Stocks open lower
Stocks opened lower on Monday, led by energy and financial services stocks, which fell more than 3% and 1%, respectively. The Dow Jones Industrial Average slid 169 points, or 0.5%, while the S&p 500 and Nasdaq Composite fell 0.46% and 0.23%, respectively.
— Samantha Subin
New York-area manufacturing posts surprising drop in August, survey finds
Manufacturing activity has collapsed in the New York area, according to a report released Monday.
The New York Fed’s Empire State Manufacturing Survey for August dipped to minus 31.3, a 42-point drop fueled by a sharp decline in new orders and shipments. The index measures the difference between companies experiencing expansion and contraction. Economists polled by Dow Jones were looking for a reading of 5.
It was the lowest reading since May 2020 and both the second lowest reading overall and the second biggest drop in history for a data series dating back to July 2001. plus the massive decline in general conditions, the shipments index was minus-49.4 and the new orders index was minus-35.8.
Employment also remained slightly expanding, with an index at 7.4, but this is a drop of 10.6 points compared to July.
There was some hope for the future, as the general business conditions index six months from now rose to 2.1, a gain of 8.3 points.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, cautioned against taking too much away from the dismal report.
“As always, remember the Empire State is a small regional investigation and not definitive proof of anything,” he wrote. “It is not a reliable indicator of the national ISM manufacturing index. We are now very curious about the other regional reports for August, expected over the next few weeks. Our bet is that none of them will be as surprisingly terrible as this one.”
Energy and technology expected to open lower
Few stocks remained in positive territory in pre-market Monday, with energy and technology leading the declines.
A drop in oil prices weighed on energy stocks as weak data from China, which is the world’s largest crude importer, raised concerns of a slowdown.
Most tech names also remained in the red, led by shares of Apple, Microsoft and Amazon. Despite the downtrend, Analog Devices shares rose about 2.7% premarket.
On the banking front, shares of Goldman Sachs, Bank of America and Morgan Stanley all fell around 1%.
— Samantha Subin
Fall in stock futures
Stock futures fell on Monday before the market opened. Futures tied to the Dow Jones Industrial Average lost 224 points, or 0.66%, while S&P 500 and Nasdaq 100 futures lost 0.7% and 0.5%, respectively.
— Samantha Subin
More pain awaits despite summer rebound, says Canaccord Genuity
A strong summer rally saw the S&P 500 rebound 16% from its June low, but investors should refrain from chasing “whooshes” or “outsized rallies,” Canaccord Genuity said.
Oversold conditions and fears of both the Fed and an economic recession argue for a summer rebound, analyst Tony Dwyer said in a note to clients on Monday. That said, further uncertainties loom and investors should look to reduce the heightened risk brought on by the summer rebound.
“The strength of the summer rally has caused some momentum-based indicators to suggest that the worst of the bear market is over, but the macro backdrop of yield curve inversions, real liquidity and further rate hikes the Fed argues otherwise,” he said.
— Samantha Subin
A ‘Goldilocks’ in recent weeks
While the rally seems to be taking a break on Monday, the bulls have been receiving a slew of good news lately. When last checked, the S&P 500 was up more than 17% from its mid-June low, cutting its loss for the year by more than half, with the benchmark now down 10%. % for 2022.
Tavis McCourt, institutional equity strategist for Raymond James, summed it up in a note on Sunday:
“An absolute two-week ‘Goldilocks’ for those paying attention to economic data, as last week’s ridiculously high July payrolls were followed by CPI, PPI (headline and core) weaker than expected export and import prices, pushing the S&P 500 up ~3.2% with even more small/mid caps As central bankers took to the airwaves in an attempt to tighten financial conditions, equity markets have continued to rally and credit spreads have continued to tighten as it looks likely that inflation will have peaked barring another dramatic supply We are seeing that in the world of post-war 1940s, which we still think is the closest historical economic analogy to today, stocks bottomed when inflation peaked, but remained largely range-bound for about 4 years before reaching new heights. “
Oil slides on global growth concerns
Oil prices fell on Monday following weak economic data from China, raising concerns about slowing demand.
West Texas Intermediate Crude, the US oil benchmark, fell 4.5% to trade at $87.94 a barrel. World reference Crude Brent fell 4.5% to $93.71 a barrel.
“China’s numbers are really worrying,” said Craig Erlam of Oanda.
“This doesn’t bode well for oil demand, especially when the country remains so committed to zero Covid. And with cases continuing to rise, the downward pressure on oil prices could intensify. “, he added.
The Selected Energy Sector SPDR Fund (XLE)which tracks the S&P 500 energy sector, fell 3% premarket.
Halliburton, Valero, Devon Energy, western and Marathon Oil were all down more than 3%.
China’s central bank unexpectedly cuts rates
The People’s Bank of China, the country’s central bank, surprised investors overnight by cutting the rate on its one-year medium-term loan facility to 400 billion yuan ($59.3 billion) at 2.75% from 2.85%. The PBOC also cut another key rate, its seven-day repo rate, by 10 basis points to 2%.
—Fred Imbert, Abigail of
Disappointing data from China
Sentiment eased somewhat on Monday after the Chinese government released economic data that missed the mark.
Overnight, Chinese National Bureau of Statistics said retail sales rose 2.7% in July. That’s well below Reuters’ forecast of a 5% gain. It is also a slowdown compared to the 3.1% advance in June. Industrial production, meanwhile, rose 3.8%, also missing an estimate of 4.6%.
—Fred Imbert, Evelyn Cheng
European markets mixed after cautious gains last week
European markets were muted on Monday morning, struggling to build on a positive trend seen at the close of trading last week.
The pan-European Stoxx 600 rose 0.1% in early trading, with health care stocks adding 0.7% while autos slipped 0.9%.
European stocks closed higher last Friday as investors digested economic data from the region, including a preliminary reading of UK second-quarter GDP, impressions of July inflation in France, Spain and in Italy and euro area industrial production for June.
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— Zavier Ong
Earnings season is coming to an end
More than 90% of S&P 500 companies have now reported earnings, and some 78% of those names have posted earnings above expectations, according to Refinitiv. These results helped overall S&P 500 earnings rise 9.7% from the prior year period.
What to expect from retail revenue this week
As investors await quarterly financial results from the retail giants, Wall Street is expects several shortfalls and the full-year outlook is reduced as companies continue to face headwinds such as high inflation, global economic uncertainty and supply chain issues.
Walmart and Home Depot will be the first to report on Tuesday. Last quarter, Walmart slashed earnings estimates due to rising food prices, while Home Depot raised its full-year outlook.
Check out CNBC Pro for more on what to expect from retail revenue this week.
The S&P 500 is testing its bearish case
On Friday, the S&P 500 closed above 4,231, the 50% retracement from its high to its low. BTIG Technical Analyst Jonathan Krinsky Says Close Above This Level would mean that it is a new bull market and not just a bear market bounce.
The broad stock index also traded above that level on Thursday, but did not close above it.
The S&P 500 gained 9% in July and, as of Friday’s close, was up 3.6% for the month.