Late Rally In Volatile August Lifted U.S. and Global Stocks Higher

Barry Adams
31 Aug, 2023
New York City

Stocks were volatile on the final day of the month but market averages retained upward bias. 

Market averages are likely to stretch the latest winning streak to the fifth session in a row and Treasury yields edged lower. 

The latest market gains helped the S&P 500 index trim its August losses to 1.5% and the Nasdaq to 2.3% after a rally in tech stocks lifted broader indexes. 

Treasury yields edged lower after the release of alternative measure of inflation data. 

Core personal consumption expenditures index increased 0.2% in July from the previous month and jumped 4.2% from a year ago, the U.S. Bureau of Economic Analysis reported Thursday. 

The core PCE index, which significantly understates inflation felt by most families, is the preferred inflation measure of the Federal Reserve. 

The PCE index increased 0.2% from the previous month and rose 3.3% from a year ago. 

The inflation reading confirmed prices are still rising at a faster pace, despite multiple rate hikes over the last sixteen months. 

The stubborn inflation data provided another signal to Fed's policymakers and supported the case for hawkish stance. 

In other economic news, initial jobless claims adjusted for seasonal factors declined 4,000 to 228,000 in the week ending on August 26, the Labor Department reported Thursday. 

Meanwhile, continuing claims  rose 28,000 from the previous week's downwardly revised to 1.725 million in the week ending on August 19. 

 

U.S. Indexes & Yields 

The S&P 500 index traded up 0.3% to 4,518.44 and the Nasdaq Composite gained 0.3% to 14,060.16. 

The yield on 2-year Treasury notes decreased to 4.89%, 10-year Treasury notes inched lower to 4.09% and 30-year Treasury bonds edged down to 4.20%. 

Crude oil increased $1.54 to $83.16 a barrel and natural gas prices decreased 1 cent to $2.78 a thermal unit. 

 

U.S. Stock Movers 

Salesforce Inc jumped 4.9% to $226.0 after customer management software developer reported better-than-expected sales and earnings. 

Revenue increased to$8.6 billion and adjusted diluted earnings per share of $2.12. 

Costco Wholesale Corp increased 0.3% to $544.18 after the membership discount wholesale club said August sales increased 5% to $18.42 billion. 

Five Below Inc declined 4.5% to $174.88 after the deep discount retailer forecasted weak third quarter results. 

The retailer estimated revenue to fall between $715 million and $730 million and earnings per share between 17 cents and 25 cents, sharply lower than estimates set by some analysts. 

Victoria's Secret & Company declined 4.9% to $17.06 after the lingerie retailer reported disappointing second quarter results. 

The specialty retailer reported revenue of $1.43 billion and adjusted earnings per share of 26 cents. 

Chewy Inc dropped 15.1% to $23.12 after the online pet food retailer said second quarter sales of $2.78 billion and diluted earnings per share of 4 cents. 

Okta Inc jumped 14.2% to $83.83 and the identity access management reported sales and earnings ahead of market expectations. 

Second quarter revenue increased to $556 million and adjusted earnings per share of 31 cents. 

Crowdstrike Holdings Inc jumped 7.6% to $160.21 after the cybersecurity company reported better-than-expected revenue and earnings. 

The company reported second quarter adjusted earnings per share of 74 cents on revenue of $734 million. 

 

European Markets Trim August Losses, Inflation Stays Elevated

European markets advanced and investors overlooked German retail sales and the Euro Area inflation data. 

Market indexes on the last day of the month in London, Paris and Frankfurt traded higher but popular averages are set to close down between 2% and 3% in August. 

In volatile trading this month, investors remained divided on the future rate path as stubborn inflation remained significantly ahead of the European Central Bank's target level of 2%.  

Consumer price inflation in the eurozone remained unchanged at 5.3% in August, the European Central Bank reported Thursday. 

On the other hand, core inflation rate, which excludes volatile food, energy and tobacco prices, cooled to 5.3% from 5.5% in July. 

In other economic news in the region, the Euro Area seasonally adjusted jobless rate stayed at a record low of 6.4% in July, lower than 6.7% in the period a year ago, Eurostat reported Thursday. 

Jobless rate was the lowest in Germany with 2.9% and was the highest in Spain at 11.6% followed by 7.6% in Italy and 7.4% in France.

 

Europe Indexes & Yields

The DAX index increased 0.4% to 15,947.08, the CAC-40 index declined 0.7% to 7,316.70 and the FTSE 100 index advanced 0.2% 7,487.89.

The yield on 10-year German bonds decreased to 2.48%, French bonds traded lower to 3..0%, the UK gilts edged down to 4.43% and Italian bonds fell to 4.13%.

The euro edged to the lowest level since mid-June on the hopes that the central is more likely to pause its rate hike campaign and assess the impact of the multiple rate hikes on the economy. 

The euro edged lower to $1.087, the British pound to $1.267 and the U.S. dollar fetched 88.19 Swiss cents.

Brent crude increased $1.60 to $86.63 a barrel and the Dutch TTF natural gas decreased €0.96 to €35.93 per MWh.

 

Europe Stock Movers

Pernod Ricard SA dropped 4.5% to €185.65 after the French spirits maker said sales in key markets in China and the U.S. are likely to decline in the fiscal first quarter ending in September. 

Sanofi SA gained 1% to €99.61 after the company reorganized its executive management team.  

Grafton Group Plc increased 1.5% to 867.90 pence after the building materials supplier hiked its dividend and announced a new stock repurchase plan of up to £50 million. 

Frasers Group Plc added 1.6% to 809 pence after the sportswear retailer lifted its stake in online retailer Boohoo to 9.1% from 7.8%. 

Boohoo Group Plc jumped 4.5% to 34.85 pence. 

UBS Group AG jumped 5.8% to CHF 23.47 after the Swiss banking group reported significantly higher earnings on higher revenue.  

Profit-before-tax jumped to $29.23 billion, primarily reflecting a $28.9 billion negative goodwill related to the acquisition of Credit Suisse Group and including net credit loss expenses of $740 million. 

Net profit attributable to shareholders was $28.88 billion, with diluted earnings per share of $8.99. 

Return on CET1 capital was 185.0% or 4.5% excluding negative goodwill, integration-related expenses and acquisition costs.

Revenue in the second quarter jumped to $9.5 billion from $8.9 billion and net income jumped to $28.9 billion from $2.1 billion and diluted earnings per share soared to $8.99 from 61 cents a year ago. 

Credit Suisse group's performance appears to be stabilizing and net deposit outflow reversed to inflow in the second quarter was $18 billion, taking the total deposit inflow for the group including UBS increased  to $23 billion. 

UBS also said it plans to wind down noncore businesses of Credit Suisse, including its investment banking, wealth management and asset management units.