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 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
one of the largest companies in the world by revenue, which reported better than expected earnings, and by data showing U.S. retail sales jumped in July.
Sales at internet retailers soared 2.8% from June, a gain that may be tied to sales offered by Amazon.com Inc.
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 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
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 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 that should include “substantial and sufficient” bond purchases as well as cuts to the bank’s key interest rate.
Mexico’s central bank cut interest rates for first time in five years Thursday and in the U.S. St. Louis Fed President James Bullard said Thursday he has one more interest-rate cut “penciled in” for 2019 but said he wasn’t sure it would be needed.
Which stocks are in focus?
reported better-than-expected, second-quarter earnings and same-store sales growth, 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.
were down, after giving tepid guidance for the next quarter late Wednesday.
Shares of General Electric Co.
tumbled to a more than six-month low, after a research report from Madoff whistleblower Harry Markopolos 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.
advanced, after reporting fiscal first-quarter results Thursday morning.
Retailer J.C. Penney Co. Inc.
reported a narrower-than-expected loss.
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