U.S. Stocks Bounce Around Flatline After Sharp Downward Revision In Job Growth

Alexander Garcia
21 Aug, 2024
Miami

Stocks traded higher on Wall Street as investors looked forward to the release of the latest policy meeting and reviewed the latest nonfarm payroll revisions. 

The S&P 500 index and the Nasdaq Composite traded around the flatline, and investors are looking for clues about the possible rate cut in September. 

The U.S. economy created fewer jobs than previously reported for the year ending in Match 2024, the Bureau of Labor Statistics noted in its annual benchmark revisions released Wednesday. 

The job market added 818,000 fewer jobs in the period, indicating that actual job growth was 30% less than previously estimated 2.9 million over the one-year period ending in March 2024. 

In the year to March 2024, the U.S. economy still added just over 2 million jobs, but clearly the job market is not as strong as it was previously thought to be. 

The largest downward revision was in the professional and business services sector, where job growth was downwardly revised by 358,000, followed by the leisure and hospitality sector with a revision of 150,000 jobs. 

However, private education and health services saw an upward revision of 87,000, transportation and warehousing by 56,400, and other services by 21,000.

Moreover, investors also awaited comments from Fed Chair Jerome Powell at the annual gathering of central bankers in Jackson Hole, Wyoming. 

Market indexes over the last two weeks have rebounded sharply from the near 10% losses earlier in the month after the U.S. economy added fewer than expected jobs in July, setting off the fears of an unexpected economic slowdown. 

Market sentiment recovered after retail sales, jobless claims, and inflation data were ahead of expectations, calming market anxieties and setting aside the worries of a slowdown. 

Stocks are resting in today's session after market indexes halted an 8-day rally on Tuesday, the longest stretch of gains since late 2023. 

 

U.S. Indexes and Treasury Yields

The S&P 500 index increased 0.2% to 5,609.98, the Nasdaq Composite rose 0.2% to 17,858.98, and the Russell 2000 index rose 0.9% to 2,154.80. 

The yield on 2-year Treasury notes edged lower to 3.99%, 10-year Treasury notes decreased to 3.81%, and 30-year Treasury bonds inched higher to 4.08%.

WTI crude oil increased $0.71 to $72.47 a barrel, and natural gas prices edged down 5 cents to $2.14 a thermal unit.

Gold fell by $4.53 to $2,508.03 an ounce, and silver increased by $0.05 to $29.50.

The dollar index, which weighs the US currency against a basket of foreign currencies, edged lower to 101.21.

 

U.S. Stock Movers

Toll Brothers increased 1.1% to $135.0, and the luxury home builder reported higher-than-expected fiscal third quarter results and lifted its estimate of home deliveries for the year. 

Keysight Technologies jumped 11.5% to $155.69, and the test equipment manufacturing company reported better-than-expected results in the latest quarter and lifted its outlook for the current quarter. 

Macy's Inc. decreased 8.5% to $16.24, and the department store operator reported better-than-expected adjusted earnings. 

However, the retailer lowered its annual sales outlook to between $22.1 billion and $22.4 billion from the previous estimate between $22.3 billion and $22.9 billion. 

The company also guided comparable sales to shrink between 0.5% and 2.0%, compared to the previous estimate of a fall between 1.0% and 1.5%. 

Target Corp. jumped 15% to $166.51, and the retailer reported better-than-expected second quarter results. 

Revenue increased 2.7% to $25.4 billion from $24.8 billion, net income advanced 42.8% to $1.2 billion from $835 million, and diluted earnings per share rose 42.4% to $2.57 from $1.80 a year ago. 

The company guided comparable store sales increase in the third quarter to rise between zero and 2.0%, and GAAP and adjusted earnings per share between $2.10 and $2.40. 

Target said it repurchased $155 million of its shares in the second quarter, retiring 1.1 million shares of common stock at an average price of $145.94. 

The company paid dividends of $509 million in the second quarter, compared with $499 million last year, an increase of 1.9% in the dividend per share.

