Stocks Continued Last Week’s Decline Amid Friday’s Fed Comments…..
U.S. stocks ended the day in the red, continuing last week’s sharp drop following comments from Fed Chairman Jerome Powell last Friday that heightened inflationary concerns. During the Fed symposium in Jackson Hole, Wyoming, Powell signaled that “pain” could be felt by businesses and households alike as the Central Bank continues its aggressive monetary policy with the goal of restoring price stability. Treasury yields continued to climb, with the yield curve steepening, though the U.S. dollar remained subdued after hitting fresh multi-decade highs early last week. Crude oil prices rallied while gold moved modestly lower. As earnings season is heading to a close, shares of Catalent fell after issuing disappointing guidance, while Pinduoduo rallied after reporting stronger-than-expected Q2 earnings and revenues. The economic calendar was relatively quiet today, but data on Dallas manufacturing activity showed that the index remained in contraction territory despite a slight improvement. Asia finished mostly lower, but China nudged higher. Europe moved broadly to the downside, while U.K. markets were closed for a holiday. The global markets continued to grapple with Friday’s hawkish commentary by Fed Chair Powell.
The Dow Jones Industrial Average was down 184 points (0.6%) to 32,099, the S&P 500 Index declined 27 points (0.7%) to 4,031, and the Nasdaq Composite lowered 124 points (1.0%) to 12,018. In moderate volume, 3.4 billion shares of NYSE-listed stocks were traded, and 4.1 billion shares changed hands on the Nasdaq. WTI crude oil gained $3.95 to $97.01 per barrel. Elsewhere, the gold spot price modestly decreased $0.40 to $1,749.40 per ounce, and the Dollar Index was mostly unchanged at 108.42.
The Dallas Fed Manufacturing Index improved but remained in contraction territory (a reading below zero) for August. The index increased to -12.9 from -22.6 in July, and compared to the Bloomberg consensus estimate calling for an improvement to -12.7. The Index came off the lowest in two-years as new orders improved but remained negative, while production and shipments continued to expand. Employment decelerated but remained comfortably in expansion territory, and inflation pressures remained severely elevated but did moderate, with both prices paid and received decelerating.
Today’s report kicked off the economic week and with earnings season exiting stage left, it will likely garner heavier scrutiny, amplified by the backdrop of the Fed remaining more aggressive until the data says otherwise. However, with the calendar shifting to September, the headlining data points could be the August ISM Manufacturing Index and this month’s key nonfarm payroll report. Finally, we will get some Fedspeak to follow the tone set during last week’s Fed annual symposium in Jackson Hole.
Tomorrow’s economic calendar will introduce reports on June’s S&P CoreLogic home prices that are projected to increase 0.9% m/m on a seasonally adjusted basis and 19.20% y/y non-seasonally adjusted, versus the prior reads of 1.32% and 20.50%, respectively. Additionally, we will get the Confidence Board’s August consumer confidence release that is predicted to give a reading of 98 from the prior month’s 95.7. The Job openings and labor turnover survey (JOLTS) for July will also be introduced, expected to decrease to 10,375,000 from the prior month’s 10,698,000 read.
Treasury yields were higher, as the yield on the 2-year note rose 3 basis points (bps) to 3.44%, the yield on the 10-year note gained 7 bps to 3.11%, and the 30-year bond rate increased 4 bps to 3.25%.
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