9% in July, down from June’s 5.4%
In July, Australia’s consumer price index (CPI) experienced a year-on-year growth of 4.9%, indicating a slower pace of increase compared to June’s 5.4%. Notably, this marks the third consecutive month of decelerating inflation.
When excluding the influence of volatile elements such as fuel, fresh food, and holiday travel, the inflation rate was recorded at 5.8%, presenting a decline from the revised June figure of 6.1%.
According to Australia’s statistics bureau, the most substantial factors contributing to the annual rise in July were elevated prices in the housing sector, as well as those in the category of food and non-alcoholic beverages.
Chinese banks to cut existing mortgage rates soon: Reuters
Several state-owned banks in China are reportedly considering a reduction in interest rates for their current mortgage customers, as per information from three sources familiar with the situation, as reported by Reuters.
Should these rate reductions come into effect, it would mark the first instance of such action since the occurrence of the global financial crisis.
Reuters’ sources shared that the extent of the rate cuts might differ based on the clients and geographical location. In some instances, the reductions could potentially reach up to 20 basis points.
Stocks head for losing months despite 11th-hour rally
Stocks secured their third consecutive day of gains on Tuesday. However, despite this positive trend, the losses sustained earlier in August have not been fully recovered.
Here’s the current standing of the three major indexes for the month:
- The Nasdaq Composite has experienced a decline of 2.8%.
- The S&P 500 has shown a decrease of 2%.
- The Dow has registered a decline of 2%.
With Thursday’s closure, the trading month comes to an end.
Stocks making the biggest moves after hours
Here are several stocks experiencing significant movements in after-hours trading:
- Box: The cloud stock declined by 7% after hours due to a second-quarter report with mixed results.
- Ambarella: The semiconductor manufacturer witnessed a decline of nearly 14% as a result of subdued current-quarter guidance, which overshadowed an otherwise strong report.
- HP: The product manufacturer experienced a drop of 5.6% during extended trading, following its fiscal third-quarter revenue falling below the expectations set by Wall Street.
Stock futures are near flat
Around 6 p.m. ET, stock futures exhibited minimal movement.
Futures linked to the Dow, S&P 500, and Nasdaq 100 were all trading at nearly unchanged levels.