As of the end of the quarter, the company had approximately $9.5 billion available under the repurchase program authorized by its Board of Directors in August 2021.

Arch Resources Inc. jumped 6.5% to $135.0, and the company said it plans to merge with Consol Energy to form a new company, Core Natural Resources. 

Consol Energy jumped 7.2% to $102.33. 

The combined company is expected to have annual revenue of $5.7 billion and a coal production capacity of 101 million tons, with an export potential of 25 million tons. 

Core National, after the merger, would operate 11 mines in six states, and the combination is expected to generate cost and operational synergy between $110 million and $140 million within six to 18 months following the close of the transaction, primarily from the logistics optimization. 

 

European Markets Extend Weekly Gains, Euro Hovers Near 8-month High 

Major stock markets across Europe advanced and extended gains for the third week in a row and erased losses booked earlier in the month. 

Benchmark indexes in London, Paris, and Frankfurt inched higher amid optimism that central banks in Europe and in the U.S. are ready to cut interest rates next month. 

The rate-cut expectations have bolstered market sentiment over the last two weeks following a string of positive updates on inflation in Europe and improving retail sales, labor market, and inflation indicators in the U.S. 

Natural gas prices weakened slightly after gas storage levels reached 90% capacity as Norway prepares for heavy maintenance over the next few weeks. 

 

Europe Indexes and Yields

The DAX index increased by 0.5% to 18,451.75; the CAC-40 index rose by 0.5% to 7,524.72; and the FTSE 100 index advanced by 0.1% to 8,283.43. 

The yield on 10-year German bonds edged lower to 2.22%, French bonds inched down to 2.94%, the UK gilts edged higher to 3.92%, and Italian bonds inched up to 3.59%.

The euro edged down to $1.11; the British pound inched higher to $1.30; and the U.S. dollar weakened to 85.49 Swiss cents.

Brent crude decreased $0.39 to $76.88 a barrel, and the Dutch TTF natural gas rose by €0.90 to €37.21 per MWh.

 

Europe Stock Movers

Mining companies in London advanced after aluminum futures in Shanghai rose to a five-week high amid tight supplies. 

Glencore increased 1.1% to 414.51 pence, Anglo American jumped 2% to 2,291.0 pence, and Antofagasta added 1.5% to 1,908.0 pence. 

Barratt Developments decreased 0.5% to 546.40 pence after the UK's Competition and Markets Authority signaled its willingness to accept measures proposed by the company and Redrow to alleviate local competition concerns. 

Costain Group PLC jumped 5.1% to 99.40 pence, and the UK-based construction and engineering company announced strong first-half results and a stock repurchase plan of £10 million. 

Alcon AG decreased 1.8% to CHF 81.18 after the Swiss pharmaceutical and medical device company for eyecare reported weaker-than-expected second quarter results. 

 

Tokyo Indexes Trimmed Weekly Gains

A stronger yen and tech weakness in New York dragged down market indexes in Tokyo in Wednesday's trading. 

The Nikkei 225 decreased 0.3%, and the broader Topix index dropped 0.2% after the yen resumed its upward move. 

The yen traded as high as 149.96 against the U.S. dollar, and market indexes turned lower because stronger yen contributes to the weakness in corporate earnings. 

Market sentiment was also weak after investors turned cautious on Wall Street and halted the 8-day rally amid worries about the high valuation of artificial intelligence-linked stocks. 

 

Japan's Trade Deficit Soared In July 

On the economic front, Japan's trade deficit soared in July after imports soared and exports rose at a slower pace, according to data from the Ministry of Finance. 

Exports rose 10.3% from a year ago to 9.6 trillion yen, accelerated from a 5.4% increase in the previous month, and rose for the eighth month in a row amid weakness in the yen, driving demand for machinery and semiconductor equipment. 

Imports soared 16.6% to 10.2 trillion from 8.7 trillion a year ago, resulting in a trade deficit increase of ninefold to 621.8 billion yen from 61.3 billion yen. 

