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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