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Traders work on the floor of the New York Stock Exchange (NYSE) in New York, US, on Friday, Feb. 16, 2024. Wall Street is ending the week on a bit of a sour note, with stocks and bonds falling after economic data continued to fuel speculation the Federal Reserve will be in no rush to cut interest rates. Photographer: Michael Nagle/Bloomberg
The moves come after the S&P 500 shed 6% over the past three sessions. The turmoil was sparked by data showing a rise in US unemployment, causing investors to worry the Federal Reserve is not moving quickly enough to cut interest rates in order to stave off a recession.
Among individual stocks, Nvidia Corp. rose as much as 4.4%, while other chip stocks also gained. Palantir Technologies Inc. jumped 8.1% after the data-analysis software company raised full-year forecasts, citing demand for artificial intelligence software. Cyber security firm Crowdstrike Holdings Inc. was lifted by Piper Sandler advising clients to use beaten-down valuations to buy the shares. Uber Technologies Inc. advanced 6% after an earnings beat.
A rush of Wall Street strategists have told clients not to fret over the recent pullback. Bank of America Corp.’s Savita Subramanian said pullbacks of 5% or more have occured three times per year on average since the 1930s and 10% corrections once annually, adding a “fell-fledged bear market is unlikel.”
Strategists at Goldman Sachs Group Inc. said buying US stocks after a slump of the scale witnessed over the past month has usually been profitable, based on analysis of four decades of data. Since 1980, the S&P 500 Index has generated a median return of 6% in the three months that followed a 5% decline from a recent high, a team led by chief US equity strategist David Kostin said late Monday.
Other market players including Jonestrading’s Mike O’Rourke downplayed the setback, telling clients in a note that “a 10% or more correction is absolutely appropriate amid such market strength.”
Concerns of an abrupt downturn were somewhat allayed by numbers Monday showing the US services sector expanded in July, after the worst contraction in four years a month earlier. Economic data releases over the coming weeks will be key to gauging the Fed’s next move and the direction of stocks.
“Taking a contrarian approach around these big moves is not a bad approach for active manager and investors,” said Ben Kirby, co-head of investments at Thornburg Investment Management.
Sectors to Watch
- Machinery stocks outperform after Caterpillar said its annual profit will be higher than previously expected
- Ride-hailing companies Uber and Lyft stocks jump after the former reported strong earnings results
- Railroad operators may gain after CSX results impressed
- Canadian stocks today are poised to catch up with the selloff that impacted US and global markets on Monday while the Toronto Stock Exchange was closed for a civic holiday
Markets at a Glance
- S&P 500 Index rose 0.5%
- Dow Jones Industrial Average fell 0.1%
- Nasdaq Composite Index rose 0.5%
- Nasdaq 100 Index rose 0.3%
- Russell 2000 Index rose 0.1%
- 10-year Treasury yield rose 1.9 basis points
- Cboe Volatility Index fell 6.21 points
- Bloomberg Dollar Index rose 0.3%
- West Texas Intermediate crude fell 0.9% to $72 a barrel
- Euro fell 0.3%
Here Are the Most Notable Movers
- Uber shares rise 6% after the company reported better-than-expected orders in the second quarter, underscoring the continued strength in demand for rideshare and delivery services.
- Lucid shares jump as much as 13% after after the EV startup announced a commitment of up to $1.5 billion from one of its biggest investors — an affiliate of Saudi Arabia’s Public Investment fund.
- ZoomInfo Technologies drops 16% after the infrastructure-software company undershot earnings expectations.
- Palantir Technologies’ stock jumps 8.1% after the company raised its annual outlook, citing continuing demand for its artificial intelligence software.
- Caterpillar shares gain 3.2% after the heavy machinery producer reported second-quarter adjusted earnings per share that came ahead of estimates.
- Celsius Holdings shares rise 5% after the energy-drink maker reported second-quarter revenue and earnings per share that topped Wall Street expectations.
- Vimeo shares rise 13% after the video software company forecast revenue for the full year above the average analyst estimate and reported second-quarter revenue that beat forecasts.
Notes From the Sell-Side
- CrowdStrike edges higher as Piper Sandler raised the recommendation on the cyber security company to overweight from neutral, saying investors should “opportunistically build positions at current levels.”
- Amazon is removed as top pick at Morgan Stanley, with the bank citing additional merchandise margin pressure and slower cost to serve improvements. Shares were slightly lower.
- Alphabet fell following Monday’s ruling by a US judge that Google illegally monopolized the search market through exclusive deals. Analysts now say that Alphabet will appeal the verdict and the process will take time to resolve.
- Chegg shares slide 27% after the education technology company’s forecast for third-quarter adjusted Ebitda missed consensus estimates. Piper Sandler said this was a disappointing quarter from the company.
- Hims & Hers Health shares fall even after the firm boosts full-year adjusted Ebitda guidance. Citi described the performance as “impressive,” but noted that the debate on GLP-1 weight loss drugs was far from over.
Related Market News
- Taking Stock: Fighting the tape is never a good idea, and the intensity of the stock market selloff yesterday indicates traders have already hit the panic button.
- European Stocks: European stocks fell Tuesday, suggesting any rebound from this month’s selloff remained fragile as investors worried about the outlook for US economic growth.
- Inside Asia: Most Asian currencies weakened, paring some of Monday’s gains, after the dollar bounced back. The Philippine peso outperformed amid hawkish signals from the central bank.
