U.S. stocks opened lower Tuesday as investors weighed signs that the U.S. economy’s surprising resilience may begin to crack.
The S&P 500 (^GSPC) fell 0.3% while the tech-heavy Nasdaq Composite (^IXIC) fell 0.2% after both indexes closed higher in the previous session during a hectic day. The Dow Jones Industrial Average (^DJI) rose just above the flat line.
Stocks have struggled to find their footing as investors face a dilemma over the direction of interest rates. Recent weak manufacturing data has prompted Wall Street strategists to downgrade their optimism about economic growth, arguing in favor of rate cuts. But Federal Reserve officials have cautioned against hoping for a change in course immediately until inflation cools sufficiently — and it’s unclear when that time will come.
Eyes will be on April’s job opening figures, due later Tuesday for more clues on how the economy is holding up, with orders for factories and durable goods also on the cards. The labor market update serves as a precursor to the crucial May jobs report released Friday – the highlight of the week’s data.
Meanwhile, the GameSpot (GME) rally – just part of a nervous start to summer for stocks – ran out of steam on Tuesday, on the heels of a 21% rise for the darling meme. Shares of the video game retailer were down about 2% in morning trading.
Elsewhere, India’s stock index fell, wiping out nearly $35 billion in value, after hitting all-time highs on Monday. The vote count in the country’s national elections has cast doubt on the majority held by Prime Minister Narenda Modi’s ruling party, despite exit poll results showing a likely landslide victory.
Live7 updates
Job openings fall to lowest level in more than three years
Job openings fell in April to their lowest level since February 2021, as the labor market showed further signs of rebalancing.
New data from the Bureau of Labor Statistics released Tuesday showed there were 8.05 million jobs open at the end of April, down from 8.35 million jobs available in March, which was revised to the decrease from 8.48. Economists surveyed by Bloomberg expected the report to show 8.35 million openings in April.
The Job Openings and Labor Turnover Survey (JOLTS) also showed 5.6 million hires were made during the month, little change from March.
The hiring rate remained at 3.6%, unchanged from March. Also in Tuesday’s report, the resignation rate, a sign of worker confidence, remained at 2.2%.
Stocks open lower, led by decline in energy sector
Stocks opened in the red on Tuesday amid growing concerns about the health of the U.S. economy following weaker-than-expected manufacturing data.
The tech-heavy S&P 500 (^GSPC) and Nasdaq Composite (^IXIC) both fell about 0.3% after closing slightly higher Monday in a choppy session for the major three indicators. The Dow Jones Industrial Average (^DJI) fell about 0.2% after losing more than 100 points in the previous session.
The S&P 500 Energy Select ETF (XLE) led the declines as oil hit its lowest level in four months on Tuesday. Traders continued to evaluate the latest OPEC+ production cut plan amid fears of oversupply towards the end of the year. The oil alliance plans to extend most of its production cuts until 2025, but will begin phasing out other voluntary cuts from October.
Recent data shows activity slowing by various metrics, dampening expectations that U.S. economic growth could accelerate for a second straight year.
April job openings expected later this morning could be another indication of how the economy is holding up. The labor market update serves as a precursor to May’s crucial jobs report, released Friday.
The unsavory business of fast food
Fast food stocks have been ice cold.
The Street has really gone bad against McDonald’s (MCD), Restaurant Brands (QSR), Yum! Brands (YUM) and many others in recent months amid stubborn inflation and renewed $5 price wars.
In short, there simply isn’t any catalyst in place to push stocks higher in the near term.
This was highlighted this morning by EvercoreISI analyst David Palmer, who reduced his same-store sales estimates for the aforementioned names.
I wanted to highlight two interesting sections of his report:
“US drive-thru chains are experiencing weakness across most income groups, but the weakness is most pronounced among households earning less than $50,000/year. This cohort benefits less from rising asset prices and suffers more from rising interest rates. It is these consumers who suffer the most from the regressive tax of inflation itself, with food cost inflation of over 30% in the COVID era, combined with the higher costs of dining out (over 4 times higher than those prepared at home) to create an affordability problem. Social media scrutiny of fast food prices has added to the pressure on McDonald’s, in particular. »
And:
“In the past, well-priced menus often focused on a flagship product – often seen by the consumer as a loss leader. These included the $1 double cheeseburger (McDonald’s 2003-2012), the $1 any size soft drink (McDonald’s 2017-2020). ), the $5 foot (Subway), the $5 mix-and-match (Domino’s) and the $1.50 hot dog (Costco). Question of the day: Will a $5 pack be enough to stabilize traffic at McDonald’s and will the food be higher. Is the cost of the meal worth it for the rest of the summer (or longer)? If the $5 meal isn’t a long-term solution, will a $1 BOGO menu do the trick for McDonald’s? We think the answer will come? in advertising effectiveness – will this take advantage of McDonald’s billion-dollar national advertising budget? If McDonald’s is able to stabilize traffic with value in Q3, the steady flow of new products in 2H24 and 2025 should launch a substantial recovery for the brand.
Good point on Goldman stock
And I woke up to a 16-page research report on stocks from Goldman Sachs. Excellent train reading.
Good point from his team on stocks:
“However, given rising valuations and the corresponding recent rise in investor confidence, stocks are more vulnerable to disappointments. So far, stocks have largely shrugged off the delay in interest rate cuts “because growth has held up – the cyclical sectors of the major markets have outperformed the defensives, leaving them exposed to any signs of a slowdown in economic activity (particularly around the labor market).”
Citi spent time with Nvidia’s CFO
While Nvidia (NVDA) CEO Jensen Huang gets all the attention, it’s also important to follow his longtime CFO if you’re invested in the name.
Colette Kress has been Nvidia’s CFO for 10 years and is considered in Wall Street circles as one of the best in the business.
Citi was able to spend some time with her this week and came out with a message. I think what they said below (based on their meeting with Kress) is interesting and a little-discussed demand driver for the chipmaker.
“Sovereign demand for AI is strong in various regions around the world. In Europe, Nvidia is seeing countries like France, Germany, and Italy doing work, with France leading the way. The Middle East is also a region that is investing heavily in AI. This is also the case in Southeast Asia. Typically, sovereign AI customers already have specific use cases for using their products. because generally speaking, entities seek to construct models based on their own characteristics.
Stifel’s appeal to the markets
I have no problem with strategists making bold decisions, as long as they are grounded in reality.
I think that’s what Stifel’s Barry Bannister is telling us this morning.
Bannister says he expects a 10% correction in the S&P 500 to around 4,750 between the second and third quarters.
For what:
“Persistent (and slightly higher) inflation in the second half, from the start of 3Q24E. »
