Stocks struggled to hold their ground on Monday, following the S&P 500′s third straight weekly gain, as demand concerns for the semiconductor industry weighed on tech names.
The S&P 500 slipped 0.12% to 4,140.06. The Nasdaq Composite ticked down 0.10% to 12,644.46. The Dow held on to a gain of 29.07 points to close at 32,832.54.
Nvidia announced weaker-than-expected revenue for the second quarter, putting pressure on semiconductor stocks. Shares of the chip giant fell more than 6%, and rival stocks like AMD and Broadcom were also under pressure.
Some clean energy related shares gained after the Senate passed the Inflation Reduction Act. The measure includes billions of dollars aimed at addressing climate change. The House is expected to pass the measure later this week.
Disney was the top stock in the Dow, gaining more than 2%.
Monday's moves follow a weekly rise for the S&P 500 and the Nasdaq Composite as a surprisingly strong monthly jobs report eased some recession fears. The resilient labor market also signaled that the economy could withstand more rate hikes from the Federal Reserve.
"The question is if the rally is running out of breadth," said Angelo Kourkafas, investment strategist at Edward Jones. "There are certainly things that have improved after the past month that would justify, in our view, a move higher, which we have certainly seen. ... However, a lot has to go right to be able to say that the coast is clear."
A new reading for the consumer price index, slated for release Wednesday, will give investors more clarification about the central bank's next move at its policy meeting in September.
Bed Bath & Beyond has biggest volume day ever
Bed Bath & Beyond had its biggest volume day on record, with the consumer goods stock trading more than 120.5 million shares on the day. That's well above the stock's 30-day volume average of 14.266 million.
The stock also rallied nearly 40% on the day, posting a nine-day winning streak.
—Fred Imbert, Gina Francolla
Market closes with S&P 500, Nasdaq slightly lower
The S&P 500 and Nasdaq Composite both finished down about 0.1%, giving up all of their gains from earlier in the session. The Dow squeaked out a gain of 29 points, or 0.1%.
The small-cap Russell 2000, helped in part by the meme stock rally, rose about 1%.
S&P 500, Nasdaq creep up into the close
The S&P 500 and Nasdaq Composite have bounced off their lows in the final hour of trading and are now about 0.1% below the flatline. The Dow has held in positive territory for most of the day.
Treasury yields in quiet drift ahead of inflation data
Treasury yields slipped in quiet trading Monday, as investors await Wednesday's report of the July consumer price index.
"I think volumes are just so light. There's nothing truly fundamental driving it," said Ben Jeffery, BMO rate strategist.
He said 2.75% is a technical level for the 10-year, and then 2.51%, which was the low of last week. Monday's slide was quiet and orderly compared to the wild swings of last week, where the 10-year yield moved in a more than 30 basis point range. (A basis point equals 0.01)
Rally unlikely to go deep into 2023, BCA Research says
BCA Research's Doug Peta said the rally seen in U.S. stocks will likely fizzle out early next year.
"We continue to expect the economy will be surprisingly resilient, allowing equities to rally further before the Fed squashes the expansion. We doubt the rally will persist very far into 2023, however, so we are reducing equities to equal weight over a twelve-month timeframe," the firm's chief U.S. investment strategist said in a note to clients.
Cryptocurrencies have found a low for this cycle, JPMorgan says
Cryptocurrency prices have been sliding all year with the broader market, and as investors debate whether or not the bottom is in, JPMorgan says cryptocurrencies "have found a floor."
In June, bitcoin plunged to $17,958, its lowest level since December 2020, according to Coin Metrics. Ether sank to $881, its lowest level since January 2021. Ether then rebounded 70% in July.
On Monday the price of ether hit its highest level in two months and was last trading around $1,770. Bitcoin was up to about $23,900.
Cryptocurrencies have been trading in tandem with stocks for more than a year.
— Tanaya Macheel
Tax hikes unlikely to make a dent in portfolios, according to Citi.
The Inflation Reduction Act passed by the Senate over the weekend has several revenue-raising provisions, but they shouldn't be a big deal for investors, according to Citi analyst Scott Chronert.
In a note to clients on Monday, Chronert said that a new 15% minimum corporate tax and a tax on stock buybacks would both have less than 1% impact on earnings per share for S&P 500 companies.
"The deserved focus on Fed actions, inflation consequences, economic deceleration and rate influences will likely prove more relevant to the forward earnings growth discussion," Chronert wrote.
— Jesse Pound
Boeing Dreamliner deliveries set to resume, FAA says
Boeing is set to resume deliveries of its 787 Dreamliners, according to the Federal Aviation Administration. Deliveries were suspended as regulators reviewed manufacturing flaws in the airliner.
"Boeing has made the necessary changes to ensure that the 787 Dreamliner meets all certification standards," read a statement. "The FAA will inspect each aircraft before an airworthiness certificate is issued and cleared for delivery."
Shares gained more than 3%.
— Sarah Min
S&P 500 tries to break out of summer range
The S&P 500 rose above its June high of 4,177 but was unable to hold onto it Monday.
