U.S. Major Averages Extended Gains Following the Best Weekly Advance Last Week

Alexander Garcia
19 Aug, 2024
Miami

Market indexes on Wall Street overcame morning doldrums and advanced above the flatline. 

At the end of last week, stock indexes recovered for the second week in a row and erased losses for August, following wild market gyrations at the start of the month. 

Earlier in the month, the S&P 500 index and the Nasdaq Composite tumbled in volatile trading amid growing worries of a U.S. economic slowdown after non-farm payrolls expanded at a slower-than-expected pace. 

However, last week, market sentiment reversed and overcame worries of a slowdown after retail sales, inflation, and jobless claims data were ahead of market expectations. 

On the economic front, investors are looking forward to the release of existing home sales at 3.8 million units and new home sales near 0.6 million in July.

The S&P 500 index and the Nasdaq Composite are approaching their record highs as set about five weeks ago amid growing optimism around possible rate cuts by the Federal Reserve. 

Investors are hoping that policymakers are likely to cut rates by at least 25 basis points at the end of a two-day meeting on September 18. 

Those hopes may not be realized if the Fed decides to hold rates because, despite eleven rate cuts over 2022 and 2023, inflation is still closer to 3% and not near the 2% target set by the policy committee. 

 

U.S. Indexes and Treasury Yields

The S&P 500 index increased 0.5% to 5,585.09, the Nasdaq Composite rose 0.7% to 17,751.23, and the Russell 2000 index advanced 0.8% to 2,159.30. 

The yield on 2-year Treasury notes edged higher to 4.08%, 10-year Treasury notes increased to 3.89%, and 30-year Treasury bonds inched higher to 4.14%.

WTI crude oil decreased $2.13 to $74.44 a barrel, and natural gas prices edged up 9 cents to $2.21 a thermal unit.

Gold fell by $4.73 to $2,503.49 an ounce, and silver increased by $0.25 to $29.28. 

The dollar index, which weighs the US currency against a basket of foreign currencies, edged lower to 101.92.

 

U.S. Stock Movers

Icahn Enterprises decreased 6.2% to $15.93 after the Securities and Exchange Commission fined activist investor Carl Icahn for failing to disclose the company's stock as collateral for personal margin loans. 

Carl Icahn and Icahn Enterprises agreed to pay $0.5 million and 1.5 million, respectively, according to the company announcement. 

AMD increased 2.2% to $151.97, and the advanced semiconductor company agreed to acquire ZT Systems for $4.9 billion. 

Estee Lauder Companies decreased 1.8% to $93.20, and the cosmetic company announced weaker-than-expected quarterly results. 

Chief executive Fabirizio Freda said he plans to step down at the end of fiscal 2025, ending in June 2025, after leading the company for sixteen years. 

Dutch Bros. declined 2.5% to $31.86 after Piper Sandler downgraded the stock to "neutral" from "overweight.'

 

European Indexes Wipe Out August Losses

European markets lost steam after rising for four days in a row, and the euro inched to an eight-month high. 

Benchmark indexes in London, Paris, and Frankfurt struggled to advance after three hours of trading, and defense stocks led the decliners. 

European markets advanced for the second consecutive week, tracking gains on Wall Street and easing worries of a U.S. economic slowdown.

Over the last week, market indexes recovered losses earlier in the month after a steep fall following the worries of the U.S. economic slowdown. 

Those worries were set aside last week after U.S. weekly jobless claims, inflation, and retail sales were ahead of market expectations, powering the market rebound. 

On the economic front, investors are looking forward to the release of construction output, an inflation update, and the current account balance in the Euro Area. 

 

Europe Indexes and Yields

The DAX index increased by 0.5% to 18,421.69; the CAC-40 index rose by 0.7% to 7,502.01; and the FTSE 100 index rose 0.5% to 8,356.94. 

The yield on 10-year German bonds edged higher to 2.22%, French bonds inched up to 2.94%, the UK gilts edged higher to 3.91%, and Italian bonds inched up to 3.59%.

The euro edged down to $1.10; the British pound inched higher to $1.292; and the U.S. dollar weakened to 86.50 Swiss cents.

Brent crude decreased $2.02 to $77.67 a barrel, and the Dutch TTF natural gas rose by €0.11 to €39.54 per MWh.

 

Europe Stock Movers

Aerospace and defense stocks led the decliners on a report that Germany is likely to cut its defense spending for military operations in Ukraine by half amid spending cuts. 

BAE Systems decreased 1.9% to 1,324.50 pence, Rolls Royce plunged 0.7% to 497.60 pence, MTU Aero Engines declined 0.3% to €267.90, and Rheinmetall AG fell 1.8% to €552.20. 

