Month: August 2023

(C) Reuters

Investing.com — The pace of annual inflation in the U.S. accelerated last month, while jobless claims unexpectedly declined, as the Federal Reserve mulls over potentially keeping interest rates on hold at its next policy meeting in September.

The Commerce Department’s personal consumption expenditures (PCE) index rose by 3.3% in the 12 months through July, meeting estimates. The figure was faster than an increase of 3.0% in the prior month.

On a monthly basis, the number was unchanged as anticipated at 0.2%.

Meanwhile, the core reading, which strips out volatile items like food and energy, quickened to 4.2% year-on-year and held steady at 0.2% month-on-month.

The PCE price indices are the Fed’s preferred measures for its 2% inflation target. Corralling runaway price gains has been a central focus of the central bank’s long-standing campaign of borrowing cost hikes, which has pushed the key federal funds rate up from near-zero to a range of 5.25% to 5.50%.

Data this week has suggested that the elevated interest rate environment may also be weighing on what has been a recently strong U.S. labor market. Job openings and resignations declined in July, while private payrolls growth slowed in August.

On Thursday, separate data from the Labor Department showed that first-time claims for unemployment benefits slipped to 228,000 in the week ended on August 26, down from an upwardly revised mark of 232,000 in the prior week. Economists had predicted that claims would edge higher to 235,000. The four-week moving average, which smooths out some of the week-to-week volatility, ticked up marginally by 250 to 237,500.

The Fed has made cooling labor demand a major objective of its tightening cycle, with policymakers hoping that this trend could help slow wage growth and, in turn, alleviate some inflationary pressures.

Investors may receive a fuller picture of the job market on Friday when the crucial nonfarm payrolls report is released. The U.S. economy is projected to have added 170,000 roles in August, down from 187,000 in the previous month.

(C) Reuters.

Investing.com — Investors await a fresh slew of U.S. economic data on Thursday after figures earlier in the week bolstered predictions that the Federal Reserve may soon end an aggressive interest rate hiking campaign. Dow futures point into the green, aided by improved guidance from Salesforce (NYSE:CRM), which boosted shares in the software group in premarket trading. Elsewhere, activity in China’s key manufacturing sector contracts, spurring on calls for Beijing to take stronger action to support the stuttering economy.

1. Futures mixed after fourth-straight winning session

U.S. stock futures were mixed on Thursday, but hovered mostly around the flatline, after the main indices on Wall Street posted their fourth winning session in a row.

At 05:13 ET (09:13 GMT), the Dow futures contract moved up by 100 points or 0.3%, S&P 500 futures added 4 points or 0.1%, and Nasdaq 100 futures edged down by 8 points or 0.1%.

Investors are digesting a series of economic figures in recent days that have pointed to some slowing in the U.S. labor market, fueling expectations that the Fed may soon bring its long-standing cycle of interest rate hikes to a close.

In individual equities, cloud-software group Salesforce lifted its full-year revenue guidance, giving added support to Dow futures (more below).

2. Jobless claims, PCE ahead

Traders will have the chance to parse through weekly initial claims for unemployment benefits as well the personal consumption expenditures (PCE) price index, the Fed’s preferred gauge of inflation, later today.

Economists expect initial jobless claims to tick up slightly to 235,000, while the annual core PCE measure is seen accelerating slightly to 4.2%.

The numbers are the latest in a parade of scene-setting data points ahead of the release of the closely-watched nonfarm payrolls report on Friday. The U.S. economy is projected to have added 170,000 roles in August, down from 187,000 in the previous month.

The Fed’s policy tightening campaign, which aims to cool red-hot inflation, has pushed the federal funds rate from near-zero to a range of 5.25% to 5.50% — the highest mark in more than two decades. But analysts say that signs of easing in the job market and broader economy could persuade officials at the central bank that inflationary pressures are waning, and the time to step back from rate hikes has come.

3. Salesforce raises guidance, UBS’s plans for Credit Suisse

Shares in Salesforce rose by more than 5% in premarket U.S. trading on Thursday after the software group increased its annual revenue outlook, citing strong demand for its cloud products.

