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Stocks rose on Wednesday as Wall Street attempted to recover from steep losses in the previous session. The rebound was boosted by a dip in Treasury yields and positive economic data.
The Dow Jones Industrial Average gained 0.03%, or 11 points on Wednesday. The S&P 500 climbed 0.3% while the Nasdaq Composite advanced 0.4%.
The 10-year Treasury yield pulled back from reaching its highest level since 2007 on Tuesday. The 2-year Treasury yield also declined after hitting a recent multi-year peak.
The Commerce Department reported Wednesday morning that orders for durable goods unexpectedly rose 0.2% in August, beating estimates. The data indicates economic resilience despite rate hikes and inflation.
Rising interest rates have added pressure on stocks recently, sparking fears the Fed may maintain tighter policy for longer than anticipated. On Tuesday, the S&P 500 fell below 4,300 for the first time since June, while the Dow posted its largest one-day drop since March, shedding over 300 points.
“Consumers remain worried about inflation and higher borrowing costs impacting housing. However, high savings, a strong job market and solid wage growth provide some support as we enter the fourth quarter,” said Rob Haworth, senior investment strategist at U.S. Bank Asset Management.
September has seen increased volatility and losses in line with its reputation as a historically weak month for stocks. The S&P 500 has lost 5.2% month-to-date, the Dow has shed 3.2% while the Nasdaq lags with a nearly 7% decline.
Some strategists expect the turbulence to persist into October before stabilizing. “Earnings season begins in mid-October and positive results may provide the catalyst to end this market correction,” said Robert Schein, chief investment officer at Blanke Schein Wealth Management.
Stocks Open Higher As Treasury Yields Decline
U.S. stocks opened higher on Wednesday as Treasury yields dipped, providing some relief to the battered market.
The Dow Jones rose 0.33%, or 112 points. The S&P 500 edged up 0.3% and the Nasdaq gained over 0.4% at the open.
Yields pulled back from recent multi-year highs, giving stocks a boost after losses driven by rising rates and recession fears.
Micron Stock Rises Ahead of Earnings Report
Shares of semiconductor producer Micron gained 1% in premarket trading on Wednesday, ahead of its fiscal Q4 earnings release after market close.
Analysts forecast Micron to report revenue of $3.95 billion and a loss per share of $1.15, based on estimates compiled by StreetAccount.
Investors will be watching closely to see if robust global semiconductor demand can offset Chinese export bans on chipmaking metals.
Micron stock is up nearly 36% year-to-date. Its quarterly results will provide insight into the health of the memory chip market.
Durable Goods Orders Top Estimates in August
Orders for long-lasting manufactured goods unexpectedly rose 0.2% in August, per Commerce Department data released Wednesday.
The increase was driven by a boost in defense aircraft and machinery orders. It reversed a 5.6% decline in July and exceeded estimates for a 0.5% drop.
Excluding transportation, durable goods orders grew 0.4%. But orders declined 0.7% when defense is excluded.
The better-than-expected data points to economic resilience despite rate hikes aimed at taming inflation.
U.S. Dollar Nears Highs As Yields Remain Elevated
The U.S. dollar index traded near its highest level since November 2002 on Wednesday, boosted by high Treasury yields and safe-haven demand.
The dollar index hit 106.349, just shy of its 2022 peak of 107.195 reached last November. It has climbed over 2.6% in September, on pace for its best month since May.
Persistent inflation and tighter Fed policy have kept yields at elevated levels compared to other countries, boosting the greenback.
Media Stocks Inch Up As Hollywood Writers Strike Ends
Media stocks including Warner Bros. Discovery, Disney, Comcast and Paramount edged higher premarket as writers and studios approved a new labor deal, ending a nearly 150-day strike.
The contract includes a minimum 5% pay raise and residuals based on viewership. It restricts using AI to generate content without compensation.
The agreement brings relief to Hollywood and media companies, resuming production of television shows and movies.
China Puts Evergrande Founder Under Police Control — Report
China has placed Evergrande founder Hui Ka Yan under police supervision at a designated location, Bloomberg reported, citing sources.
