U.S. Stocks Turn Volatile After Factory Activities Contracts and Jobless Claims Rise

Barry Adams
01 Aug, 2024
New York City

Stocks on Wall Street turned volatile following sharp gains in the previous session as investors reviewed the latest batch of earnings and key economic data. 

The S&P 500 index and the Nasdaq Composite advanced 0.7% after Meta Platforms reported strong earnings and offered an upbeat outlook, but indexes turned down after the release of the manufacturing survey. 

The ISM Manufacturing PMI eased to 46.6 in July from 48.5 in the previous month, reflecting the sharpest decline in activities since November 2023. 

Market indexes jumped sharply in the afternoon on Wednesday after the Federal Reserve held the Fed Funds rate range between 5.25% and 5.50% for the eighth time in a row. 

Fed Chair Jerome Powell signaled that the central bank could see a possible scenario where rate cuts could begin as early as September if inflation continues to be on the downward slide and the employment market remains healthy. 

“If that test is met, a reduction in our policy rate could be on the table as soon as the next meeting in September,” Powell said.

Traders bid up stocks after Powell's comments and factored in that at least two rate cuts are likely in the fourth quarter. 

 

Weekly Unemployment Claims Advance to One-year high

Initial jobless claims rose last week, and a measure of labor costs rose less than expected in the second quarter, according to economic data released Thursday. 

First-time jobless claims increased from 14,000 to 249,000 for the week ending July 27, the Labor Department reported Thursday. 

Initial weekly claims were the highest since August 2023, as the job market tightened over the last year. 

Continuing claims, which run one week behind, rose by 33,000 to 1.877 million in the week ending July 20. 

 

Unit labor costs Increase Slows In Second Quarter

Unit labor costs in the nonfarm business sector increased at an annual pace of 0.9% in the second quarter, following the downwardly revised 3.8% in the first quarter, the Bureau of Labor Statistics reported Thursday. 

Unit labor costs reflect a 3.3% increase in wages and a 2.3% rise in productivity. 

Over the last four quarters, unit labor costs increased by 0.5%, the lowest rate of increase since the third quarter of 2019. 

Unit labor costs in the manufacturing sector increased by 3.2%, and in the business sector, they rose by 2.2%. 

 

U.S. Indexes and Treasury Yields

The S&P 500 index increased 0.7% to 5,559.79, the Nasdaq Composite gained 0.8% to 17,753.70, and the Russell 2000 index rose 0.2% to 2,258.31.

The yield on 2-year Treasury notes edged lower to 4.24%, 10-year Treasury notes decreased to 4.0%, and 30-year Treasury bonds decreased to 4.29%.

WTI crude oil increased $0.44 to $78.35 a barrel, and natural gas prices edged up 5 cents to $2.09 a thermal unit.

Gold increased by $4.56 to $2,450.65 an ounce, and silver declined by $0.06 to $28.94. 

The dollar index, which weighs the US currency against a basket of foreign currencies, edged lower to 104.25.

 

U.S. Stock Movers 

Meta Platforms soared 7.6% to $510.66 after the parent company of Facebook and WhatsApp reported higher-than-expected quarterly results. 

The company guided third quarter revenue between $38.5 billion and $41 billion and capital expenditure for the full year between $37 billion and $40 billion, higher than the previous range between $35 billion and $40 billion. 

Arm Holdings PLC declined 8.3% to $132.30 after the UK-based advanced chip designer's fiscal second quarter earnings per share outlook of 23 cents to 27 cents fell short of market expectations. 

The company guided fiscal second quarter revenue between $780 million and $830 million, and non-GAAP diluted earnings per share between 23 cents and 27 cents. 

Ferrari NV increased 4% to $429.41, and the luxury sports car maker reported better-than-expected quarterly results and raised its full-year outlook. 

Sports car shipment increased by 2.7% from a year ago to 3,484. 

Ferrari estimated revenue in the financial year at Є6.55 billion from the previous estimate of Є6.4 billion, adjusted earnings before interest and taxes at Є1.82 billion from Є1.77 billion, and adjusted earnings per share at Є7.90 from Є7.50.  

Teladoc Health declined 18.7% to $7.67 after the online health service provider reported weaker-than-expected quarterly revenue in the second quarter. 

The company recorded a noncash goodwill impairment charge of $790 million, reflecting changes in future cash flows related to the company's BetterHelp segment. 

Microsoft Corp. declined 1.1% to $418.35 after the software company reported better-than-expected quarterly results, but cloud segment growth fell short of market expectations. 

Azure and cloud services revenue increased 29%, Microsoft cloud revenue rose 21%, Xbox content and services revenue soared 61%, and search and news advertising revenue advanced 19%. 

Advanced Micro Devices jumped 4.2% to $144.48 after the advanced chip maker reported better-than-expected quarterly results.