4-Day Market Rally Gathers Momentum On Wall Street, World Markets Follow

Alexander Garcia
13 Aug, 2024
Miami

Benchmark indexes raced to one-month high levels as market sentiment stabilized after wild swings in the previous week. 

Stocks advanced in a broad rally as investors bid up stocks after the release of the producer price inflation report. 

The S&P 500 index gained 1.5% and the Nasdaq Composite jumped 2.7% as investors kept hopes of a rate cut alive after producer price inflation slowed in July. 

Factory gate prices rose 0.1% on the month in July, slower than the 0.2% rise in June, and core PPI was unchanged from the prior month, the U.S. Bureau of Labor Statistics reported Tuesday. 

On an annual basis, producer price inflation rose at a slower pace of 2.2% from an upwardly revised 2.7% in June. 

A softer increase in producer prices also raised hopes that consumer price inflation, scheduled to be released on Wednesday, will also rise at a slower pace of 0.2% from the previous month in July and 3% from a year ago.

Investors are counting on at least a 25 basis point cut in interest rate after the September policy meeting, but those hopes may be in vain if inflation fails to weaken to 2%, the target level set by the Fed's policymakers. 

 

U.S. Indexes and Treasury Yields

The S&P 500 index gained 1.4% to 5,424.24, the Nasdaq Composite advanced 2.2% to 17,159.31, and the Russell 2000 index increased 1.2% to 2,086.34. 

The yield on 2-year Treasury notes edged lower to 3.98%, 10-year Treasury notes increased to 3.98%, and 30-year Treasury bonds inched lower to 4.19%.

WTI crude oil decreased $1.36 to $78.69 a barrel, and natural gas prices edged down 3 cents to $2.15 a thermal unit.

Gold increased by $5.70 to $2,469.02 an ounce, and silver decreased by $0.24 to $27.76. 

The dollar index, which weighs the US currency against a basket of foreign currencies, edged lower to 103.01.

 

U.S. Stock Movers 

Starbucks surged 16% to $89.47 after the coffee chain announced a surprise CEO change, replacing Laxman Narasimhan with Brian Niccol, the current CEO of Chipotle Mexican Grill. 

Laxman appears to have been forced out by the company under mounting pressure from activist investors Starboard Value and Elliott Investment. 

Chipotle Mexican Grill dropped 8.6% to $51.06. 

Home Depot dropped 1.5% to $340.43, and the home improvement retailer estimated a larger comparable same-store sales decline in 2024. 

The retailer estimated comparable sales to fall between 3% and 4% from the previous estimate of a 1% decline. 

Total revenue is expected to rise between 2.5% and 3.5%, higher than the previous estimate of a 1% increase.

Super Micro Computer increased 2.9% to $555.91 and extended its two-day gains to 10%. 

The server and data storage company plunged 20% after reporting weaker-than-expected quarterly earnings, but sales were ahead of market expectations. 

ON Holding AG decreased 0.5% to $39.35, and the Swiss athletic apparel and accessories company reported better-than-expected revenue in the second quarter, but earnings per share missed analyst expectations. 

Revenue increased 28% to CHF 567.7 million, income increased eightfold to CHF 30.8 million from CHF 3.3 million, and basic earnings per share soared to 10 Swiss cents from 1 cent a year ago. 

 

European Indexes Lacked Direction, Investor Sentiment Plunged 

European markets lacked direction in Tuesday's trading, and investors awaited the release of key economic data in the eurozone, the U.S., and the U.K. 

Benchmark indexes in Paris, London, and Frankfurt headed lower and extended recent losses amid rate path uncertainties and a weak economic outlook. 

The U.K. jobless rate eased to 4.2% in the three months to June from 4.4% in the period to May, according to the latest data released by the Office for National Statistics. 

Regular pay excluding bonuses increased 5.4% to £645 per week in three months to June, according to a separate report released by the ONS. 

The weekly pay increase slowed from 5.8% in the previous three-month period ending in May. 

Adjusted for inflation, regular weekly pay, excluding bonus, increased to 2.4%, slower than 2.5% in the previous three-month period. 

The ZEW Indicator of Economic Sentiment for the eurozone decreased for the second month in a row in August 2024, falling 25.8 points to a nine-month low of 17.9. 

The weakening domestic economic backdrop, rising tensions in the Middle East, and ongoing war in Ukraine contributed to the deterioration in sentiment for the second month in a row. 

In the meantime, the indicator of the current economic situation increased by 3.7 points to -32.4, and inflation expectations edged up by 2 points to -39.1.

 

Europe Indexes and Yields

The DAX index increased by 0.4% to 17,812.45; the CAC-40 index rose by 0.4% to 7,275.87; and the FTSE 100 index gained by 0.3% to 8,235.23. 

The yield on 10-year German bonds edged lower to 2.20%, French bonds inched down to 2.95%, the UK gilts edged lower to 3.90%, and Italian bonds inched up to 3.61%.

The euro edged down to $1.09; the British pound inched lower to $1.272; and the U.S. dollar weakened to 86.69 Swiss cents.

Brent crude decreased $1.32 to $80.96 a barrel, and the Dutch TTF natural gas fell by €0.45 to €39.36 per MWh.

 

Europe Stock Movers

Just Group soared 17% to 137.20 pence after the retirement income and services provider reported better-than-expected first-half results and lifted its 2024 estimates. 

