Dow clings to gain as energy and bank stocks rise, but S&P 500 and Nasdaq under pressure

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MARKET SNAPSHOT

The Dow industrials clung to a modest gain Monday afternoon as energy and bank shares rose, aided by a rally in Treasury yields. But the move in rates also was causing headwinds for rate-sensitive areas of the market, including technology.

What are major indexes doing?

  • The Dow Jones Industrial Average traded up 149 points, or 0.4%, at 34,947, and had hit a intraday peak at 35,061.12 .
  • The S&P 500 index was down 3 points, or 0.1%, to around 4,451.
  • The Nasdaq Composite Index retreated 0.4%, or 63 points, to reach 14,984, but had been as low as 14,864.96 earlier Monday.
  • The small-capitalization Russell 2000 index soared 1.6% to 2,284.

On Friday, the Dow rose 33 points, or 0.1%, to 34798, the S&P 500 increased 7 points, or 0.15%, to 4455, while the Nasdaq dropped 5 points, or 0.03%, to 15048.

What’s driving markets?

A move in yields was serving as catalyst for stocks Monday, with a renewed selloff for the benchmark 10-year Treasury pushing its rate briefly back above 1.5% for the first time since late June, according to FactSet. Yields and prices move in opposite directions.

Rising yields can increase the discount rate for tech-related stocks and highly valued sectors, while helping to boost shares of financials whose business models benefit from higher longer-end rates. Goldman Sachs Group Inc. shares advanced 2.3%, while the Financial Select Sector SPDR ETF rose 1.4%.

An energy crisis sweeping the globe was another catalyst for equities on Monday. Power shortages led to forced factory production cuts in China, while in the U.K., a shortage of truck drivers led to hoarding and declining inventories at gas stations.

Analysts at Goldman Sachs hiked their oil-price forecast to $90 a barrel, citing the impact of what it said was the most bullish hurricane in U.S. history on supply. The Energy Select Sector SPDR ETF jumped 3.5% as oil prices continued to press higher.

Energy disruptions have highlighted what’s been a growing issue for the global economy, namely that supply hasn’t recovered as fast as demand in a variety of markets. Costco Wholesale last week said it imposed limits on purchases of toilet paper and water.

Orders for durable goods surged 1.8% in August largely thanks to more demand for Boeing jetliners, but continued supply shortages held back auto makers and remained a drag on the U.S. economic recovery. Economists surveyed by The Wall Street Journal had forecast a 0.6% rise.

Investors continued to cast a wary eye on the impact of China Evergrande’s debt troubles on the world’s second-largest economy, while elections in Germany, the No. 1 European economy, have so far failed to produce a decisive result in what’s expected to be months of coalition talks.

There are a number of Federal Reserve officials due to speak this week. Chicago Fed President Charles Evans, in a speech Monday morning, said he was more worried that the economy wouldn’t produce enough inflation rather than run too hot.

New York Fed President John Williams said he doesn’t expect the recent surge in inflation to last, predicting it will fall to around 2% next year, but also said a reduction in the central bank’s massive $120 billion in monthly bond purchases may be soon warranted.

Read: Fed Williams predicts U.S. inflation rate will cool to 2% in 2022

Investors also were keeping an eye on Europe. “The lack of a clear winner in Germany’s election combined with a new batch of speeches from most central bankers may slow the rally down,” said Pierre Veyret, technical analyst at ActivTrades, in a note. “In addition, investors’ eyes are cautiously monitoring the situation in China where both the energy and liquidity crises are worsening, increasing worries of a knock-on impact on other economies.”

In public health news, chief executive of Pfizer Inc. said the company is expecting to submit data from late-stage trials of its COVID-19 vaccine in 5- to 11-year-old children to the U.S. Food and Drug Administration within days, raising hopes that another key patient group will soon be eligible for shots.

Which companies are in focus?

  • Swedish electric car maker Polestar Performance AB said Monday it would go public via a merger with special purpose acquisition company Gores Guggenheim Inc.  in a deal with an implied enterprise value of about $20 billion. Shares of Gores Guggenheim rose 5.5%.
  • In a Monday blog post, Facebook Inc. that it was putting a “pause” on efforts to create a version of Instagram for children under 13. Shares edged up 0.3%.
  • Public Service Enterprise Group said Monday it’ll increase its annual dividend by 12 cents a share to $2.16 per share beginning in the first quarter of 2022 and buy back $500 million in stock after it closes the $1.9 billion sale of its Fossil unit to ArcLight Capital Partner LLC, as announced in August. Shares were up 1.6%.
  • Beyond Meat Inc. BYND said Monday that it is expanding the availability of Beyond Breakfast Sausage Classic Patties by more than 1,500 Walmart Inc. WMT stores, and Beyond Breakfast Sausage Spicy Patties by more than 1,300 stores. Shared climbed by 2.7%.
  • Shares of Acceleron Pharma Inc. XLRN gained over 5.5% on Monday after Bloomberg reported Friday that an unnamed buyer is considering spending $11 billion to buy the company. 
  • Shares of Intra-Cellular Therapies Inc. ITCI gained 2.5% on Monday after the company said clinical data showed that its experimental treatment for bipolar disorder reduced depressive symptoms.

How are other assets faring?

  • The yield on the 10-year Treasury note TMUBMUSD10Y rose to around 1.48% Monday from 1.459% on Friday.
  • The ICE U.S. Dollar Index DXY, a measure of the currency against a basket of rivals, was up 0.1% at 93.38.
  • Oil futures climbed, with the U.S. benchmark CL00 trading 2.2% higher at $75.63 a barrel. Gold futures GC00 rose less than 0.1% to settle at $1,752 an ounce.
  • In Asia, Hong Kong’s Hang Seng Index HSI rose less than 0.1%, while China’s CSI 300 index 000300 climbed 0.6%. The Nikkei 225 index NIK closed marginally lower.
  • In Europe, the Stoxx Europe 600 SXXP, closed down 0.2%, while the FTSE 100 index UKX rose 0.2% higher.

Steve Goldstein contributed reporting

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