Stocks Mixed in Final Hour Push…..
U.S. equities came off the lows of the day to finish mixed, with the Dow able to capitalize on yesterday’s solid rebound. The markets continued to face a host of headwinds, notably stubbornly high inflation pressures that have forced the Fed to begin an aggressive monetary policy tightening campaign. The economic calendar disappointed, as preliminary data on the domestic manufacturing and services sectors came in below estimates, new home sales plunged, and a read on regional manufacturing activity surprisingly fell into contraction territory. Meanwhile, inflation, labor costs, and supply chain issues remained evident in corporate earnings reports, with Snap falling sharply after lowering its guidance, while Best Buy posted mixed results, Abercrombie & Fitch reported an unexpected loss, and Autozone topped quarterly estimates. Treasuries were higher to apply downside pressure on yields, and the U.S. dollar added to yesterday’s drop. Crude oil prices were lower, and gold gained ground. Europe finished mixed, while markets in Asia were lower with China leading the way.
The Dow Jones Industrial Average rose 48 points (0.2%) to 31,929, while the S&P 500 Index lost 32 points (0.8%) to 3,941, and the Nasdaq Composite declined 271 points (2.4%) to 11,264. In moderate volume, 4.9 billion shares of NYSE-listed stocks were traded, and 4.7 billion shares changed hands on the Nasdaq. WTI crude oil edged $0.52 lower to $109.77 per barrel. Elsewhere, the gold spot price was up $17.30 to $1,865.10 per ounce, and the Dollar Index lost 0.3% at 101.75.
Reads on business activity and housing disappoint…..
The preliminary S&P Global U.S. Manufacturing PMI Index for May declined to 57.5 from April’s unrevised 59.2 figure, and versus the Bloomberg consensus estimate of a decrease to 57.7. The preliminary S&P Global U.S. Services PMI Index showed growth for the key U.S. sector in May slowed to 53.5, compared to expectations to decline to 55.2 from April’s 55.6 figure. However, growth remained as readings above 50 for both indexes denote expansion.
S&P Global said the measure of input prices moved to the highest level since 2009, but output prices slowed from the record pace set in April, adding that companies reported that “demand is coming under pressure from concerns over the cost of living, higher interest rates and a broader economic slowdown.”
In housing news, new home sales (chart) tumbled 16.6% month-over-month (m/m) in April to an annual rate of 591,000 units, well short of the Bloomberg consensus forecast calling for a rate of 749,000 units, and below March’s downwardly-revised 709,000-unit level. The median home price rose 19.6% y/y to $450,600. New home inventory rose to 9.0 months from March’s level of a 6.4-months supply at the current sales pace. Sales fell m/m in all regions except for the West. Sales in the Northeast were higher y/y, while sales in the Midwest, South and West were lower. New home sales are based on contract signings, offering a timelier read on housing activity compared to the larger contributor of existing home sales, which are based on closings.
The Richmond Fed Manufacturing Activity Index surprisingly fell into contraction territory (a reading below zero) for May, plunging to -9 from April’s 14 reading, and well below forecasts for a reading of 10. Capacity utilization, new order volume and shipments dropped into contraction territory, and employment cooled significantly, while prices paid accelerated and remain severely elevated.
Treasuries gained ground, and yields have been choppy as of late as markets anticipate tighter Fed monetary policy amid the backdrop of persistent inflation and signs of slowing economic growth.
©2022 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.