Stock market today: Stocks tick higher as S&P 500 eyes fresh record
09/25/2024 01:05
Investors are weighing the chances of another jumbo interest rate cut and China's launch of aggressive stimulus.
US stocks were mixed on Tuesday as investors digested China's launch of aggressive stimulus that lifted market spirits and a weaker-than-expected reading on consumer confidence.
The tech-heavy Nasdaq Composite (^IXIC) rose about 0.5%, while the S&P 500 (^GSPC) up about 0.2%, building on its latest record close. Meanwhile, the Dow Jones Industrial Average (^DJI) slid just below the flat line.
Stocks declined around 10 a.m. ET before recovering losses following the latest consumer confidence index reading. The Conference Board's index fell to 98.7 in September, below the 105.6 seen in August and lower than what the 104 economists surveyed by Bloomberg expected.
Stocks have shown momentum as the prospect of a Federal Reserve interest rate-cutting campaign and an apparently resilient economy spurs confidence in a coming rally. Some on Wall Street now forecast the S&P 500 will hit 6,000 this year — a big milestone less than 5% away.
The Fed's jumbo rate cut last week kicked off the rally, and on Monday, several policymakers hinted the door is open for more big moves. On Tuesday, Fed governor Michelle Bowman explained she dissented to last week's half percentage point interest rate cut because "upside risks to inflation remain prominent."
Read more: What the Fed rate cut means for bank accounts, CDs, loans, and credit cards
Also boosting the mood was China's launch of a raft of stimulus measures, its biggest since the pandemic. Global stocks and oil (CL=F, BZ=F) rallied after the PBOC's move to revive a slowing economy and support markets.
On the corporate front, beleaguered plane maker Boeing (BA) took what it called a "best and final offer" directly to striking factory workers after their union balked at putting it to a vote.
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Americans are growing more concerned about the labor market
Concerns about the labor market drove down consumer confidence in September.
The latest index reading from the Conference Board was 98.7, below the 105.6 seen in August and lower than what the 104 economists surveyed by Bloomberg expected. The drop in consumer confidence from August to September was the largest month-over-month decline since August 2021, according to The Conference Board.
In the September Consumer Confidence survey, 18.3% of consumers said jobs were "hard to get," up from 16.8%. Meanwhile, 30.9% of consumers said jobs were “plentiful,” down from 32.7% in August. This pushed what economists call the labor market differential, the amount of respondents who see jobs as plentiful minus the amount who see jobs as "hard to get," is at its lowest level since March 2021.
When excluding the pandemic, its at levels last seen in 2017.
"The persistent drop in this measure is a clear sign that the labor market is not nearly as tight as it once was," Wells Fargo economist Shannon Seery Grein wrote in a note to clients on Tuesday. "That said, we're hesitant to put too much weight on this data given broader confidence measures have remained depressed this cycle despite resilient spending habits of households."
As Yardeni Research chief markets strategist Eric Wallerstein highlighted on X, the decline in this metric could also be defined as "labor market normalization."
Whether it's normal or not will likely still be up for debate over the next several months as the trajectory of the labor market remains heavily in focus. For now, we just know that consumers aren't pleased with what they're seeing when they look for a job and it's not the same experience as the "great resignation" of 2021.
The "long lasting" impact of China's stimulus package remains unclear
China stocks ripped higher on Tuesday after the government announced plans for wide spreading stimulus.
Online retail giants Alibaba (BABA), Pinduoduo (PDD), and JD.com (JD) were all up at least 6%. But Charles Schwab’s Chief Global Investment Strategist Jeffrey Kleintop warned that prior pops in Chinese equities after the pandemic have quickly faded.
"I'm afraid we might already know how this is going to end for China," Kleintop said. "We know that Chinese stocks have rallied 20% in the past, when hopes about a stimulus driven turnaround happen. We saw that in May of this year, but that rally fizzled out as details revealed that the plan just wasn't as big or broad as hoped as it was actually implemented, and funding sources were pretty scarce. So only time will tell."
