U.S. and Global Markets Attempt to Claw Back Monday's Losses

Alexander Garcia
07 Aug, 2024
Miami

Stocks attempted to rebound on Wall Street for the second day in a row as market sentiment stabilized and investors tried to recoup Monday's losses. 

The S&P 500 index gained more than 1% and the Nasdaq Composite advanced closer to 2% as investors surmised that the recent three-day sell-off may have been overdone. 

Investors debated the health of the U.S. economy and looked for alternative indicators to assess the underlying drivers, such as rail cargo loadings, ocean freight demand, online traffic at shopping sites, and credit card charge volumes. 

Market indexes rebounded on Wednesday after falling sharply in the previous three sessions in a row, following worries that labor market conditions are deteriorating faster than previously estimated and factory activities shrank for the third month in a row in June. 

Moreover, market sentiment was weak after mega-cap tech companies reported weaker-than-expected earnings results, stoking fears that the elevated capital expenditure to build out artificial intelligence infrastructure may be cut. 

 

U.S. Indexes and Treasury Yields

The S&P 500 index gained 0.4% to 5,263.01, the Nasdaq Composite advanced 0.6% to 16,450.79, and the Russell 2000 index rose 0.1% to 2,064.88. 

The yield on 2-year Treasury notes edged higher to 4.0%, 10-year Treasury notes increased to 3.93%, and 30-year Treasury bonds advanced to 4.23%.

WTI crude oil increased $1.75 to $75.03 a barrel, and natural gas prices edged up 6 cents to $2.07 a thermal unit.

Gold increased by $13.75 to $2,397.68 an ounce, and silver rose by $0.09 to $26.92. 

The dollar index, which weighs the US currency against a basket of foreign currencies, edged lower to 103.22.

 

U.S. Stock Movers 

Airbnb plunged 14.2% to $111.92 after the online booking platform reported a weaker-than-expected third-quarter outlook. 

The booking platform operator estimated revenue to fall between $3.67 billion and $3.73 billion, slightly below analysts expectations of at least $3.85 billion. 

Wynn Resorts declined 0.3% to $76.10 after the casino and resort operator reported weaker-than-expected revenue in the second quarter. 

Reddit dropped 6% to $51.08, despite the social news company reporting better-than-expected second quarter revenue and earnings and issuing third quarter revenue in line with market expectations. 

The company estimated revenue in the third quarter to fall between $290 million and $310 million. 

Walt Disney & Company decreased 2.5% to $87.77 after the theme park operator reported better-than-expected quarterly results. 

Lyft Inc. dropped 16.6% to $9.15, and the digital ride-hailing company issued weaker-than-expected third-quarter revenue guidance. 

The company estimated gross booking in the third quarter to range between $4.0 billion and $4.1 billion and adjusted operating earnings between $90 million and $95 million. 

CVS Health decreased 0.6% to $57.95 after the drugstore chain operator reported better-than-expected second quarter earnings, but the company lowered its full-year net income outlook, citing higher costs. 

Super Micro Computer dropped 14.3% to $528.77 after the computer server company reported weaker-than-expected fiscal fourth quarter earnings. 

The company also announced a 10-for-1 stock split. 

 

European Markets Rebounded Shaking Off Global Worries

European markets rebounded as investors reacted to domestic economic updates and economic reports in China. 

Benchmark indexes in London, Paris, and Frankfurt increased between 1% and 2%, and German industrial output rose more than expected and exports fell in June. 

Global market sentiment recovered after days of weakness following a string of weak key economic U.S. data and weaker-than-expected earnings from big tech companies. 

Moreover, investors were also on edge after the Bank of Japan unexpectedly raised the interest rate, forcing the yen carry trade to unwind, roiling global financial markets, and spiking volatility to a level not seen since 1987. 

Advanced chip equipment makers were under pressure for the second week in a row after investors unwound artificial intelligence-linked stocks on fears of stretched valuations and a possible slowdown in spending by mega-cap tech companies. 