Sales are now seen at between $34.7 billion to $34.8 billion in its current fiscal year, up from its prior prediction of $34.5 billion to $34.7 billion. The improved forecast added to hopes that Salesforce and other major cloud players could see a recent downturn in client spending begin to abate during the second half of 2023.

Elsewhere, UBS has announced that it will absorb the domestic unit of Credit Suisse, as the Swiss bank provided further details about its plans for the former rival it rescued in a government-brokered deal five months ago.

The move, which has been hotly debated in Switzerland ahead of national elections in October, will see Credit Suisse’s 167-year old brand eliminated and 3,000 jobs cut in the country. UBS Chief Executive Sergio Ermotti said it represented “the best outcome” for the merged lender, stakeholders and the Swiss economy.

U.S.-listed shares in UBS Group AG (NYSE:UBS) jumped premarket, mirroring a similar rally in the stock’s Swiss listing (SIX:UBSG).

4. Chinese manufacturing activity slips

Manufacturing activity in China contracted for a fifth consecutive month in August, heaping further pressure on Beijing to do more to help reinvigorate the post-pandemic recovery of the world’s second-largest economy.

China was initially projected to bounce back strongly from draconian COVID-19 rules this year, but a string of disappointing economic figures have all but eradicated this optimism.

Meanwhile, the crucial property sector remains plagued by a liquidity crisis, a trend that was illustrated on Wednesday when China’s biggest developer Country Garden posted a $7 billion first-half loss. The once-booming export industry has also been hit by weaker global consumption.

Chinese officials have rolled out some new measures to support the economy, but have stopped short of introducing wide-ranging stimulus policies. Analysts have argued that more action may still be needed.

5. Oil volatile after Chinese data, U.S. inventories draw

Oil prices edged higher in choppy trading on Thursday, as traders digested the conflicting influences of disappointing business activity data from top crude importer China and a substantially bigger-than-expected draw in U.S. crude inventories.

The Energy Information Administration reported Wednesday that U.S. oil inventories shrank by 10.6 million barrels last week, well above the 3.3 million barrels expected, as refiners ramped up production before the Labor Day weekend that usually signals peak U.S. summer demand.

Markets were also watching for any more disruptions in output stemming from Idalia, which made landfall in Florida on Wednesday, and has since been downgraded from hurricane status back to a tropical storm.

By 05:16 ET, the U.S. crude futures traded 0.4% higher at $81.92 a barrel, while the Brent contract gained 0.3% to $85.52.

(C) Reuters. FILE PHOTO: Passersby walk past an electric board displaying Japan’s Nikkei share average outside a brokerage in Tokyo, Japan April 18, 2023. REUTERS/Issei Kato/File Photo

By Stephen Culp

NEW YORK (Reuters) – Wall Street lost earlier momentum and the dollar bounced back on the last trading day of August, as closely-watched inflation data offered few surprises and bolstered the likelihood that the Federal Reserve will press the policy pause button at next month’s monetary policy meeting.

The tech-laden Nasdaq was modestly higher, the S&P 500 was essentially flat, while the Dow turned negative.

All three indexes remain on course to notch losses for the month, with the S&P 500 suffering its biggest percentage drop since February and the tech-laden Nasdaq clocking its largest slide this year.

“In August, a little bit of enthusiasm surrounding AI and the big tech names has been digested,” said Joseph Sroka, chief investment officer at NovaPoint in Atlanta. “Investors are looking for a theme that broadens support beyond the big seven stocks that contributed the most to returns over the course of the year.”

Among a smattering of U.S. economic reports, the Commerce Department’s closely watched Personal Consumption Expenditures (PCE) price index – the Fed’s preferred inflation yardstick – nailed consensus, soothing fears of an upside surprise, which could have helped provoke yet another interest rate hike in September.

“The PCE data came in inline with most expectations, and now we’ve got tomorrow’s employment report and then CPI and PPI along the road to the next Fed meeting,” Sroka added. “Employment has really been the missing piece for the Fed. The Fed says unemployment needs to rise and there needs to be more slack in the labor market to ease wage pressure. And we haven’t seen that yet.”

The Dow Jones Industrial Average fell 105.83 points, or 0.3%, to 34,784.41, the S&P 500 lost 0.29 points, or 0.01%, to 4,514.58 and the Nasdaq Composite added 40.23 points, or 0.29%, to 14,059.54.