He added that lower mortgage rates on existing loans, a potential benefit of the new package, but it's unclear how much that helps the economy as a whole.
"It's a positive, but it's unclear how long lasting of an impact this will have on stocks," Kleintop said.
Intel stock pops as company launches new chips
Intel (INTC) stock rose nearly 2% as the chipmaker announced a slew of new products.
Yahoo Finance's Dan Howley reports:
The new chips, the Xeon 6 CPU and Gaudi 3 AI accelerator, promise improved performance and power efficiency and come at a time when Intel is trying to prove it has what it takes to be a major player in the AI space.
The announcement follows a Wall Street Journal report that Qualcomm is looking into a potential takeover of Intel to bolster its own chip business. Bloomberg, meanwhile, reported that Apollo Global Management is interested in making a multibillion-dollar investment in the chipmaker that would back Intel CEO Pat Gelsinger’s massive turnaround plan. Apollo is the parent company of Yahoo Finance.
Intel says the new Xeon 6 chip offers P-cores, or performance cores, and says it features twice the performance of its predecessor. The chip, according to the company, is built for AI and high-performance compute scenarios including edge and cloud systems.
The Gaudi 3 processor, on the other hand, is purpose-built for generative AI applications and will compete directly with Nvidia’s H100 and AMD’s MI300X line of chips. Intel says IBM (IBM) is using its Gaudi 3 accelerators as part of its IBM Cloud with the goal of offering a lower overall total cost of ownership.
Starbucks stock downgraded as turnaround will need more time, analyst says
Starbucks (SBUX) will need time to "brew a fresh pot," per Jefferies analyst Andy Barish.
On Tuesday, before the market open, Barish downgraded shares of the coffee giant to Underperform and lowered his price target to $76, citing "a lot of uncertainty over the next 12 months" following the "big run" in the past six weeks since Chipotle's (CMG) Brian Niccol was named CEO.
Since Aug. 1, shares are up nearly 30% to around $95. In a note to clients, Barish said he expects "the stock will stall here and begin to retrace the 'Niccol gains' particularly as fundamentals become more of the focus."
Niccol, who began in the new role on Sept. 9, has signaled that changes are to come. But changes will be challenged by bigger issues like operations, culture, value perception, and technology, said Barish.
He expects fiscal fourth quarter and fiscal year 2025 guidance to "disappoint," with EPS growth in the low single digits and same-store sales declining.
Barish called 2025 a "throwaway" year in which Starbucks attempts to reinvest and stabilize the business so it may rebound in fiscal 2026 and beyond.
Last quarter, same-store sales declined 2% in the US. Those trends may have extended into the third quarter as its coveted pumpkin spice debut was met with lackluster foot traffic, per Jefferies and data analytic platform Placer.ai.
Consumer confidence sees largest decline in more than three years
Consumer confidence tumbled in September as Americans grew increasingly worried about the labor market.
The latest index reading from the Conference Board was 98.7, below the 105.6 seen in August and lower than what the 104 economists surveyed by Bloomberg expected. The drop in consumer confidence from August to September was the largest month-over-month decline since August 2021, according to The Conference Board.
"Consumers' assessments of current business conditions turned negative while views of the current labor market situation softened further," The Conference Board chief economist Dana Peterson said in the release. "Consumers were also more pessimistic about future labor market conditions and less positive about future business conditions and future income."
The cutoff date for the release was Sept. 17, meaning respondents replied to the survey before the Fed announced it would cut its benchmark interest rate by half a percentage point on Sept. 18. But there had been several signs of softening in the labor market before consumers replied.
The unemployment has steadily risen throughout 2024 and sits at 4.2%, just below its highest level in almost three years. Meanwhile, job openings in August were at their lowest level since January 2021.
In the September Consumer Confidence survey, 18.3% of consumers said jobs were "hard to get," up from 16.8%.