T3live.com's Scott Redler said that while the S&P 500's initial run at the high got rejected, he expects it may make another move after Wednesday's release of the consumer price index — if it's in line with expectations or a bit softer. "The first time you see an important level, it often does get rejected," he said.
The CPI is expected to have risen by 8.7% in July, according to Dow Jones, a slight cooldown from June's 9.1% surge. "It's very key. If we got a hot CPI report, then I would think the market would retreat pretty fast," said Redler.
Oppenheimer's Ari Wald said the more important level is the 200-day moving average, just above 4,300, but the June high is still important near-term.
"It's kind of the most glaring level on the chart, and it was kind of where it peaked right before the June CPI print for May came out, which catalyzed the final leg lower in the washout for the market," said Ari Wald, technical analyst at Oppenheimer.
Chip stocks weighing on market
The major indexes have drifted toward the flatline in midday trading, with the S&P 500 up just 0.1%.
The reversal comes as the sell-off for semiconductor stocks has deepened. Shares of Nvidia are down nearly 9%. The PHLX Semiconductor Sector Index is off by about 2.5%.
Stocks retreat from session highs
The major indexes came off of their session highs in late morning trading, drifting back toward their opening levels. The Nasdaq is now up less than 1%, while the Dow is up about 180 points.
The Invesco Solar ETF, which surged in early trading, is now up less than 2%.
Fed survey shows future inflation expectations coming down sharply
Consumers inflation expectations over the next several years fell sharply in July amid a big drop in gas prices and expected declines for food and housing.
The New York Fed's Survey of Consumer Expectations shows respondents still expect price increases to be considerable over the next one-, three- and five-year increments. But they fell to 6.2% over the next year and 3.2% over the next three years, respective monthly declines of 0.6 percentage points and 0.4 percentage points. The five-year outlook declined to 2.3%.
Food price expectations fell at the fastest monthly pace in the survey's 9-year history, while gas was down at the second-fastest pace. Housing price appreciation was put at 3.5%, the slowest since November 2020.
Markets expect the Fed to raise benchmark interest rates by 0.75 percentage point in September in an effort to tamp down inflation running at its highest level in more than 40 years.
Tyson Foods drops after earnings miss
Shares of Tyson Foods dropped more than 9% after the company's adjusted third-quarter earnings came in short of expectations. Company executives said that supply chain issues were weighing on sales, according to transcript from FactSet.
Tyson reported $1.94 in adjusted earnings per share on $13.50 billion of revenue. Analysts surveyed by Refinitiv were expecting $1.98 in earnings per share on $13.25 billion of revenue.
— Jesse Pound
Bed Bath & Beyond shares soar more than 50%
Bed Bath & Beyond's stock jumped more than 50% as meme traders on Reddit's WallStreetBets seemed to be betting on the beaten-up retail stock.
Despite any obvious catalyst for the move, users under a pinned thread titled "AMC and BBBY Memestock Megathread for Monday August 8th, 2022" seemed to be buying up shares of the stock, with one user alleging to have used the opportunity to turn $45,000 into almost $450,000 using common stock and call option.
The retailer, which has been a member of the meme stock craze that has forced many short sellers over the years into a short squeeze, was the most searched name on WallStreetBets on Monday, according to Quiver Quantitative. FactSet data suggests that 46% of the stock's float is sold short.
— Samantha Subin
Stocks rise to kick off the week
The stock market opened higher on Monday, as investors appeared to shake off the weak revenue report from Nvidia. The Dow was up roughly 200 points in the opening minutes of trading.
— Jesse Pound
Nvidia under pressure after early report
Shares of chipmaker Nvidia fell more than 7% after the company pre-announced its second-quarter revenue of $6.7 billion. The company had previously guided for $8.1 billion in revenue. Nvidia said the miss was due primarily to weakness in gaming.
— Jesse Pound
Palantir slides after second-quarter miss
Shares of defense tech company Palantir slid more than 13% in premarket trading after the company reported a surprise loss for the second quarter.
Palantir loss 1 cent per share on $473 million of a revenue. Analysts surveyed by Refinitiv were expecting 3 cents of positive earnings per share on $471.3 million of revenue.
— Jesse Pound
Pfizer agrees to buy Global Blood Therapeutics
Pfizer announced a deal on Monday morning to buy Global Blood Therapeutics, a biopharmaceutical company focused on sickle-cell disease, for $68.50 per share in cash. The deal is valued at $5.4 billion, when including GBT's debt and cash.
In premarket trading, shares of GBT were up 4%, building on a gain of more than 33% on Friday. Shares of Pfizer were little changed.
— Jesse Pound
Oil moves lower, building on last week's losses
Oil prices traded lower to start the week, building on recent losses that's seen the key commodity give back all of its gains following Russia's invasion of Ukraine.
West Texas Intermediate crude, the U.S. oil benchmark, shed 1.45% to trade at $87.72 per barrel. The contract lost nearly 10% last week, which was its worst week since April and its fourth negative week in the last five.