European shares reversed earlier gains to close lower as falling consumer staples and luxury stocks offset gains in financials and real estate.

The pan-European STOXX 600 index lost 0.20% and MSCI’s gauge of stocks across the globe shed 0.14%.

Emerging market stocks lost 0.78%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.39% lower, while Japan’s Nikkei rose 0.88%.

The greenback gained ground against a basket of world currencies in the wake of U.S. economic data, while the euro sagged following cautious comments by a leading European Central Bank hawk.

The dollar index rose 0.41%, with the euro down 0.71% to $1.0846.

The Japanese yen strengthened 0.59% versus the greenback at 145.41 per dollar, while sterling was last trading at $1.2664, down 0.42% on the day.

U.S. Treasury yields were last a bit lower in choppy trading after data reinforced expectations that the Fed will hold interest rates steady in September.

Benchmark 10-year notes last rose 7/32 in price to yield 4.0906%, from 4.118% late on Wednesday.

The 30-year bond last rose 14/32 in price to yield 4.2023%, from 4.228% late on Wednesday.

Oil prices jumped, boosted by a U.S. inventory drawdown and production cuts by the OPEC+ group of oil producing nations.

U.S. crude rose 2.45% to settle at $83.63 per barrel, while Brent settled at $86.86 per barrel, up 1.16% on the day.

Gold prices inched lower in the wake of the PCE report, in opposition to the dollar.

Spot gold was essentially flat, at $1,941.13 an ounce.

(C) Reuters.

Investing.com — U.S. stocks were rising to close out August on a positive note as investors await Friday’s jobs report for August.

At 11:03 ET (15:03 GMT), the Dow Jones Industrial Average was up 76 points or 0.2%, while the S&P 500 was up 0.2% and the NASDAQ Composite was up 0.4%.

Wall Street’s main indices closed higher Wednesday, the fourth straight winning session. The blue-chip Dow Jones Industrial Average rose 0.1%, while the broad-based S&P 500 climbed 0.4% and the tech-heavy Nasdaq Composite 0.5%.

That said, these major averages are still on course to record monthly losses. The DJIA and Nasdaq Composite are each lower by around 2% in August, while the S&P 500 is off by 1.4%.

Jobless claims, core PCE index in focus

Recent economic data, including second quarter gross domestic product, job openings and private payrolls, all point to a cooling U.S. economy, raising expectations that the Federal Reserve will soon be finished with its rate-hiking cycle.

There is more data to digest Thursday. Initial jobless claims were 228,000 last week, lower than the expected 235,000, while the annual core PCE inflation measure was 4.2%, meeting expectations.

The Fed has lifted its federal funds rate from near-zero to a range of 5.25% to 5.50%, the highest level in more than 20 years, but is widely expected to stand pat in September.

UBS sees upside for S&P 500 next year

Even with the cooling economic data, UBS is confident about the future, with the Swiss banking giant seeing a June 2024 price target on the S&P 500 index of 4,700, compared with its 2023 year-end target of 4,500, around the current level.

“Stocks should be able to climb a bit higher in 2024 as earnings growth improves and the market begins to anticipate eventual Fed rate cuts if inflation continues to trend to the Fed’s target,” UBS said.

The blue-sky scenario could take the S&P 500 to 5,200, UBS added, if artificial intelligence really proves to be a game-changer.

Salesforce gains on strong cloud demand

Earnings season continues to wind down. Dollar General (NYSE:DG) disappointed on revenue and profit and gave a weaker than expected forecast. Shares fell 15.6%. Broadcom (NASDAQ:AVGO) and Lululemon Athletica (NASDAQ:LULU) report after the close.

Salesforce (NYSE:CRM) stock rose 3.9% after the software group increased its annual revenue outlook, citing strong demand for its cloud products.

Crude gains after massive U.S. inventory draw

Oil prices edged higher Thursday, as traders digested the conflicting influences of disappointing business activity data from China, the world’s biggest crude importer, and a hefty draw in U.S. crude inventories.

The Energy Information Administration reported Wednesday that U.S. oil inventories shrank by 10.6 million barrels last week, as refiners ramped up production before the Labor Day weekend, which usually signals peak U.S. summer demand.