Trade deficit with China increased 80% to 638.5 billion yen, and the surplus with the U.S. declined 9% to 768.6 billion yen. 

Trade deficit with Western Europe soared sixfold to 206.3 billion yen after exports declined 2% to 1.1 trillion yen and imports rose 13.7% to 1.3 trillion yen. 

 

Japan Stock Movers 

The Nikkei 225 stock average decreased 0.3% to 37,970.84, and the Topix index fell 0.2% to 2,664.49. 

Tech stocks led the decliners in Tokyo trading following losses in overnight trading in New York. 

Advantest, Disco Corp., Lasetec, SoftBank, and Tokyo Electron fell between 2% and 4%. 

Financial stocks also participated in the market selloff, with leading banks and insurance companies losing more than 1%. 

Sumitomo Mitsui, Mitsubishi UFJ, and Mizuho Financial declined between 0.4% and 1.7%. 

Dai-ichi Life declined 2.5% to ¥4,059.0, Tokio Marine Holdings dropped 1.9% to ¥5,474.0, and MS&AD eased 0.7% to ¥3,343.0. 

Seven & I Holdings jumped 3% to ¥2,044.50, and Canada's retail giant Alimentation Couche-Tard offered to buy the company for $38 billion. 

Tokyo-based Seven & I Holdings, which owns the 7-Eleven chain, said it has formed a special committee to review the offer. 

 

Foreign Investor Exodus Adds to Selling Pressure in Hong Kong 

Stocks in Shanghai and Hong Kong accelerated their declines amid weakening economic backdrops and a lack of earnings growth catalysts. 

The Hang Seng index plunged 1% and wiped out this week's gains, and the CSI 300 index declined 0.2%. 

The latest selloff was sparked by a weakness in tech stocks after a Bloomberg News report suggested that Walmart is looking to sell its stake in the online platform JD.com and increase its investment in its operations. 

The tech stocks turned lower following the Walmart news and added to the growing exodus of foreign investors from Chinese stocks trading in Hong Kong. 

China, the second-largest economy in the world, is undergoing deep structural changes, weakening consumer confidence, and residential property market malaise that shows no signs of ending. 

Increasingly, foreign investors are losing patience with Chinese markets amid a lack of consistent policy support and a weak earnings growth outlook. 

While foreign investors are significantly cutting their exposure to Chinese stocks, in particular tech stocks, domestic investors are searching for undervalued companies with stock buyback plans. 

So far in the year, stock buybacks in Hong Kong have surged 30%, and to a record high of HK $164.8 billion, or $21.2 billion, according to data provider Hang Seng Indexes Company. 

 

China Stock Movers 

The Hang Seng index decreased 1% to 17,329.24 and the CSI 300 index dropped 0.2% to 3,327.69. 

Alibaba Group declined 1.2% to HK $79.45, Baidu decreased 2% to HK $84.85, Xiaomi fell 1.2% to HK $17.46, and Kuaishou Technology plunged 10.5% to HK $39.80. 

Sunny Optical Technology advanced 8.5% to HK $49.50, and the optical lens and camera module maker reported better-than-expected earnings. 

Revenue in the first half increased 32.1% to 18.8 billion yuan from 14.3 billion yuan, and profit attributable to shareholders soared 147% to 1.1 billion yuan from 459.4 million yuan a year ago. 

Diluted earnings per share jumped to 99.1 yuan from 39.95 yuan a year ago. 

Despite today's bounce, Sunny Optical stock has collapsed over the three years from a high of HK $252.60. 

Hong Kong Exchanges and Clearing Ltd. decreased 1.9% to HK $227.40 despite the company reporting increase in profit for the first time in three quarters. 

Revenue in the June quarter increased 8% from a year ago to HK $5.4 billion and net income advanced to 9% to HK $3.16 billion, following a rebound in initial public offering and in trading activities.