Peterson added, "The deterioration across the Index's main components likely reflected consumers concerns about the labor market and reactions to fewer hours, slower payroll increases, fewer job openings — even if the labor market remains quite healthy, with low unemployment, few layoffs and elevated wages. The proportion of consumers anticipating a recession over the next 12 months remained low but there was a slight uptick in the percentage of consumers believing the economy was already in recession."
Lone Fed dissenter worried bigger rate cut would send signal of 'economic fragility'
Federal Reserve governor Michelle Bowman, who was the lone dissenter of the Fed's 50 basis point interest rate cut last week, further explained her thinking in a speech on Tuesday.
Yahoo Finance's Jennifer Schonberger reports:
Bowman elaborated in a speech Tuesday about her decision to dissent from last week's jumbo rate cut, saying that she worried that a 50 basis point reduction would send the signal that central bank policymakers see economic weakness ahead.
"I was concerned that reducing the target range for the federal funds rate by half percentage point could be interpreted as a signal that the committee sees some fragility or greater downside risks to the economy," Bowman said.
With no clear signs of material weakening or fragility, she added, it would have been better to cut by 25 basis points.
She also said she was worried a bigger first cut would lead markets to believe the Fed would cut at that pace going forward. Bringing the rate down too quickly also carries the risk of unleashing pent-up demand and "potentially reigniting inflationary pressures," she said.
China stocks rip at the open
Chinese equities sold in the US ripped higher at the open on Tuesday after China announced a widespread stimulus package.
Alibaba (BABA), Nio (NIO), JD.com (JD), and PDD Holdings (PDD) all soared in early trading, rising more than 5% each. KraneShares CSI China Internet ETF (KWEB) rose more than 7%.
Below is a look at how some of the largest Chinese stocks sold in the US are performing on Tuesday morning.
Source: Yahoo Finance US home prices notch another record high in July
US home prices hit a record high in July, but the pace of price increases moderated.
The S&P Case-Shiller National Home Price Index rose 0.2% over the prior month in July on a seasonally adjusted basis, unchanged from June’s monthly increase. This marked the sixth consecutive monthly increase and an all-time high for the index.
On an annual basis, prices increased 5%, down from the 5.5% gain seen in June.
The index tracking home prices in the 20 largest metropolitan areas gained 0.3% in July from June, lower than the Bloomberg consensus estimate of 0.4% and June's 0.5%. The 20-city index jumped 5.9% compared to last July.
“Accounting for seasonality of home purchases, we have witnessed 14 consecutive record highs in our National Index,” Brian Luke, head of commodities, real and digital assets at S&P Dow Jones Indices, wrote in a statement.
“While the S&P 500 has achieved 39 record highs and the S&P GSCI Gold TR hit 35 record highs, housing is following a similar trajectory. The growth has come at a cost, with all but two markets decelerating last month, eight markets seeing monthly declines, and the slowest annual growth nationally in 2024. Overall, the indices continue to grow at a rate that exceeds long-run averages after accounting for inflation.”
Tech leads at the open
US stocks picked up on Tuesday, extending a winning streak as pro-rate-cut Fedspeak and China's launch of aggressive stimulus lifted market spirits.
Stocks initially rallied following the announcement before paring those gains. The tech-heavy Nasdaq Composite (^IXIC) popped about 0.5% while the S&P 500 (^GSPC) rose more than 0.1%. The Dow Jones Industrial Average (^DJI) was up nearly 0.1%.
China's CSI 300 Index has best day in more than four years
Chinese stocks and bonds rallied Tuesday as China's central bank unveiled its biggest stimulus package since the pandemic.
Governor Pan Gongsheng announced plans to lower borrowing costs and inject further stimulus into the economy. In addition, the government will ease households' mortgage repayments.
China's benchmark index, the CSI 300 (000300.SS), rose more than 4.3% for its best day since July 2020.