Markets were also watching for any more disruptions in production stemming from Idalia, which made landfall in Florida on Wednesday, and has since been downgraded from hurricane status back to a tropical storm.

(Peter Nurse and Oliver Gray contributed to this item.)

(C) Reuters

Investing.com — Broadcom reported Thursday better-than-expected revenue guidance for current quarter and third-quarter results that beat analysts’ forecasts as the chipmaker expects AI-related spending on infrastructure software and semiconductors to boost demand.

Broadcom Inc (NASDAQ:AVGO) shares fell 3.3% in after-hours trading following the report. The stock had ended regular session, notching a 52-week high.

Broadcom reported earnings per share of $10.54 on revenue of $8.88 billion. Analysts polled by Investing.com anticipated EPS of $10.43 on revenue of $8.85 billion.

Revenue in quarter was supported by “demand for next generation networking technologies as hyperscale customers scale out and network their AI clusters within data centers,” the company said.

Semiconductor solutions, its core business, rose 78% to $6.94B, while infrastructure software rose 22% to $1.94B.

Looking ahead to fourth quarter, revenue was expected to come in at $9.27B, up 4% from the prior year period, and in-line with Wall Street’s estimates for $9.27B.

(C) Reuters.

Investing.com — The Dow closed lower Thursday, snapping a four-day wining streak as investors weighed up mixed economic showing steady inflation, but still-strong consumer spending ahead of the crucial monthly jobs report due Friday.

The Dow Jones Industrial Average fell 0.5%, 169 points, Nasdaq gained 0.1%, the S&P 500 fell 0.2%.

Fed pause hopes still alive amid in-line Inflation, hot consumer spending data

The core personal consumption expenditures price index, the Fed’s preferred gauge of inflation, rose 0.2% in July, in-line with the prior month’s pace and economists’ expectations.

But consumer spending, rose 0.8% in July, the fastest pace in more than six months, “perpetuating the notion of a resilient consumer,” Stifel said in a note.

Despite the strong consumer data and still-above trend inflation, just 12% of traders expect the Fed to deliver its twelfth rate-hike on Sept. 20, Stifel added, with about 56% of investors anticipate another hold.

Salesforce, Crowdstrike win big on earnings stage

Salesforce Inc (NYSE:CRM) lifted its guidance after reporting second-quarter results that topped Wall Street estimates, driven by momentum in MuleSoft, — the firm’s integration software used to connect applications and data – while its “overall subscription business further proving strength in the Beltway,” Wedbush said in a note.

Crowdstrike Holdings Inc (NASDAQ:CRWD) also reported a beat and raise in the quarter, underpinned by improved margins in the quarter amid ongoing cybersecurity demand.

After clearing the tough second-quarter bar, Crowdstrike “will now lap significantly easier comps as cloud security, identity threat detection, and LogScale/Observability all hit respective strides,” UBS said, adding that it likes the setup for the company into the second half of the year.

Dollar General punished for annual guidance cut, underwhelming quarterly results

Dollar General Corporation (NYSE:DG) fell 12% as the discount retailer cut its full-year guidance after quarterly earnings missed Wall Street estimates amid weaker consumer demand and inventory shrink, a loss in inventory not due to sales but other factors including employee theft.

Gross margin fell 126 basis points, “primarily driven by lower markups, increased shrink, markdowns, inventory damages, and unfavorable category mix shift, partially offset by a lower LIFO provision and a reduction in transportation costs,” Goldman Sachs said in a note.

Cannabis stocks on fire amid easing restrictions

Cannabis stocks including Canopy Growth Corp (NASDAQ:CGC), Aurora Cannabis (TSX:ACB), and Tilray Inc (NASDAQ:TLRY), with latter up more than 12%, surged on optimism the U.S. government may reclassify marijuana to a much lower risk category.

The U.S. Department of Health and Human Services delivered a recommendation to the U.S. Drug Enforcement Administration that marijuana be moved from its current Schedule I to Schedule III of the Controlled Substances Act.

“While the recommendation has yet to be confirmed by the DEA, we view this as a positive development, which materially increase the odds of a rescheduling to Schedule III, which as mentioned would be a boon for the industry,” Wedbush said in a recent note.