Dow Average Is Set for First Record Since December: Markets Wrap

(Bloomberg) -- Wall Street traders juggling mixed signals on how consumers are feeling about the economy drove stocks away from session lows amid hopes that corporate profits will continue to drive gains. Bonds fell alongside the dollar.

Attention will soon turn to a meeting between Donald Trump and Vladimir Putin due to start at 3 p.m. New York time. The S&P 500 was little changed. The Dow Jones Industrial Average rose toward its first record since December. UnitedHealth Group Inc. soared as prominent funds piled into the insurer. Applied Materials Inc. tumbled on a disappointings outlook. Solar shares surged.

Treasuries dropped, with longer-dated bonds leading losses. The yield on 30-year bonds advanced five basis points to 4.93%. That’s ahead of next week’s central bank gathering in Jackson Hole, Wyoming, with traders getting ready for Jerome Powell’s speech.

US retail sales rose in July in a broad-based advance, boosted by car sales and major online promotions. Later, a separate report showed consumer sentiment unexpectedly fell for the first time since April and inflation expectations rose.

To Bill Adams at Comerica Bank, while the data don’t all point in the same direction, the US economy looks to be in OK shape. 

“What consumers do is more important to the economy than what they say,” he said.

To Bret Kenwell at eToro, July’s retail sales figures weren’t necessarily a blowout. However, control group sales — which are used in the gross domestic product calculation — topped economists’ expectations, while June’s already strong report was revised even higher.

Retailers will start reporting earnings next week, which should provide more insights into consumer behavior, he noted.

As long as consumer spending holds up and companies are able to retain workers because of that robust spending, the flywheel can continue to spin, according to Chris Zaccarelli at Northlight Asset Management. 

And that would push both corporate profits and stocks higher, he said.

“While the consumer appears relatively healthy, the Fed is in a tough spot with its dual mandate of maximum employment and stable prices,” said Kenwell at eToro. “If they opt to cut rates as the market currently expects, that could be another benefit for consumers.”

Ahead of the Fed’s Jackson Hole symposium, markets are still wholly convinced that officials will cut rates by 25 basis points in September — and follow that up with at least one other cut in October or December, noted Paul Ashworth at Capital Economics.

He says Fed Chair Powell will possibly caution that a modestly restrictive policy stance remains appropriate. 

“Nevertheless, the near-stagnation in payrolls employment gains in recent months mean that, even though the unemployment rate hasn’t really risen, a September rate cut now looks like the most likely outcome,” Ashworth said.

‘Buy Rumor, Sell Fact”

At Bank of America Corp., strategists led by Michael Hartnett say US stocks are set to decline in the event of dovish signals from the Fed in Jackson Hole as investors “buy rumor, sell fact.”

Investors poured about $21 billion into US equity funds in the week through Aug. 13, after redeeming nearly $28 billion in the week prior, according to a BofA note citing EPFR Global data.

Retail investors are increasingly validated in the buy-the-dip approach, given the speed of the recovery from the recent selloff, potentially creating a self-fulfilling prophecy the next time the market experiences a minor selloff, according to Mark Hackett at Nationwide. 

“Despite this well-established trend, there are few signs of excess or complacency, as many investors remain skeptical of the rally despite the market returning double-digits to date this year, he said.

Corporate Highlights:

• The Trump administration is considering using funds from the US Chips Act to take a stake in Intel Corp., according to people familiar with the discussions, part of efforts to rescue the embattled chipmaker and shore up domestic semiconductor manufacturing.
• Opendoor Technologies Inc., a real estate company that became a meme stock in recent months, said Chief Executive Officer Carrie Wheeler is stepping down immediately, an announcement that sent the stock surging.
• UnitedHealth Group Inc. shares jumped after funds piled into the company, which has been hampered by a federal probe into its business practices and weakening results.
  • Warren Buffett’s Berkshire Hathaway Inc. was among the investors, buying 5 million shares in the second quarter, according to a filing. David Tepper’s Appaloosa Management LP also invested, boosting its holdings of the health insurance giant by 2.3 million shares.
• Swiss chocolatier Lindt & Spruengli AG may shift production of its world-famous, gold-wrapped Easter bunnies to the US to sidestep import tariffs.
• Danish jewelry company Pandora A/S is weighing potential price increases in the US and elsewhere due to higher tariffs, according to its chief executive officer.

Some of the moves in markets:

Stocks

• The S&P 500 fell 0.1% as of 2:28 p.m. New York time
• The Nasdaq 100 fell 0.4%
• The Dow Jones Industrial Average rose 0.3%
• The MSCI World Index was little changed
• Bloomberg Magnificent 7 Total Return Index fell 0.2%
• The Russell 2000 Index fell 0.4%

Currencies

• The Bloomberg Dollar Spot Index fell 0.3%
• The euro rose 0.5% to $1.1704
• The British pound rose 0.2% to $1.3556
• The Japanese yen rose 0.4% to 147.21 per dollar

Cryptocurrencies

• Bitcoin fell 0.5% to $117,415.59
• Ether fell 2.4% to $4,426.66

Bonds

• The yield on 10-year Treasuries advanced four basis points to 4.33%
• Germany’s 10-year yield advanced eight basis points to 2.79%
• Britain’s 10-year yield advanced six basis points to 4.70%
• The yield on 2-year Treasuries advanced two basis points to 3.75%
• The yield on 30-year Treasuries advanced five basis points to 4.93%

Commodities

• West Texas Intermediate crude fell 1.7% to $62.87 a barrel
• Spot gold was little changed

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