Stocks edge higher after Fed disappointment sparks selloff - MarketWatch

U.S. stocks traded flat to slightly higher at the market open Thursday, a day after Federal Reserve Chairman Jerome Powell dampened expectations for further interest rate cuts, following the central bank’s first rate cut in more than a decade on Wednesday.

Investors, meanwhile, continue to assess a steady stream of second-quarter earnings, while looking ahead to Friday’s July jobs report as an important hurdle.

How are the benchmarks faring?

The Dow Jones Industrial Average DJIA, +0.68%  rose 28 points, or 0.1%, to 26,887, while S&P 500 index SPX, +0.74%  advanced 6 points, or 0.2% at 2,987. The Nasdaq Composite index COMP, +1.19% added 47 points, or 0.6%, to 8,224

The Dow and S&P 500 on Thursday suffered their biggest one-day percentage losses since May 31. The Dow ended Thursday with a loss of 333.75 points, or 1.2%, at 26,864.27, while the S&P 500 fell 32.8 points, or 1.1%, to close at 2,980.38. The Nasdaq  fell 98.19 points to 8,175.42, a drop of 1.2% — the biggest one-day fall for the tech-heavy gauge since June 25.

Read: How the Fed and Jerome Powll sent ‘a bit of a shock wave’ through financial markets

What’s driving the market?

The Fed on Thursday cut interest rates by a quarter of a percentage point and moved to more quickly halt the end of its balance-sheet wind-down. Stocks wobbled after the policy announcement, but then tumbled after Powell played down the scope for further rate cuts in his news conference, describing the easing as a “mid-cycle adjustment.” Stocks pared losses after Powell clarified that Thursday’s cut wasn’t necessarily a one-time event.

In addition to the stock-market selloff, the U.S. dollar jumped and the Treasury yield curve flattened.

Read: Fed’s hawkish rate cut could be good for the stock market in the long run, analysts say

“An upside surprise in Friday’s nonfarm payrolls report may significantly lower expectations of further easing in the upcoming FOMC meeting in September, especially if wage growth beats market expectations,” said Hussein Sayed, chief market strategist at FXTM, in a note. “So, expect an upside surprise in tomorrow’s data releases to be negative news for equity markets and vice versa.”

Economists surveyed by MarketWatch, on average, look for July nonfarm payrolls to rise 171,000, while the unemployment rate is forecast to decline to 3.6% from 3.7%. Average hourly earnings are forecast to show a 0.2% rise.

Weekly jobless claims showed little sign of labor-market weakening, after the Labor Department estimated that 215,000 Americans applied for jobless benefits in the week ended July 27. That’s a bit higher than the 210,000 predicted by economists, per a MarketWatch poll, but still at historically low levels.

The Institute for Supply Management will release its July manufacturing index at 10 a.m. Eastern. It’s forecast to strengthen to 51.9% from 51.7% in June. A reading above 50 indicates an expansion in activity.

See: Economic Calendar

Which stocks are in focus?

On the earnings front, shares of Dow component Verizon Communications Inc. VZ, +1.38%  rose 2.1% early Thursday, after the telecommunications giant beat Wall Street expectations for second-quarter earnings, but fell short on revenue.

Qualcomm Inc. QCOM, -3.95%  announced third-quarter earnings Wednesday after the close of trade. Shares were down 5.4% Thursday morning after the chip maker provided a downbeat outlook for fourth-quarter results, due in part to the recently instituted export ban to China’s Huawei Technologies Co.

Shares of General Motors Co. GM, +2.68%  rose 2.1% after reporting second-quarter earnings Thursday.

Yum Brands Inc. YUM, +6.21% stock rose 3.4%, after the operator of Taco Bell, Pizza Hut and KFC Restaurants reported declining earnings and revenue year-over-year, though both were better than expected.

Shares of DuPont de Nemours Inc. rose 1.2% early Thursday, after the chemicals and materials company reported an adjusted earnings-per-share that beat Wall Street expectations, but revenue that fell below forecasts. The stock has fallen 5.2% year-to-date.

Dunkin’ Brands Group Inc. DNKN, -2.88% stock was in focus after the company reported a second-quarter profit and Dunkin’ same-store sales that beat expectations, while revenue and Baskin-Robbins same-store sales missed. The stock fell 1.4% Thursday.

Jeff Bezos, chairman and chief executive of Amazon.com Inc. AMZN, +1.24%  sold 968,148 shares worth $1.84 billion, according to filings with the Securities and Exchange Commission.

What’s happening in other markets ?

The yield on the 10-year U.S. Treasury note TMUBMUSD10Y, -1.72%  fell 2 basis points to 2.001%.

In commodities markets, the price of crude oil CLU19, -2.66%  fell 2.4% to $57 per barrel, while gold prices GCQ19, -1.16%  retreated 1.7% to $1402 per ounce.

In Asia overnight, stocks closed mostly lower, with China’s CSI 300 000300, -0.83%  declining 0.8%, Japan’s Nikkei 225 NIK, +0.09%  rose 0.1% and Hong Kong’s Hang Seng index HSI, -0.76%  retreated 0.8%. In Europe, stocks were virtually unchanged, as measured by the Stoxx Europe 600 SXXP, +0.09%.

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https://www.marketwatch.com/story/stock-futures-bounce-after-fed-disappointment-sparks-selloff-2019-08-01

2019-08-01 13:44:00Z
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