Myriad of Uncertainties Hamper Stocks…..
U.S. equities finished lower in the midst of a host of variables, adding to a choppy start to September, which has historically been a challenging month in terms of stock performance. The unemployment picture remained a source of uncertainty, as a reading on the Job Openings and Labor Turnover Survey (JOLTS) hit a record high, further widening the gap between labor demand and the unemployed. Moreover, the Fed released its Beige Book on business activity ahead of its September 22 monetary policy decision, indicating a pullback in economic growth amid uncertainty surrounding the Delta variant and material shortages. The supply-chain concerns were exacerbated after Sherwin-Williams, PulteGroup, and Vertiv Holdings all cut guidance due to the disruption, on the heels of yesterday’s warning from PPG. In M&A news, PayPal Holdings agreed to acquire Japanese “buy-now-pay-later” upstart Paidy for $2.7 billion in cash. Treasuries gained ground, applying downside pressure on yields, and the U.S. dollar modestly added to yesterday’s rally, while gold continued its descent and crude oil prices traded higher. Europe saw some pressure ahead of tomorrow’s monetary policy decision from the European Central Bank, while markets in Asia were mixed following some data in the region.
The Dow Jones Industrial Average declined 69 points (0.2%) to 35,031, the S&P 500 Index shed 6 points (0.1%) to 4,514, and the Nasdaq Composite fell 88 points (0.6%) to 15,287. In moderate volume, 810 million shares were traded on the NYSE and 4.1 billion shares changed hands on the Nasdaq. WTI crude oil gained $0.95 to $69.30 per barrel. Elsewhere, the gold spot price fell $7.40 to $1,791.10 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—moved 0.2% higher to 92.69.
Job openings post another record high, mortgage applications dip, Fed report released…..
As labor shortage remains a drag on business sentiment, the Labor Department’s Job Openings and Labor Turnover Survey (JOLTS), a measure of unmet demand for labor, showed a new record high of 10.93 million jobs were available to be filled in July, versus the Bloomberg forecast calling for 10.05 million jobs and June’s upwardly-revised 10.19 million level. The report showed the hiring rate declined to 4.5% from June’s 4.7% pace, and separations ticked higher to 3.9% from the prior month’s 3.8% pace. The quit rate remained at the prior month’s 2.7% pace.
The MBA Mortgage Application Index decreased by 1.9% last week, following the prior week’s 2.4% decline. The decrease came as a 2.8% drop for the Refinance Index was met with a 0.2% dip for the Purchase Index. The average 30-year mortgage rate was unchanged at 3.03% for the third-straight week.
In afternoon action, the Federal Reserve released its Beige Book, an anecdotal read on the nation’s business activity used as a policy tool to prep for the Fed’s next two-day monetary policy meeting set to conclude on September 22. The report noted that economic growth tempered to a moderate pace, citing in large part the rise in the Delta variant, as well as widespread shortages of materials and labor. Despite a falloff in dining out, travel and tourism, most districts continued to report an uptick in overall employment. Regarding inflation, most Districts reported steady inflation at an elevated pace, but as a result of supply-chain issues, as well as the impact of Hurricane Ida, several Districts said they anticipate higher selling prices ahead.
Consumer credit, released in the final hour of trading, showed consumer borrowing expanded by $17.0 billion during July, short of the $25.0 billion forecast of economists polled by Bloomberg, while June’s figure was adjusted slightly upward to an increase of $37.9 billion from the originally reported $37.7 billion. Non-revolving debt, which includes student loans and loans for vehicles and mobile homes, was $11.5 billion, a 4.1% increase year-over-year (y/y), while revolving debt, which includes credit cards, was $5.6 billion, a 6.7% y/y rise.
The markets continue to expect the Fed to begin trimming its monthly asset purchases sometime in Q4, despite last Friday’s much softer-than-expected August nonfarm payroll report, but the first rate hike is not expected for some time.
Treasuries were higher, as the yield on the 2-year note was unchanged at 0.22%, while the yields on the 10-year note and the 30-year bond decreased 4 basis points to 1.34% and 1.95%, respectively. The U.S. dollar moved slightly to the upside to extend yesterday’s rally.
©2021 Charles Schwab & Co., Inc. All rights reserved. Member SIPC.
Schwab Center for Financial Research (“SCFR”) is a division of Charles Schwab & Co., Inc. The information contained herein is obtained from third-party sources and believed to be reliable, but its accuracy or completeness is not guaranteed. This report is for informational purposes only and is not a solicitation, or a recommendation that any particular investor should purchase or sell any particular security. The investment information mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. All expressions of opinions are subject to change without notice in reaction to shifting market conditions.