Stocks Rebound in Final Minutes of Trading…..
U.S. equities were able to bounce off their lows to finish mixed, with the Dow and S&P 500 able to avoid a fifth-straight day of losses. On the other hand, Treasury yields and the U.S. dollar rallied, with the 2-year note hitting its highest level since 2007, as the markets continued to wrestle with solidified expectations of continued aggressive Fed tightening. Investors also sifted through a host of lackluster global August manufacturing data. U.S. manufacturing output came in above estimates but remained subdued, jobless claims moderated unexpectedly, and Q2 productivity and unit labor costs figures were revised favorably but continued to suggest economic headwinds. Equity news was lackluster, as Ciena Corporation missed earnings expectations, Campbell Soup offered mixed guidance, and Hormel Foods’ profits came in below forecasts. As well, semiconductor stocks saw pressure as the U.S. moved to restrict chip sales to China. Meanwhile, gold and crude oil prices were lower. Markets in Europe and Asia saw widespread losses, as the global markets continued to be hampered by the impact of tighter monetary policies and the manufacturing data.
The Dow Jones Industrial Average was up 146 points (0.5%) to 31,656, the S&P 500 Index increased 12 points (0.3%) to 3,967, but the Nasdaq Composite lost 31 points (0.3%) to 11,785. In moderate volume, 4.1 billion shares of NYSE-listed stocks were traded, and 4.7 billion shares changed hands on the Nasdaq. WTI crude oil fell $2.94 to $86.61 per barrel. Elsewhere, the gold spot price decreased $19.40 to $1,706.80 per ounce, and the Dollar Index jumped 0.9% to 109.66.
The August Institute for Supply Management (ISM) Manufacturing Index showed manufacturing growth (a reading above 50) came in above estimates but remained at the lowest level since June 2020. The index held at July’s 52.8 level, versus the consensus Bloomberg estimate of a decrease to 51.9. The stronger-than-expected report came as new orders rose back into expansion territory, though production growth slowed, and inventories declined. Employment rose and moved into expansion territory, and supplier delivery times shortened slightly. Inflation pressures eased noticeably, with the Prices Index falling to 52.5 from 60.0.
The ISM said, “Sentiment remained optimistic regarding demand, with five positive growth comments for every cautious comment.” However, ISM noted that panelists continue to express unease about a softening economy, and they are seeing growing worries about total supply chain inventory.
The final August S&P Global U.S. Manufacturing PMI Index was revised higher to 51.5, compared to estimates calling for an unrevised 51.3 level. The index was below July’s reading of 52.2, with a reading above 50 denoting expansion. S&P Global’s report differs from the ISM as it surveys a more diverse range of companies regarding size.
Construction spending declined 0.4% month-over-month (m/m) in July, versus projections of a 0.2% decrease and compared to June’s favorably revised 0.5% drop. Residential spending fell 1.5% m/m, while non-residential spending rose 0.8%.
Weekly initial jobless claims came in at a level of 232,000 for the week ended August 27, below estimates of 248,000 and south of the prior week’s downwardly revised 237,000 level. The four-week moving average declined by 4,000 to 241,500, but continuing claims for the week ended August 20 rose by 26,000 to 1,438,000, matching estimates. The four-week moving average of continuing claims increased by 4,500 to 1,428,500.
Final Q2 nonfarm productivity was revised favorably to a 4.1% decrease on an annualized quarter-over-quarter (q/q) basis, from an initial 4.6% estimated decline, and versus estimates of a revision to a 4.3% drop. Q1 productivity was unadjusted at a 7.4% decline. Labor productivity, or output per hour, is calculated by dividing real output by hours worked and is a major contributor to the economy’s long-term health and prosperity. Unit labor costs were adjusted to a 10.2% q/q increase, from the preliminary jump of 10.8%, and versus forecasts of a revised 10.5% gain. Unit labor costs were unrevised in Q1 at an increase of 12.7%.
Treasury yields were higher, with the yield on the 2-year note rising 8 basis points (bps) to 3.52%, the yield on the 10-year note gaining 13 bps to 3.26%, and the 30-year bond rate advancing 12 bps to 3.37%.
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