Dowlais Group decreased 8% to 53.85 pence after the UK-based automotive parts maker reported a wider loss in the first half and the company lowered its annual revenue outlook. 

Valneva SE increased 5.2% to €3.23, and the French biotech company's net income in the first half swung to profit and confirmed its annual revenue outlook. 

Brenntag declined 1% to €63.22, and the German chemical distributor lowered its full-year estimate. 

Evotec SE gained 3.4% to €5.58, and the German drug maker achieved a significant milestone in its partnership with Bristol Myers Squibb, triggering a performance-based payment of $75 million. 

HelloFresh SE jumped 10.9% to €5.99 after the meal-kit provider reported better-than-expected results in the second quarter. 

 

Japan Indexes Soared 3% After Wholesale Inflation Accelerated In July 

Investors bid up stocks following a three-day holiday as market sentiment stabilized after wild swings in the previous week. 

The Nikkei 225 stock average gained 3%, and the Topix index gained 2.6%. 

Market sentiment turned positive after a week of tumultuous trading that saw the Nikkei plunge 12.4%, recording the single-largest point decline, but managed to recover the losses in the following session, in the record point gains. 

Bank of Japan's unexpected rate cut and hawkish rate outlook contributed to the wild swings in markets last week, forcing Deputy Governor of the Bank of Japan Shinichi Uchida to comment that the central bank will refrain from raising rates when markets are unstable, calming market nerves. 

The yen traded at 147.67 against the U.S. dollar and weakened from the eight-month high as investors worried that the Bank of Japan's reluctance to lift rates will continue to keep pressure on the yen. 

Market sentiment was also bolstered after the producer price index increased 3% in July, the Bank of Japan reported Tuesday. 

Producer prices increased after energy costs rose, driven by the ending of government subsidies. 

Producer prices accelerated for the sixth month in a row and increased to 3% for the first time since August 2023, after the yen-denominated costs of imported goods and materials soared 10.8%. 

Producer price inflation in June was 2.9%. 

Weaker yen has contributed to higher prices for imported food, fuel, and materials, but the recent rebound in the yen may slow inflation in the months ahead. 

 

Japan Stock Movers 

The Nikkei 225 stock average jumped 3% to 36,096.44, and the Topix index advanced 2.6% to 2,546.76. 

Tech stocks were among the leading gainers Tuesday's trading following the rebound in artificial intelligence-linked stocks in New York. 

Tokyo Electron gained 6.3% to ¥27,430.0, Advantest Corp. jumped 7.3% to ¥6,217.0, and Screen Holdings increased 7.3% to ¥10,390.0. 

Rakuten Group advanced 8.8% to ¥847.90, and Trend Micro jumped 5.4% to ¥8157.0. 

Mitsubishi UFJ Financial increased 1.7% to ¥1,435.0, Sumitomo Mitsui advanced 3.6% to ¥9,296.0, and Mizuho Financial gained 2.7% to ¥2,855.0. 

Sharp Corp. declined 5.7% to ¥817.60 and Nippon Express declined 2.5% to ¥6,717.0. 

Meiji Holdings dropped 5.2% to ¥3,452.0, and the company reported better-than-expected June quarter revenue of 279 billion yen and earnings per share of 50.23 yen. 

 

Hong Kong Indexes Extended 5-day Rally 

Benchmark indexes in Shanghai and Hong Kong struggled to advance amid ongoing economic growth worries and mixed corporate performance. 

The Hang Seng Index added 0.2%, but the CSI 300 index edged down 0.2% as investors awaited the release of a flood of economic data later in the week. 

The Hang Seng index extended gains for the fifth session in a row, and the benchmark index rebounded but hovered near its three-month low. 

Moreover, trading contracted on the Hong Kong Stock Exchange, and stock trading volume dropped to a six-month low of HK $70.3 billion or US$9 billion on Monday, according to the data available from the exchange. 

China's statistics bureau is scheduled to release retail sales, industrial output, fixed asset investment, and home price data later in the week. 

Market sentiment has been cautious after consumer price inflation advanced for the sixth month in a row in July, but producer price inflation declined for the 22nd month in a row, confirming the deflation trend. 

Investors are also worried that the recent gains in exports may come to a halt in the second half as punitive tariffs kick in in the U.S. and Europe, contributing to the economic slowdown in the period. 

 

China Stock Movers 

The Hang Seng index increased 0.3% to 17,155.99, and the CSI 300 index fell 0.2% to 3,320.61. 

Tencent Holdings jumped 1% to HK $378.60, and the diversified Internet services provider is scheduled to release its earnings on Wednesday. 

Investors are estimating earnings to jump more than 50% in the second quarter compared to a year ago. 

Country Garden Services decreased 5.5% to HK $4.44, and the company said profit in the first half declined 37% from a year ago to 1.7 billion yuan, or $237 million. 

Country Garden Services estimated first-half revenue between 20.9 billion yuan and 21.2 billion yuan and net income between 1.47 billion yuan and 1.65 billion yuan. 

The company said it lowered its revenue estimate because of property market weakness and reduced investment income. 

Despite the current market weakness, the company expects over $12.2 billion in cash reserves at the end of the first half, as it plans to tighten its risk management and cut costs to improve profitability.