Dow posts longest winning streak in nearly 3 months as investors dismiss signs of slowdown in China
Stocks rebounded from a lower open on Monday, giving the Dow its longest winning streak since late May as investors pushed past soft data from China and U.S. data that missed forecasts.
How the stocks traded
The Dow Jones Industrial Average DJIA,
closed up 151.39 points, or 0.5%, at 33,912.44. This is its longest winning streak since the period ending May 27, when it rose for six straight trading days, according to Dow Jones Market Data.
The S&P 500 SPX,
ended up 16.99 points, or 0.4%, at 4,297.14.
The Nasdaq Composite COMP,
finished 80.87 points, or 0.6%, up at 13,128.05.
Last week, the S&P 500 advanced 3.3% for its fourth consecutive weekly gain and the longest winning streak since November. Meanwhile, the Dow Jones climbed 2.9% last week, while the Nasdaq Composite gained 3.1%.
What drove the markets
Stocks ended higher after reversing from a lower open when disappointing economic news out of China set a negative tone. China’s retail sales, investment and industrial production all slowed and missed forecasts, while the Asian country’s central bank cut lending rates.
Concerns over slowing demand from China put pressure on the energy sector, with September WTI futures losing $2.68, or 2.9%, to settle at 89.41 $ per barrel.
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In U.S. data releases, the New York Fed’s Empire State Trading Conditions Index, an indicator of manufacturing activity in the state, fell 42.4 points to minus 31.3 in august. Although the figure did not help sentiment, economists took it with a grain of salt.
Empire State data “wasn’t all bad: delivery times were flat for the first time in nearly two years, employment managed to grow, and inflationary pressures didn’t rise,” it said. said Oren Klachkin, chief US economist at Oxford Economics, in a note.
“At the same time, manufacturers were unhappy with the outlook for the next six months,” Klachkin wrote. “We advise you not to stray too far from this report, as manufacturing in New York is only a small part of the country’s manufacturing base.”
Stocks began to see further upward momentum late in the morning after the S&P 500 ended a four-week winning streak on Friday, which posted its best percentage advance for such a period since November 2020.
Similarly, the tech-heavy Nasdaq Composite sits at a nearly four-month high after jumping 23.3% from its mid-June low on Monday. Stocks were supported last week as the US Consumer Price Index and Producer Price Index showed a cooling in inflation, although still quite warm.
“Good inflation news following a very strong payrolls report in July has revived belief in a ‘soft landing’ for the economy. This is an outcome that we thought was at least as likely as a recession, and now markets are pricing closer to that scenario,” Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management, said in a statement. note.
“The risk is that markets get ahead of themselves, especially with investor FOMO starting to kick in,” she wrote, referring to the phenomenon known as “fear to miss”.
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Technical indicators testify to the improving tone lately. The Cboe VIX volatility index,
a gauge of expected market volatility that typically rises when investors are scared, hovered around its long-term average of 20 on Monday.
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The magnitude of the latest market rally is also seen as favourable, with Bespoke Investment noting that the percentage of S&P 500 stocks trading above their 50-day moving average rose to 88% from just 2% on June 16. .
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In other economic data, the National Association of Home Builders’ monthly confidence index fell 6 points to 49 in August, the trade group said Monday. It is the first time since 2020 that it has fallen below a break-even point of 50.
Companies in the spotlight
Shares of Walt Disney Co.
ended up 2.2% after Dan Loeb of Third Point LLC, which liquidated a large stake in the entertainment giant earlier this year, revealed that he had “bought out a large stake” in the company and that he would work with the Disney leadership team to pursue strategic changes. Disney responded by saying it “welcomes” the views of its investors.
Chief Executive Elon Musk noted a milestone for the company on Sunday, tweeting that the electric vehicle maker has produced more than 3 million vehicles, a third of which are made in China. The shares ended up 3.1%.
Shares of Bed Bath and Beyond Inc.
ended up 23.6% as the Reddit crowd that made it into meme stock embraced it again. The volume of 127 million shares traded was more than eight times the 65-day average of 15 million shares traded in a single day. The stock is on a tear with no real news behind the move, but participants in Reddit’s WallStreetBets forum were celebrating the gains.
How other assets have performed
The 10-year Treasury yield TMUBMUSD10Y,
fell 5.8 basis points to 2.79%. This is the biggest one-day drop in a week.
The ICE US Dollar DXY Index,
rose 0.8%, and the stronger dollar helped push gold lower. December gold futures settled at $1,798.10 an ounce, down $17.40 or 1%.
rose above $25,000 for the first time since June, then reversed and fell 1.3% to $24,052.
In Europe, the Stoxx 600 SXXP,
ended up 0.3%, while London’s FTSE 100 UKX,
ended up 0.1%.
In Asia, the Shanghai Composite SHCOMP,
ended slightly lower, while the Hang Seng HSI index,
ended down 0.7% in Hong Kong and Japan Nikkei 225 NIK,
advanced by 1.1%.
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— Jamie Chisholm contributed to this article.