Brent crude, the international oil benchmark, stood at $93.43 per barrel on Monday, down 1.5%. The contract lost 13.7% last week for the worst week since April 2020.
— Pippa Stevens
Strong economic data puts 'Fed pivot' rally in danger, Essaye says
Tom Essaye of the Sevens Report said in a note to clients on Monday that last week's strong economic data puts extra pressure on the inflation data this week, or else the stock market could be due for a reversal.
"The market has rallied hard on the idea of a Fed pivot. Friday's jobs report didn't support that hope and, if anything, will make the Fed more resolute about rate hikes. So, now inflation needs to clearly show signs of peaking and declining, otherwise we'd expect this market to abandon some of that near-term hope, and for volatility to increase," Essaye wrote.
— Jesse Pound
JPMorgan upgrades First Solar to overweight, says new climate bill could lift shares more than 20%
Now is the time to buy First Solar as shares could rally more than 20% with the passage of the latest government climate bill, JPMorgan says.
The bank upgraded shares of the solar technology stock to overweight from a neutral rating, saying in a note to clients that the stock will benefit from the manufacturing credits in the Inflation Reduction Act.
The bill, passed Sunday in the Senate, outlines more than $300 billion toward energy and climate investments.
Along with the upgrade, the bank upped its price target on the stock. Shares of First Solar jumped more than 4% in the premarket.
— Samantha Subin
Morgan Stanley's Wilson says best part of this rally is over
With the S&P 500 up more than 13% from its lows of the year, many investors are hoping the bottom is in. Mike Wilson, Morgan Stanley's top equity strategist who called the bear market, believes there will still be another leg lower, even though he acknowledges that inflation may have peaked.
"The rally in stocks has been powerful and has investors believing the bear market is over and looking forward to better times," wrote Wilson in a note over the weekend. "However, we think it's premature to sound the all-clear simply because inflation has peaked. The next leg lower may have to wait until September when our negative operating leverage thesis is better reflected in earnings estimates."
"With valuations this stretched, we think the best part of the rally is over," Wilson added.
Senate passes Inflation Reduction Act
The Senate passed the $430 billion Inflation Reduction Act on Sunday, a climate and economic package, with Vice President Kamala Harris casting the tie-breaking vote. The bill now heads back to the House later this week where it is expected to pass. More than $300 billion in the bill will be used to combat climate change.
The bill raises revenue through various taxes on companies, including a 15% minimum tax and a tax on share buybacks. Jim Cramer told his Investing Club members over the weekend that bill is overall bearish for U.S. stocks.
Shares of some clean energy stocks were higher in premarket trading Monday following the Senate passage. The Invesco Solar ETF (TAN) was higher by 1.7% in early trading. Shares of Sunrun were 3.8% higher.
European stocks climb cautiously as traders assess earnings, economic data
European markets advanced on Monday as investors continued to monitor corporate earnings and key economic data points, assessing the risk of recession.
The pan-European Stoxx 600 index climbed 0.5% in early trade, with retails stocks adding 1.1% to lead gains as most sectors and major bourses entered positive territory.
Corporate earnings continued to drive individual share price movement in Europe, with Siemens Energy, Porsche and BioNTech among the companies reporting before the bell on Monday.
- Elliot Smith
Fed Governor Bowman says 'similarly sized' rate hikes on the table until inflation declines
Federal Reserve Governor Michelle Bowman on Saturday said she endorses the central bank's recent big interest rate increases and added that "similarly sized increases should be on the table" until inflation declines in a consistent and lasting way.
Speaking in Colorado for the Kansas Bankers Association, Bowman said she will closely monitor upcoming inflation data before deciding how much she thinks rates should be increased. However, she is doubtful that inflation has peaked, given recent data.
"I have seen few, if any, concrete indications that support this expectation, and I will need to see unambiguous evidence of this decline before I incorporate an easing of inflation pressures into my outlook," she said.
Bowman said she foresees "a significant risk of high inflation into next year for necessities including food, housing, fuel and vehicles."
— Lee Ying Shan, Jeff Cox
S&P 500 is now 14% above its June low
The market rebound in the past few weeks have pushed major indices significantly off their lows in June.
- S&P 500 is 13.98% above its 52-week intraday low of 3,636.87 from June 17
- Dow is 10.6% above its 52-week low intraday low of 29,653.29 from June 17
- Nasdaq is 19.8% above its 52-week intraday low of 10,565.14 from June 16
— Yun Li
Solid earnings so far
The second-quarter earnings season is moving to its tail-end with 432 S&P 500 companies having already reported results. Among those companies, 77.5% reported earnings per shares above analysts' expectations, according to Refinitiv. Nearly 70% of companies posted quarterly revenue that topped analysts' estimates, according to Refinitiv.
Berkshire Hathaway reported Saturday that its operating profits jumped 39% from a year ago in the second quarter despite fears of slowing growth. However, Warren Buffett's conglomerate was not immune to the overall market turmoil with a whopping $53 billion loss on its investments during the quarter.
— Yun Li