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Stock Market Today – Monday, Aug 15: What You Need to Know

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Stocks started this week’s trading in the green as the recent momentum continues. Nevertheless, the U.S. stock market’s direction this week will likely be decided by earnings reported by major retailers, including Walmart and Home Depot. Also, economic releases, like the July Retail Sales report and key housing data, could influence investors’ sentiment. However, it’s worth noting that home builder sentiment has turned negative for the first time since May 2020.

Stocks Finish Monday’s Session in Positive Territory

Last Updated 4:25PM EST

Stock indices finished today’s trading session in the green. The Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 gained 0.45%, 0.4%, and 0.75%, respectively.

The energy sector was the session’s laggard, as it fell by 1.95%. Nevertheless, it was a good improvement from its losses of 4% earlier on in the day. Conversely, the consumer staples sector was the session’s leader, with a gain of 0.99%. In addition, WTI crude oil lost 3.2%, reaching $88.92 per barrel. However, it is off the session low of $86.84 per barrel.

Furthermore, the U.S. 10-Year Treasury yield decreased to 2.8%, a decline of 3.7 basis points. Similarly, the Two-Year Treasury yield also decreased, as it hovers around 3.2%. This brings the spread between them to -40 basis points. The negative spread indicates that investors still have fears of a recession.

Compared to yesterday, the market is pricing in a higher chance of a lower Fed Funds rate for the end of the year. In fact, the market’s expectations for a rate in the range of 3.75% to 4% decreased to 15.4%, which is down from Friday’s expectations of 18.6%. In addition, the market is now also assigning a 35% probability to a range of 3.25% to 3.5%. For reference, investors had assigned a 31.5% chance Friday.

Prices at the Pump Continue to Decline

Last Updated 3:15PM EST

Stock indices are in the green heading into the final hour of today’s trading session. As of 3:15 p.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are up 0.4%, 0.4%, and 0.8%, respectively.

WTI crude oil is currently hovering around the low-$89 per barrel range, trading well off its session low of $86.84 per barrel.

Gas prices across the country continue their downward momentum. Indeed, the national average for regular gas remains below $4 per gallon. Today’s average price is $3.956 per gallon, down from yesterday’s reading of $3.959. This is significantly lower than the all-time high of $5.016 per gallon on June 14.

The highest prices can be found in California, where prices are substantially higher than the national average, at $5.366 per gallon. On the other hand, Texas is the state with the lowest gas prices, at $3.456 per gallon.

It’s likely that this downward trend will continue going forward as interest rates are on the rise. However, higher rates will destroy demand throughout the whole economy.

Home Builder Sentiment Declines Over the Past Month

Last Updated 12:25AM EST

Equity markets are in the green halfway into today’s trading session. As of 12:25 p.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are up 0.4%, 0.2%, and 0.4%, respectively.

On Monday, the National Association of Home Builders released its U.S. NAHB Housing Market Index for August. The report measures home builder sentiment by surveying around 900 companies. A reading above 50 indicates that more home builders have a positive view of market conditions than a negative one.

The bad news is that today’s number came in at 49, meaning that most have a negative view of the market. In addition, this print is significantly lower than the 55 that was expected. Indeed, it was a six-point drop from the past month’s reading, which was also 55. This is the first time it fell under 50 since May 2020, when the reading was 37.

The main driver behind this drop in sentiment is higher construction costs related to rising inflation and financing costs. In addition, buyer demand is softening as builders are being forced to reduce prices in order to increase sales and limit cancelations.

This downward trend is likely to continue as the Federal Reserve continues to raise interest rates to combat accelerating inflation.

Oil Prices Fall as China’s Economy Slows Down in July

Last Updated 10:00AM EST

Stock indices are relatively flat 30 minutes into today’s trading session. As of 10:00 a.m. EST, the Dow Jones Industrial Average and the S&P 500 are down 0.02% and 0.1%, respectively. Meanwhile, the Nasdaq 100 is up 0.1%.