Plus500 Ltd. rose 5% to 2,555.59 pence after the online futures, options, and contract spread derivatives platform reported strong interim results and forecasted annual results to surpass market expectations. 

Barratt Developments rose 0.9% to 540.80 pence and Redrow plc increased 2.3% to 777.53 pence after two UK-based home builders said in joint statements that the merger deal is scheduled to be completed later this week. 

The weakness in tech stocks kept in check market gains in early trading despite the growing optimism that the U.S. Federal Reserve is more likely to cut interest rates between 50 basis points and 100 basis points before the year's end. 

SAP SE decreased 0.5% to €195.82, ASML Holding NV fell 1% to €195.82, BE Semiconductor edged higher by 0.8% to €122.05, and STMicroelectronics added 0.3% to €27.87. 

 

Tokyo Indexes Eased 1% Following Muti-year High Surge In the Last Week 

Stocks in Tokyo succumbed to profit-taking after a sharp rebound of nearly 8% in the previous week. 

The Nikkei index decreased 1.6% and the Topix dropped 1.7% after market sentiment recovered last week from wild swings earlier in the month. 

Last week, investor sentiment rebounded after worries about the possible economic slowdown eased and the Bank of Japan deputy governor's comments calmed market nerves. 

Uchida Shinichi commented that the central bank will refrain from raising rates when markets are not stable. 

The yen rebounded 2% to 145.23 against the U.S. dollar after machinery orders rose from the previous week in June. 

Japan's machinery orders, which exclude large but infrequent orders from shipping and power companies, rose 2.1% from the previous month in June, the Cabinet Office reported Monday. 

Orders rebounded from a decrease of 3.2% in May, largely because of the rise in orders from the non-manufacturing sector. 

On an annual basis, private-sector machinery orders unexpectedly declined 1.7% after surging 10.7% in May. 

 

Japan Stock Movers 

The Nikkei 224 Stock Average decreased 1.6% to 37,440.86, and the Topix index dropped 1.3% to 2,643.42. 

Tech stocks and banks were among the leading decliners in Monday's trading. Tokyo Electron, Advantest, Screen Holdings, and GS Yuasa fell between 1% and 3%. 

Sumitomo Mitsui Financial, Mitsubishi UFJ Financial, and Mizuho Financial declined between 1% and 2%. 

Automakers also fell after investors took profit in leading industrial companies. 

Toyota Motor decreased 3% to ¥2,660.50, Honda Motor fell 1.1% to ¥1,567.50, Nissan Motor declined 1.4% to ¥437.0, and Mitsubishi Motor eased 1.4% to ¥404.20. 

 

China Stocks Advanced Ahead of Earnings Releases This Week 

Domestic earnings optimism and waning fears of an economic slowdown in the U.S. supported the mark advance in Monday's trading in Hong Kong and Shanghai. 

The Hang Seng index jumped 1% and the mainland-focused CSI 300 index gained 0.4%. 

Market sentiment remained positive for the second week in a row following the largest single-day gain in Friday's trading in the Hang Seng index. 

The tech stocks index in Hong Kong jumped nearly 2% after JD.com reported second-quarter earnings increased 92% from a year ago. 

Investors are looking forward to earnings from leading corporations this week, including results from AIA on Thursday and Hong Kong Exchanges and Clearing on Wednesday. 

Market sentiment in Hong Kong and Asia was bolstered by advances in Friday's trading in New York, driving the S&P 500 index in 2024 to its best weekly gain in 2024. 

Investors have built up expectations of at least a 25 basis points rate cut at the end of the Fed's two-day policy meeting on September 18. 

Consumer price inflation has steadily declined to just under 3%, but despite the eleven rate hikes over 2022 and 2024, the inflation rate is still far higher than the Fed's 2% target rate. 

 

China Stock Movers 

The Hang Seng index soared 1% to 17,614.62, and the CSI index rose 0.4% to 3,359.25. 

JD.com jumped 5.4% to HK $114.0 and extended two-day gains to close to 10% after the diversified Internet conglomerate reported a 92% jump in earnings in the second quarter. 

Other tech leaders traded higher of their earnings announcements, following the release of earnings from JD.com. 

Baidu Inc. advanced 3.8% to HK $87.0 ahead of the search engine company's earnings on Thursday. 

Xiaomi Corp increased 2.8% to HK$17.80, and Meituan advanced 1.6% to HK$109.40. 

ASMPT Ltd. declined 0.3% to HK $85.40, and the stock jumped as much as 1.3% earlier in the day after the semiconductor company was selected to be included in the Hang Seng Tech Index.