 

Germany's Exports and Imports Eased In June 

Calendar and seasonally adjusted goods exports from Germany in June declined 3.4% from the previous month to €127.7 billion, and goods imports rose 0.3% to €107.3 billion, resulting in a trade surplus of €20.4 billion. 

On an annual basis, exports decreased 4.4% and imports fell 6.4%, the Federal Statistics Office, or Destatis, reported Thursday. 

The trade balance in May 2024 was €25.3 billion, and it was €19.0 billion in June 2023. 

Exports to the EU countries decreased 3.4% to €69.7 billion, shipments to the U.S. fell 7.7% to €12.9 billion, shipments to China rose 3.4% to €7.9 billion, and shipments to the U.K. edged down 0.6% to €6.5 billion. 

Imports from the EU nations eased 0.4% to €51.9 billion, declined 6.9% to €12.9 billion, from the U.S. decreased 6.5% to €7.4 billion, and from the UK increased 11.1% to €3.1 billion. 

 

German Industrial Output Expanded

In a separate report, the statistical office noted industrial production increased 1.4% in June but declined 4.1% from a year ago. 

Production rebounded largely because of a 7.5% increase in the automotive sector, reversing the decline of 9.9% in the previous month. 

Industrial production, excluding energy and construction, increased by 1.5% in June compared to May, adjusted for seasonal and calendar effects. 

Production of capital goods rose by 2.5%, intermediate goods by 2.1%, but consumer goods fell by 2.4%. 

Outside industry, electricity and energy production rose by 2.9%, and construction activities rose by 0.3% in June 2024 compared to the previous month. 

 

Europe Indexes and Yields

The DAX index increased by 1.5% to 17,615.15; the CAC-40 index rose by 1.9% to 7,266.01; and the FTSE 100 index advanced by 1.8% to 8,186.88. 

The yield on 10-year German bonds edged higher to 2.28%, French bonds inched higher to 3.02%, the UK gilts inched higher to 3.92%, and Italian bonds increased to 3.71%.

The euro edged down to $1.09; the British pound inched lower to $1.272; and the U.S. dollar weakened to 86.39 Swiss cents.

Brent crude increased $1.72 to $78.19 a barrel, and the Dutch TTF natural gas fell by €2.15 to €38.73 per MWh.

 

Europe Stock Movers

Novo Nordisk declined 3.7% to DKK 855.0 despite the Danish pharmaceutical company reporting weaker-than-expected second quarter profit and trimming its full-year outlook.

Puma SE decreased 11.2% to €36.79 after the athleticwear maker trimmed its full-year outlook. 

Commerzbank AG decreased 4.9% to €12.53 after the financial services company reported a decline in profit in the second quarter. 

Continental AG soared 5.8% to €57.54 after the automobile parts maker reported solid second-quarter results. 

Beiersdorf AG decreased 1.8% to €129.05, and the consumer products maker reported lower-than-expected second quarter results. 

ABN AMRO jumped 4.8% to €15.13 after the Dutch financial services company lifted its annual net interest income estimate.

Coca-Cola HBC decreased 2.7% to 2,686.0 pence after the Greece-based beverage bottling company cited macroeconomic headwinds in the second half of the year. 

Glencore increased 2.2% to 401.60 pence after the mining company shelved its plan to spin off its coal mining division, despite gaining support from its shareholders. 

Vodafone Group gained 3.2% to 72.66 pence after the wireless telecom operator launched its €500 million stock repurchase plan. 

WPP declined 2.6% to 698.40 pence after the advertising services provider agreed to sell its majority stake in FGS Global to KKR at an enterprise value of £1.7 billion. 

The state sale will generate a total of £604 million after tax. 

TotalEnergies SE increased 2.5% to €60.64 after the company agreed to sell a 50% stake in Total PARCO Pakistan Ltd. to Switzerland-based Gunvor Group. 

 

Japan Indexes Extended 2-day Gains, Yen Weakened Again 

Stock market indexes rebounded in Tokyo for the second day in a row, but market participants were worried about the outlook for the yen in the near future. 

