(New York) The New York Stock Exchange ended on a mixed note Wednesday, in a market concerned about the health of the American economy, but which does not want to commit before the publication of a crucial report on employment on Friday.
The Dow Jones Industrial Average edged up 0.09%, the NASDAQ Index fell 0.30% and the broader S&P 500 Index lost 0.16%.
As the day before, which saw a sudden drop, “investors fear a weakening of the economy,” commented Jack Ablin of Cresset Capital.
This impression was reinforced by a report from the Ministry of Labor, according to which the number of job offers fell in July to its lowest level since January 2021.
As for layoffs, they jumped by 13%, to their highest since March 2023.
In the process, operators have recalibrated their expectations regarding monetary policy and now attribute a probability of 45% to the hypothesis of a rate cut of half a point at the end of the next meeting of the American central bank (Fed), in mid-September.
Bond rates reacted immediately. The yield on 10-year US government bonds fell to 3.76%, compared to 3.83% the previous day at the close.
The deterioration in economic conditions has penalized so-called cyclical stocks, i.e. those sensitive to the economic situation, such as the construction machinery manufacturer Caterpillar (-1.03%) or the sports equipment manufacturer Nike (-0.37%).
It also further weighed down oil prices and major energy names such as ExxonMobil (-1.22%) and Chevron (-1.79%).
After their tumble on Tuesday, semiconductors have recovered, with the notable exception of Nvidia, which has dropped another 1.66%.
Still, “I don’t see a lot of conviction among investors today,” Ablin said. “The trend is weakening, but there’s no momentum in that direction.”
“We are positioning ourselves” ahead of Friday’s employment report, considered crucial before the Fed meeting, “but there is no panic,” according to the analyst.
Nancy Vanden Houten of Oxford Economics pointed to the Fed’s Beige Book, released Wednesday, which takes the temperature of the U.S. economy on the ground via the central bank’s regional offices.
The report “paints an economy that is slowing down, but remains far from recession,” she said.
On the stock market, US Steel plunged 17.47% after the Washington Post reported that US President Joe Biden is set to formally block the takeover of the US steelmaker by its Japanese rival Nippon Steel.
Nordstrom (-0.18%) did not benefit from the announcement of an offer from the founding family of the department store chain, which wants to take the group private. They are offering $23 per share, a price close to the current price ($22.78).
Discount chain Dollar Tree was penalized (-22.16%) for a profit warning. Chief Executive Todd Vasos said many of the chain’s regulars felt “financially constrained.”
Shares of Donald Trump’s media group, TMTG (-6.08%), fell to their lowest level since its IPO in late March, reached on Tuesday.
Investors are concerned that Donald Trump will sell all or part of his shares after a six-month period following the stock market launch, as the company allows him to do.
They also wonder about the future of his social network Truth Social in the event of defeat in the presidential election, and have not welcomed the return of the former head of state to X, on which he is once again publishing extensively.
TSX virtually unchanged
PHOTO TIJANA MARTIN, CANADIAN PRESS ARCHIVES
Weakness in the energy sector held back gains elsewhere in markets, leaving Canada’s main stock index virtually unchanged at the close on Wednesday, while U.S. stock markets were mixed.
The energy sector was under pressure as crude oil fell below US$70, closing down US$1.14 at US$69.20 a barrel.
The S&P/TSX energy index fell about 1.8%, eclipsing modest gains in the financials, telecommunications and utilities sectors, sending the S&P/TSX composite index down 1.69 points to 23,040.76.
The energy sector’s decline was part of a broader day of low risk aversion as the Bank of Canada’s widely expected rate cut didn’t have much of an impact on markets, said Konstantin Boehmer, head of fixed income at Mackenzie Investments.
“I don’t think the Bank of Canada’s decision has had a real impact on Canada,” he said. “I think it was entirely expected, and entirely understood, that the Bank of Canada would cut rates by 25 basis points and that they continue to do so.”
In fact, it was a US job openings report, which is usually a fairly minor data point, that affected markets because it showed fewer hires.
“That number has been dropping quite aggressively. […] Because we are focused on the labor market and it is an indication of the strength of the sector, it has attracted the attention of the markets,” he stressed.
The hiring reading is a preview of what’s to come on Friday, when the U.S. releases its last major jobs report before the Federal Reserve’s interest rate decision on September 18.
“So that sets the tone in the market, which is not very good.”
The Canadian dollar was trading at 73.94 cents U.S., up from 73.81 cents U.S. on Tuesday, as the Bank of Canada made its widely expected announcement of a quarter-percentage point cut to its key interest rate.
But the loonie’s slight gain is more the result of pressure on the U.S. dollar than a notable increase due to the Bank of Canada’s rate decision, Boehmer said.
“The logic is that as economic data is weaker, expectations of such a rate cut become greater. And because of the greater expectations of a rate cut, that is generally viewed as negative for the U.S. dollar,” he said.
Speculation that the Fed will cut its benchmark rate by half a percentage point is increasing, standing at about a 40% probability versus a 60% chance for a quarter-percentage point cut, he said.
The possibility of a bigger decline comes as investors are becoming a bit more cautious, Boehmer said.
“No panic, just a continuation of taking some chips off the table and looking at the US economy with a little more concern than before.”
On the New York Commodity Exchange, the price of natural gas fell five cents to US$2.15 per million BTU.
The gold contract rose $3 to $2,526 an ounce and the copper contract fell one cent to $4.08 a pound.
The Canadian Press