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U.S. stocks nudged higher Monday morning, attempting to shake off disappointing data on China’s economy that damped risk appetite across global markets.
What’s happening
-
The Dow Jones Industrial Average
DJIA,
+0.19%
rose 16 points, or less than 0.1%, to 34,525. -
The S&P 500
SPX,
+0.22%
was up 6 points, or 0.1%, at 4,512. -
The Nasdaq Composite
COMP,
+0.50%
gained 62 points, or 0.5%, to 14,177.
The Dow last week rose 2.3%, the S&P 500 gained 2.4% and the technology-heavy Nasdaq Composite jumped 3.3%. The Dow and Nasdaq each saw their biggest weekly percentage gains since March, while the S&P 500 booked its largest weekly rise since mid-June, according to Dow Jones Market Data.
What’s driving markets
Wall Street was off to a tepid start to the week, holding near 15-month highs, as disappointing news from China fostered a cautious tone across global markets.
Data showed the world’s second-largest economy grew by only 0.8% in the second quarter compared with the previous three months, slowing sharply from a 2.2% rise in the first quarter. Growth was 6.3% year-over-year, against forecasts of 7.3%.
Traders now have to decide whether to place a positive spin on the news because it may mean more stimulus from Beijing.
“On one hand, weak growth means that the government and the People’s Bank of China (PBOC) will step up efforts to further ease the financial conditions and pave the way for a quicker recovery,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
“On the other hand, supportive policies put in place so far have had little impact. The Chinese property downturn, risk of disinflation, and falling exports have been difficult to reverse. As a result, the knee-jerk reaction in markets was unenthusiastic,” she added.
The risk-off mood could be seen in industrial commodities sensitive to perceptions of Chinese demand, with oil
CL.1,
and copper
HG00,
prices lower.
Meanwhile, the U.S. second-quarter earnings season faces a somewhat quieter session Monday after Friday’s big bank kickoff. First Bank
FBK,
and Home Bank
HBCP,
are among those delivering their results.
The next few days are nevertheless stuffed with potential market catalysts, analysts noted.
“Further reports this week will come at a brisk pace, with updates from the likes of Tesla
TSLA,
Morgan Stanley
MS,
Goldman Sachs
GS,
Netflix
NFLX,
and Bank of America
BAC,
On the economic calendar, U.S. retail sales will provide more color as to the behavior of the vitally important consumer,” said Richard Hunter, head of markets at Interactive Investor.
Stocks rallied last week after a sharper-than-expected slowdown in inflation reflected in June data on consumer and producer prices. The data reinforced expectations the Federal Reserve is near the end of its rate-hike cycle. But some market watchers argued the rally, which has seen the S&P 500 rally more than 17% so far in 2023 has gone too far too fast.
“Key inflation categories like shelter and wages remain uncomfortably high, for example, so if we see only one (or two) additional rate hikes, prudent investors may want to cast a skeptical eye on overly exuberant rallies,” said Saira Malik, chief investment officer at Nuveen, in a note.
“Additionally, in our view, the higher-for-longer interest rate environment has likely set the stage for a mild recession sometime in 2024 (our base case). Looking at S&P 500 corporate earnings as a gauge, analyst estimates continue to be revised lower for both the second quarter of 2023 and the full year,” she wrote.
The New York Fed’s Empire State business conditions index, a gauge of manufacturing activity in the state, fell 5.5 points in July to 1.1, the regional Fed bank said Monday.
Economists had expected a flat reading, according to a survey by The Wall Street Journal. A reading above zero indicates improving conditions.
Companies in focus
-
Shares of Activision Blizzard Inc.
ATVI,
+3.25%
jumped 2.8% after a federal appeals court late Friday denied the Federal Trade Commission’s bid to temporarily block Microsoft Corp.’s
MSFT,
-0.06%
acquisition of the videogames maker. Microsoft shares were flat. - Tesla Inc. shares were up 2.3% after the first Cybertruck rolled off the assembly line Saturday in Austin, Texas, following years of delays.
-
Rivian Automotive Inc.
RIVN,
-4.43%
shares fell 2% after the Tesla news. “We see competitive pricing and specs for the Cybertruck as a fundamental and headline risk to [Rivian],” wrote Baird analyst Ben Kallo in a note to clients. -
Shares of Ford Motor Co.
F,
-5.07%
dropped 3.6% after the automaker said it was cutting prices on its F-150 Lightning electric trucks by as much as 17% for some models.
