The futures markets are little changed this morning following a notable sell-off in stock prices yesterday. Shares of bellwether retailer Target (TGT) are up in the premarket on news of a big quarterly profit improvement, even though management cut its full-year sales guidance. However, Tower Semiconductor's (TSEM) stock, a semiconductor manufacturer, is down significantly after Dow-30 component Intel (INTC) abandoned its takeover of the company, citing the failure to achieve regulatory approvals. The futures market has been trading between slightly in the red and slightly in the green this morning, suggesting little conviction in premarket action and an uneven start to the trading day. Later in the day, the Federal Reserve’s Open Market Committee will release the minutes from its July meeting, which should give further insight into how it will decide future monetary policy.
The stock market fell yesterday following the release of a few news reports. These included U.S. retail sales picking up 0.7% in July, with retail sales exclusive of autos rising 1.0%. This suggests that the consumer is still spending, which could be a key contributor to the stickiness of inflation and may cause the Fed to keep monetary policy more restrictive for longer. Elsewhere, bond-rating company Fitch warned that they may be forced to downgrade the U.S. banking industry’s score, which could trigger a series of downgrades. The markets slipped on the news, falling to their daily lows. Overall, the S&P 500 fell 52 points (down 1.16%), the NASDAQ was off 157 points (down 1.14%), and the Dow Jones Industrial Average declined 361 points (down 1.02%). Market breadth was very negative, as decliners outpaced advancers by a 5.1-to-1.0 ratio. All eleven stock market sectors finished in the red yesterday, with energy issues and financial stocks trading amongst the weakest. Healthcare equities performed the best, though only on a relative basis.
In commodity news, oil prices declined yesterday, following the broader stock market decline, as traders priced in less demand due to a weaker economic outlook. Still, this bucks the trend of several weeks of rising prices. Elsewhere, U.S. Treasury bond yields were mixed, with short-term rates rising and long-term ones falling. The yield curve is still heavily inverted, with short-term rates well above those with longer durations, which has historically portended a coming recession. The Chicago Board Options Exchange Volatility Index, or VIX, more commonly known as the fear index, was higher yesterday as traders rushed in to purchase options protection. The VIX is starting to trade near higher levels after reaching the yearly low a few weeks ago.
A few economic reports will be released in the days ahead. These include Thursday's Philadelphia Fed manufacturing survey and U.S. leading economic indicators. Elsewhere, several dozen, mostly smaller companies will report quarterly results in the days ahead, though readers should note that we are well past peak earnings season. Still, a few notable large companies will report earnings, including Dow-30 components Cisco Systems (CSCO) after today's bell and Walmart (WMT) before tomorrow's opening bell. Overall, we think most eyes will be on tomorrow's U.S. leading economic indicators report. - John E. Seibert III
At the time of this article’s writing, the author did not hold positions in any of the companies mentioned.
CLICK HERE for more information on our services or call 1-800-VALUELINE (1-800-825-8354). Our account managers are available Monday through Friday, 8:00 AM to 6:00 PM Eastern Time.
