By Chris Matthews and William Watts, MarketWatch
Dow mixed a day after biggest one-day percentage drop of
2019
U.S. stocks slipped Thursday afternoon, giving up an early boost
from a bullish Walmart earnings report, and data showing a jump in
U.S. retail sales in July, which helped stocks bounce from the
worst one-day fall this year on Wednesday.
Investors remain concerned that President Trump's trade war with
China is undermining global economic growth after China on Thursday
threatened unspecified retaliation against Trump's recent threat to
impose more tariffs on its imports from September.
Central banks around the world are concerned about weakening
economic data from China and Europe and on Thursday European
Central Bank board member, Ollie Rehn, said European Central Bank
will roll out fresh stimulus measures
(http://www.marketwatch.com/story/ecb-prepared-to-deliver-very-strong-stimulus-package-policy-maker-says-2019-08-15)
that should include "substantial and sufficient" bond purchases as
well as cuts to the bank's key interest rate.
How are the benchmarks performing?
The Dow Jones Industrial index rose 71 points, or 0.3%, to
25,553, while the S&P 500 index added 9 points, or 0.3%, at
2,850. The Nasdaq Composite advanced 6 points to 7,779, or
0.1%.
The major indexes were briefly negative Thursday morning, with
the Dow down as many as 40.28 points, or 0.2%, the S&P 500
losing 5.77 points, or 0.2% and the Nasdaq down 29.79 points, or
0.4%.
Stocks were slammed Wednesday after the yield on the 10-year
U.S. Treasury note briefly traded below the 2-year Treasury note
yield , marking an inversion of the yield curve. Such phenomena are
viewed as an often reliable recession warning signal, albeit often
with a lag of more than a year.
The Dow on Wednesday fell 800.49 points, or 3.1%, to end at
25,479.42, its biggest one-day percentage decline since Dec. 4. The
S&P 500 finished 85.72 points lower, down 2.9%, at 2,840.60,
while the Nasdaq Composite tumbled 242.42 points to end at
7,773.94. Wednesday's fall was the second-biggest one-day
percentage decline for the S&P and Nasdaq of the year, trailing
only the Aug. 5 decline.
What's driving the market?
Apple (AAPL), one of the stocks affected by tariffs on imports
from China was down 1.0%, and bank stocks extended their losses on
Thursday with Bank of America (BAC) and Citigroup both lower as
long term U.S. bond yields fell below 2% to a record low..
Earlier Thursday the Chinese government said
(https://www.wsj.com/articles/china-renews-vow-to-retaliate-against-planned-u-s-tariffs-11565874667)it
would take unspecified, "necessary countermeasures" if the Trump
administration's planned tariffs of 10% on roughly $150 billion in
annual Chinese imports goes into effect Sept. 1.
"Tariff escalation risks continue to aggravate the current
weakness in global manufacturing, with risk now threatening to
infiltrate the resilient service sector and labor market," wrote
Darrell Cronk, chief investment officer for wealth and investment
management at Wells Fargo, in a Thursday note to clients.
"Retaliation against U.S. technology companies by China as a
response to additional U.S. tariffs could bring great supply-chain
disruption."
Stocks were initially supported during the session by better
than expected earnings from Walmart
(http://www.marketwatch.com/story/walmart-shares-jump-after-earnings-beat-2019-08-15),
the largest company in the world by revenue, and by data showing
U.S. retail sales jumped in July.
(http://www.marketwatch.com/story/retail-sales-surge-in-july-in-a-reassuring-sign-for-the-us-economy-2019-08-15)
Sales at internet retailers soared 2.8% from June, a gain that
may be tied to many sales offered by Amazon.com Inc. (AMZN) for its
Prime Day promotion, along with those from online competitors.
"It's hard to get a comprehensive economic perspective from a
single company but if we were going to do that with Walmart, we
would say it's flat out impossible the economy is falling apart,"
wrote Justin Walters, co-head of research at Bespoke Investment
Group, in a Thursday note. "The company's 5,358 US locations are
simply too big of a footprint to avoid a major consumer spending
slowdown. On tariffs, the CFO noted 'no impact on consumer demand
so far'".
But the intensifying U.S.-China trade war, the continued Brexit
drama, protests in Hong Kong, and political trouble in Italy all
give portfolio managers something worry about, said Kathy Lien,
managing director of FX strategy at BK Asset Management, in a note.
"Any one of these issues could tip one if not many countries into
recession. So regardless of the durability of the yield curve
inversion, the risk of recession this cycle is greater than its
ever been."
U.S. industrial output fell
(http://www.marketwatch.com/story/industrial-output-slumps-02-in-july-2019-08-15)
0.2% in July, the second drop in the past four months, the Federal
Reserve reported Thursday. Industrial output is only up 0.5% on a
year-on-year basis.
See:MarketWatch Economic Calendar
(http://www.marketwatch.com/tools/calendars/economic)
Which stocks are in focus?
Walmart Inc. (WMT)reported better-than-expected, second-quarter
earnings and same-store sales growth,
(http://www.marketwatch.com/story/walmart-shares-jump-after-earnings-beat-2019-08-15)
while projecting that it would grow sales at already existing
stores by between 2.5% and 3% in 2020.
Shares of Dow component Cisco Systems Inc.(CSCO) were down,
after giving tepid guidance for the next quarter late Wednesday
(http://www.marketwatch.com/story/ciscos-weak-outlook-stokes-fears-of-slowdown-in-tech-spending-but-5g-may-offer-light-at-end-of-the-tunnel-2019-08-14).
Shares of General Electric Co. (GE) tumbled to a more than
six-month low, after a research report from Madoff whistleblower
Harry Markopolos
(http://www.marketwatch.com/story/ge-is-the-new-target-of-madoff-whistleblower-2019-08-15)posted
a research report online accusing the conglomerate of inaccurate
and fraudulent filings with regulators.
U.S.-listed shares of Chinese e-commerce giant Alibaba Group
Holding Ltd. (BABA) advanced, after reporting fiscal first-quarter
results
(http://www.marketwatch.com/story/alibabas-stock-surges-after-profit-and-revenue-rise-above-expectations-2019-08-15)
Thursday morning.
Retailer J.C. Penney Co. Inc. (JCP) reported a
narrower-than-expected loss
(http://www.marketwatch.com/story/jc-penney-shares-slide-after-revenue-miss-2019-08-15).
How are other markets trading?
The 10-year U.S. Treasury note yield fell to 1.48%, representing
a fresh three-year low for the benchmark bond. Treasury yields fell
across the curve, with the 30-year U.S. Treasury Bond yield falling
about 3 basis point to 1.998% after seeing a record low
Wednesday.
In commodities markets, the price of crude oil slipped 1.4% to
about $54.50 per barrel, while gold prices ticked 0.1% higher. The
U.S. dollar edged higher versus its major rivals.
Asian markets traded mixed overnight, with China's CSI 300
adding 0.3%, Japan's Nikkei 225 falling 1.2% and Hong Kong's Hang
Seng Index rising 0.8%. European equities were trading lower, down
0.6%, according to the Stoxx Europe 600 .
(END) Dow Jones Newswires
August 15, 2019 14:31 ET (18:31 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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