The energy sector (XLE) is the laggard so far, as it is down 4.1%. Conversely, the consumer staples sector (XLP) is the session’s leader, with a gain of 0.6%.

WTI crude oil is trading below $90 per barrel, as the price collapsed by more than 4%. This dramatic move to the downside can be attributed to weak economic data coming out of China. The central bank of China cut lending rates after the economy unexpectedly slowed down in July. As a result, recession fears are starting to rise again, causing WTI oil to trade in the high-$87 range.

Meanwhile, bond yields are lower, as the U.S. 10-Year Treasury yield is now hovering around 2.78%. This represents a decrease of six basis points from the previous close.

Similar movements can be seen with the Two-Year yield, which is now at 3.2%. However, the spread between the 10-Year and Two-Year U.S. Treasury yields is still negative, as it currently sits at -42 basis points.

Pre-Market Update

U.S. stock futures traded lower in Monday’s pre-market trading hours ahead of key retail earnings this week. Major U.S. indexes posted strong gains last week on better-than-feared inflation data.

Futures on the Dow Jones Industrial Average (DJIA) and the S&P 500 (SPX) were down 0.42% and 0.47%, respectively, as of 4.12 a.m. EST, Monday. Furthermore, futures tied to the tech-heavy Nasdaq 100 (NDX) fell 0.47%.

Favorable Inflation Data Drove Last Week’s Gains

Last week, the S&P 500 advanced 3.25%, marking the fourth consecutive week of positive trends. Meanwhile, the Nasdaq 100 and Dow Jones rose 2.71% and 2.92%, respectively. The major indexes gained as inflation cooled down in July, thanks to a decline in gas prices.

The July Consumer Price Index (CPI) increased 8.5% year-over-year but was flat when compared on a monthly-over-month (MOM) basis, after having increased 1.3% MOM in June. Nonetheless, comparing the change on a year-over-year basis in July, the figure was not only lower than the 9.1% rise noted in June but also came below economists’ consensus expectation of 8.7%. Further, the Producer Price Index (PPI) for July came in at 9.8%, compared to June’s reading of 11.3%.

The better-than-feared inflation numbers triggered hopes that the Federal Reserve might ease its aggressive rate-hike plans to tame inflation. However, several economists believe that the Fed might not change its stance so soon based on favorable data for just one month.

All Eyes on Retail Earnings

This week, major retailers, including Walmart (WMT), Target (TGT), Home Depot (HD), Lowe’s (LOW), and TJX Companies (TJX), will be reporting their fiscal second-quarter results. Investors will be keenly watching the numbers reported by these retailers, as well as their guidance, to understand the extent to which inflation and supply chain pressures are impacting their businesses.

Last month, retail giant Walmart spooked investors when it cut its quarterly and full-year earnings outlook due to inflation concerns.

Key Economic Releases

This week, key housing data will be released, including the National Association of Home Builders (NAHB) Home Market Index for August on Monday, Building Permits as well as Housing Starts for July on Tuesday, and Existing Home Sales for July on Thursday.   

On Wednesday, minutes from the Fed’s July 26-27 Federal Open Market Committee (FOMC) meeting will be released. It will likely give additional cues about the Fed’s approach to bringing inflation under control.

One of the key economic releases this week is the U.S. Census Bureau’s July retail sales data, scheduled for Wednesday. The report is crucial to assess the direction of consumer spending amid high inflation.

Other Major News

In other interesting news, billionaire investor George Soros’ firm, Soros Fund Management LLC bought 29,883 shares of Elon Musk’s Tesla (TSLA) for $20.1 million in the second quarter, as disclosed in an August 12 SEC filing. Soros’ firm also bought additional shares in legacy automaker Ford (F), but trimmed its position in Rivian Automotive (RIVN) to just over 17.8 million shares, down from 19.8 million shares in Q1.

Soros also built up his positions in some big tech stocks. The list includes Alphabet (GOOGL), Amazon (AMZN), Qualcomm (QCOM), Salesforce (CRM), and Snowflake (SNOW).

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