Evergrande is at the center of China’s real estate crisis. The world’s most indebted developer defaulted on debts last year and has struggled to restructure obligations.
Hui’s reported detainment indicates the Chinese government is intervening forcefully to contain the fallout from Evergrande’s collapse on the financial system and homebuyers.
Premarket Movers: Costco, XPO, ChargePoint
- Costco shares fell 1.5% premarket despite topping earnings estimates. Comparable sales rose just 0.2% in the U.S.
- XPO Logistics gained 2% following an upgrade to outperform from Evercore ISI on margin expansion forecasts.
- Electric vehicle charging company ChargePoint climbed over 4% after UBS initiated coverage with a buy rating on an attractive risk/reward.
10-Year Treasury Yield Eases From 15-Year Peak
The 10-year Treasury yield declined to 4.501% Wednesday, after hitting 4.566% on Tuesday, its highest since 2007.
Rising yields have negatively impacted stocks as risk-free bonds become more attractive compared to equities. All three major indexes have dropped this month.
The pullback in yields provided slight relief to the battered stock market. But rates remain significantly higher than last year, weighing on valuations.
Senate Pushes to Avert Government Shutdown
The Senate advanced a short-term funding measure Tuesday to avoid a potential government shutdown on October 1.
The bill would extend funding through November 17 via a continuing resolution. It received strong bipartisan Senate support.
However, House Speaker Kevin McCarthy hasn’t committed to bringing the legislation to a vote given some Republicans oppose short-term spending bills.
Without further spending authority, large parts of the federal government will be forced to shut down this weekend.
Costco Earnings Beat Expectations But Stock Falls
Costco reported better-than-expected fiscal Q4 results but shares dropped 1.5% premarket on Wednesday.
The company earned $4.86 per share on revenue of $78.9 billion, topping analyst forecasts. However, comparable sales grew just 0.2% in the U.S. during the quarter.
Costco said consumers visited warehouses more often but trimmed their spending. CFO Richard Galanti cited lower sales of discretionary items besides food in the U.S.
The results highlight inflation’s toll on consumer discretionary budgets. Costco remains resilient but spending habits are shifting.
Target Closing 9 City Stores Amid Rising Theft and Violence
Target announced it will permanently close nine stores located in major cities citing an alarming rise in theft, violence and other crime challenges.
The closures impact stores in San Francisco, Oakland, Seattle, Portland and New York. The retailer has struggled with rampant organized retail crime rings targeting its urban locations.
The shutdowns illustrate how violence and lawlessness are hurting businesses in progressive cities. Target aims to improve security by focusing on suburban and rural stores less impacted by crime waves.
Housing Market Problems Starting to Drag Stocks Lower
Problems in the housing market are exerting downward pressure on stocks, according to Wolfe Research strategist Chris Senyek.
“The equity drawdown has caused the mini-cycle to start reversing. Extreme housing unaffordability will weigh heavily on sentiment,” Senyek wrote in a note.
Home sales have slowed sharply as mortgage rates topped 6%, reducing buyer demand. But prices remain high, stretching budgets for many Americans. Housing issues could impact consumer spending and the broader economy.
European Markets Trade Cautiously Amid Recession Worries
European stocks traded mixed on Wednesday as investors weighed ongoing concerns over inflation, rising interest rates and economic challenges.
The pan-European STOXX 600 index slipped 0.1% in early trading, with utilities stocks down 0.6%. Oil and gas and tech sectors notched small gains.
Global recession fears persist as central banks aggressively tighten monetary policy to rein in inflation. Investors are monitoring the impact on corporate profits and consumer demand.
China Industrial Profits See Slower Decline in August
Profits at China’s industrial firms dropped 11.7% year-over-year in the first eight months of 2022, as per government data released Wednesday.
The pace of decline eased from a 15.5% plunge in the first seven months of the year. Profits grew 17.2% annually in August, the first monthly increase since late 2021.
The data indicates China’s economy may be stabilizing after COVID lockdowns and the real estate crisis severely