Dow, S&P 500 clamber higher in ‘stomach-churning days’ for stock market

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U.S. stock benchmarks were trying to find their footing on higher ground midday Wednesday, helped by positive economic data, though investors are fixated on next weeks Federal Reserve meeting with uncertainties growing about the central bank’s monetary-policy plans.

Meanwhile, reports from China suggest that the world’s second-largest economy is struggling in its attempt to recover from the pandemic.

How are stock futures trading?
  • The Dow Jones Industrial Average DJIA, +0.67% climbed 96 points, or 0.3%, at 34,672.
  • The S&P 500 index SPX, +0.74% traded 13 points, or 0.3%, higher to reach 4,456.
  • The Nasdaq Composite Index COMP, +0.46% rose about 1 point, or less than 0.1%, to 15,038.

On Tuesday, the Dow industrials dropped 292.06 points, or 0.8%, to finish at 34,577.57, the S&P 500 index fell 25.68 points, or 0.6%, to 4,443.05 and the Nasdaq Composite fell 67.82 points, or 0.5%, to 15,037.76.

Read: Stock-market traders brace for ‘quadruple witching’

And: The S&P 500 fights to hold above a short-term line in the sand of bullish momentum

What’s driving the market?

A choppy market is likely to be the new normal until next week’s policy meeting of the Federal Open Market Committee, at least one analyst told MarketWatch.

“It’s very hard [for the market to rise] in advance of the FOMC meeting,” Kristina Hooper, chief global market strategist at Invesco, said in a Wednesday morning phone interview.

“These are stomach churning days and we think it’s going to be very hard to gain any type of substantial positive momentum,” Hooper said. The Fed’s FOMC gathering is Sept. 21-22.

September also tends historically to be a down month for the U.S. stock market and the Dow and S&P 500 have lost ground for six of the last seven days and the Nasdaq has posted five straight days of losses. For September, the Dow is off by more than 2% and the S&P 500 and Nasdaq Composite are down about 1.5%.

Investors are also sensitive to the fallout from the COVID pandemic, which is threatening to slow global economic growth, as the delta variant has fueled surging cases in the U.S. and other countries.

Read: Shop early and expect to pay more: Supply chain issues could be a stumbling block to upbeat holiday shopping forecasts

Invesco’s Hooper also said that the Fed has done a fairly good job in communicating its intention to taper its $120 billion in monthly purchases of Treasurys and mortgage-backed securities and said that Chairman Jerome Powell has also emphasized the decoupling of tapering from eventual interest rate increases.

“The Fed has done a good job messaging but we just don’t have exact dates,” the Invesco strategist said, speculating that the beginning of tapering might come in October if not November.

Peter Cardillo, chief market economist at Spartan Capital Securities, said that from a near-term perspective, he views the market as oversold is expecting it to take a modest leg higher.

“I suspect the market is likely to bounce around as it tries to stabilize,” he said in emailed comments.

“However the cautious attitude will likely prevail since the decline has been accompanied by low volume,” Cardillo said.

Meanwhile, the New York Fed’s Empire State business conditions index surged 16 points to 34.3 in September, the regional Fed bank said Wednesday. Economists had expected a reading of 17.2, according to a survey by The Wall Street Journal. The index stood at 18.3 in August. Any reading above zero indicates improving conditions.

Separately, the import price index dropped 0.3% last month, the government said Wednesday, marking the first decline in 10 months. The drop was mostly attributed to the lower cost of foreign oil and industrial supplies.

And data on U.S. industrial production showed a 0.4% rise in August after a 0.8% gain in the prior month, the Federal Reserve reported Wednesday. The gain is below economist expectations of a 0.5%, according to a survey by The Wall Street Journal.

Overnight news saw a batch of soft data from China though, where August retail sales grew a disappointing 2.5% from a year earlier, from 8.5% growth in July. Industrial output in August and fixed-asset investment also fell short of expectations.

China’s zero-tolerance approach to controlling COVID-19 is posing difficulties for retailers and industry with relatively small outbreaks in the Fujian province this week provoking further lockdowns affecting millions.

On top of that, reports about the financial health of China Evergrande Group, which said that is facing “tremendous” liquidity strains and that it has hired advisers for what could be one of the country’s largest-ever debt restructurings, according to Bloomberg News, is being watched by market participants.

Which companies are in focus?
  • Shares of Microsoft Corp. MSFT, +1.57% rose 0.9% in midday Wednesday trade. The technology giant late Tuesday lifted its quarterly dividend by 11% and the company’s board agreed a new stock buyback plan of up to $60 billion.
  • Shares of Las Vegas Sands LVS, -3.06% were down 3.7% and those for Wynn Resorts WYNN, -7.79% skidded 8% lower, while MGM Resorts MGM, -3.40% shares declined 4.1%. The losses came after casino shares slumped in Macau on indications the local government aims to more closely supervise those companies.
  • Kansas City Southern KSU, +0.82% formally picks Canadian Pacific CP, +1.20% over Canadian National CNI, +2.92%. Shares of Kansas City were up 0.7%, CP’s shares were up 1.2%, while those for CNI gained 3.7%.
  • Share of Apple Inc. AAPL, +0.02% were down 0.5% after the iPhone maker debutted a series of updates to its suite of mobile phones and its Apple watch.
  • Exxon XOM, +3.00% and other energy stocks gained as crude oil prices rose sharply Wednesday as weather in the U.S. Gulf has reduced output.
How are other assets trading?
  • The yield on the 10-year Treasury note TMUBMUSD10Y, 1.315% fell 1 basis point to 1.273%. Yields and debt prices move in opposite directions.
  • The ICE U.S. Dollar Index DXY, -0.07%, which measures the currency against a basket of six major rivals, fell 0.1% to 92.49.
  • Oil futures were higher, with the U.S. benchmark CL00, +3.11% rising 2.1% to $71.96 a barrel. October natural gas NGV21, +2.81% climbed 4.3% to $5.48 per million British thermal units.
  • In European equities, the Stoxx Europe 600 index SXXP, -0.80% closed 0.8% lower, while London’s FTSE 100 index UKX, -0.25% finished the session down 0.3%.