The Nikkei 225 stock average jumped more than 1%, and the broader Topix advanced more than 2%. 

Global markets rebounded after calm returned to financial markets, following steep losses over the last five trading sessions as investors worried about the weakening U.S. economic conditions and the unexpected increase in interest rates by the Bank of Japan. 

The Bank of Japan's policy tightening led to a swift unwinding of the yen carry trade, stoking a surge in market volatility not seen since 1987. 

The yen eased to 146.90 against the U.S. dollar after Bank of Japan Deputy Governor Shinichi Uchida said the central bank will not raise rates if the market is unstable. 

Those comments contributed to positive market sentiment and supported the market advance in Thursday's trading.

However, investors worry that the pressure on the yen is likely to remain high, as the wide yield gap between the U.S. and Japan is likely to persist. 

 

Japan Stock Movers 

The Nikkei 225 stock average jumped 1.3% to 35,124.54, and the Topix index advanced 2.2% to 2,489.38. 

Financial services providers led the market gainers in Thursday's trading. 

Mitsubishi UFJ Financial, Sumitomo Mitsui Financial, and Mizuho Financial advanced between 8% and 10%. 

Leading industrial exporters led the gainers, and Canon jumped 9.9% to ¥4,405.0, Mitsubishi Electric advanced 3% to ¥2,160.50, and SoftBank Group jumped 6.5% to ¥7,544.0. 

Nichirei jumped 7.6% to ¥3,970.0, Nichias advanced 13.1% to ¥5,230.0, and Fujikura increased 8.3% to ¥2,650.0. 

Daikin Industries dropped 9.5% to ¥17,200.0 after the world's largest air conditioner manufacturer reported weaker-than-expected results. 

Net sales in the June quarter increased 14% to 1.25 trillion yen, and net income fell 21% to 63.10 billion yen from a year ago. 

The company estimated fiscal year revenue of 4.54 trillion yen, net income of 2.67 billion yen, and dividends of 320 yen. 

 

China Indexes Rebound from 3-Month Lows

Market indexes in Shanghai and Hong Kong rebounded from a three-month low after calm returned to global markets.

The Hang Seng index jumped more than 1.5%, and the CSI 300 index advanced 0.4%. 

Financial markets recovered  from steep losses over the last three days, heightened by worries about the unexpected weakening of U.S. economic conditions and the Bank of Japan's increase in interest rates.

Positive market sentiment was supported by a strong rise in China's exports and imports in July, indicating sustained domestic demand for imported goods. 

 

China's Exports and Imports Rise 7% In July

Exports increased 7% to $300.6 billion, and imports advanced 7.2% to $216 billion, driving the trade surplus to $84.7 billion, lower than $99.1 billion in June and higher than $80 billion a year ago. 

China's exports to the U.S. rose for the third month in a row and advanced 8%; to the ASEAN region, they increased 12.2%; to the European Union, they rose 7.9%; but declined by 2.8% to Russia.

Exports to the U.S. have been surging in the past few months, ahead of the expected tariffs on over 100 Chinese goods in the next few weeks. 

However, the outlook for China's exports is not clear in the second half, after the implementation of additional tariffs and import hurdles in the U.S. and the European Union. 

   

China Stock Movers 

The Hang Seng index soared 1.8% to 16,951.78, and the CSI 300 index added 0.4% to 3,355.76. 

Internet leaders led the gainers in Hong Kong trading after falling for three weeks in a row.

Alibaba Group advanced 2.9% to HK $77.45, Tencent Holding increased 2.9% to HK $364.60, and Meituan gained 1.8% to HK $107.50.

Techtronic Industries increased 4.9% to HK$96.05 after the power tool maker reported a 16% increase in first-half profit.

BYD Company advanced 0.08% to HK $211.05, Li Auto jumped 4.1% to HK $76.05, and Xpeng decreased 1.9% to HK $28.10.