By Clive McKeef
Dow bounces a day after biggest one-day percentage drop of
2019
U.S. stocks recovered some ground Thursday, boosted by a good
earnings report from Walmart and data showing a jump in nationwide
retail sales in July, helping stocks bounce from the worst one-day
fall this year on Wednesday.
Investors and central banks remain concerned though that
President Trump's trade war with China is undermining global
economic growth after China on Thursday threatened unspecified
retaliation
(https://www.wsj.com/articles/china-renews-vow-to-retaliate-against-planned-u-s-tariffs-11565874667)against
Trump's recent threat to impose more tariffs on its imports from
September.
How are the benchmarks performing?
The Dow Jones Industrial index ended up 99.97 points, or 0.39%,
at 25,579.39, while the S&P 500 index added just 7.00 points,
or 0.25% to 2,847.60. But the Nasdaq Composite lost 7.32 points, or
0.09%, to 7,766.62.
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?
Gains in the Dow were led by Walmart (WMT), one of the largest
companies in the world by revenue, which reported better than
expected earnings
(http://www.marketwatch.com/story/walmart-shares-jump-after-earnings-beat-2019-08-15),
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 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," he said. "On tariffs, the CFO noted 'no impact on
consumer demand so far'".
But 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.
Bank stocks extended their losses though with Bank of America
(BAC) and Citigroup lower as long term U.S. bond yields fell below
2% to a record low as investors expect more interest rate cuts by
central banks around the world.
The 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."
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."
Central banks around the world are also worried about weakening
economies 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.
(https://www.reuters.com/article/us-mexico-economy-rates-cut/mexico-central-bank-cuts-key-interest-rate-by-25-basis-points-to-8-idUSKCN1V526I)Mexico's
central bank cut interest rates for first time in five years
Thursday
(http://www.marketwatch.com/story/bank-of-mexico-to-cut-interest-rates-for-first-time-in-five-years-2019-08-15)
and in the U.S. St. Louis Fed President James Bullard said Thursday
(http://www.marketwatch.com/story/feds-bullard-says-he-has-one-more-interest-rate-cut-penciled-in-this-year-2019-08-06)he
has one more interest-rate cut "penciled in" for 2019 but said he
wasn't sure it would be needed.
Read:Central banks 'racing to the bottom' means one thing, says
Mark Mobius: that the stock market will do 'very well'
(http://www.marketwatch.com/story/central-banks-racing-to-the-bottom-mean-one-thing-the-stock-market-will-do-very-well-says-mark-mobius-2019-08-15)
(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 Treasury note yield fell 6.2 basis points to 1.534%,
its lowest since August 2016. The benchmark maturity briefly broke
below the 1.50% key psychological level in the afternoon.
The 2-year note yield plunged 9.1 basis points to 1.500%, its
lowest since October 2017, while the 30-year bond rate tumbled 5.3
basis points to 1.985%, a new all-time closing low.
In commodities markets, the price of crude oil slipped 1.4% to
about $54.47 per barrel, while gold prices added 0.2% higher at
41,531.20. 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 16:45 ET (20:45 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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