U.S. stocks were mixed Tuesday, holding near three-month highs following a summer surge as investors assessed earnings reports from major retailers, including upbeat results from Walmart Inc.
What’s happening
- The Dow Jones Industrial Average DJIA rose 72 points, or 0.2%, to 33,985.
- The S&P 500 SPX fell 13 points, or 0.3% to 4,284.
- The Nasdaq Composite COMP was off 118 points, or 0.9%, at 13,010.
Stocks rose Monday, with the Dow rising 151 points, or 0.5%, while the S&P 500 gained 0.4% and the Nasdaq Composite tacked on 0.6%. The S&P was up more than 17% through Monday from its mid-June low, but remains down 10.4% from its Jan. 3 record close.
What’s driving markets
U.S. equity indexes got off to a wobbly start, though bulls might not be too disheartened. It has been a feature of recent sessions, where in the early going stocks were struggling to hold their ground but eventually gave way to further gains as buyers took firm control.
Such underlying momentum has helped stocks bounce off the 2022 low touched in mid-June, bolstered by hopes that a peak in inflation will allow the Federal Reserve to be less aggressive in hiking borrowing costs.
Read: This stock-market milestone indicates the S&P 500 could be as much as 16% higher one year from today
Some market watchers, however, cautioned that the market could be getting ahead of itself.
“We would caution investors against chasing this rally. We expect renewed market volatility ahead, and we continue to recommend positioning portfolios for resilience under various scenarios,” said Mark Haefele, chief investment officer at UBS Global Wealth Management, in a note.
“With inflation still high, we favor value stocks including global energy. And with the economic outlook uncertain, we think investors can consider defensive equity exposure via global healthcare or quality income stocks,” he wrote.
Meanwhile, investor caution may reflect wariness ahead of a further update on Fed thinking due Wednesday, when the central bank releases the minutes of its last monetary policy meeting. The U.S. 10-year Treasury yield is BX:TMUBMUSD10Y up 7 basis points near 2.86%.
“In the U.S. many investors are playing a waiting game, waiting to scour Fed minutes and also waiting for a whole host of retailers to deliver their updates giving us an inkling into where consumers are cutting back and which consumers are managing to tread the inflation heated waters,” said Danni Hewson, financial analyst, at AJ Bell.
Results from major retailers were in focus this week as earnings season hits its final stretch.
Shares of Walmart WMT jumped 6% to lead Dow gainers after the discount retail behemoth reported fiscal second-quarter profit and revenue that beat expectations, and raised its full-year outlook. The results come just three weeks after the Dow component issued its second fiscal 2023 profit warning in two months, when the company said inflation had required more markdowns to clear inventory.
Meanwhile, Home Depot Inc. HD shares rose 3.6% after the home improvement retail giant reported fiscal second-quarter profit, record total sales and same-store sales that all rose above expectations and affirmed its full-year outlook.
The big retailers reporting this week, including Target Corp. TGT and Lowe’s Cos. LOW on Wednesday, and Kohl’s Corp. KSS on Thursday, will bring the curtain down on the current reporting season, noted Richard Hunter, head of markets at Interactive Investor.
“For the most part, companies have emerged relatively unscathed from what was expected to be a difficult round of numbers, with outlook comments emanating from boardrooms showing caution rather than despair for the coming months,” said Hunter in a note to clients.
“It is possible that earnings may need to be revised given the current state of the economy for the third quarter, but for the moment corporate news has been relatively positive,” he added.
Data that showed U.S. housing starts fell 9.6% in July, while building permits were down1.3%.
However, U.S. industrial production rose 0.6% in July, the Federal Reserve reported Tuesday. The gain topped Wall Street expectations of a 0.3% increase, according to a survey by The Wall Street Journal.
Capacity utilization rebounded to 80.3% in July from 79.9% in the prior month. The capacity utilization rate reflects the limits to operating the nation’s factories, mines and utilities. Economists had forecast a 80.2% rate.
Companies in focus
- World Wrestling Entertainment Inc. WWE delivered second-quarter results that beat expectations and said it wrapped up a probe of former chief executive Vince McMahon. A special committee identified $19.6 million in unrecorded expenses, which will be paid by McMahon. WWE said it’s revising its previously issued financial statements to record the unrecorded expenses for the years ended 2019, 2020 and 2021, as well as the first quarter of 2021 and 2022. Shares rose 2.5%.
- Apple Inc. AAPL laid off 100 contract workers in charge of recruiting, according to Bloomberg. Apple shares fell 0.4%.
- Shares of Bed Bath & Beyond Inc. BBBY jumped another 24.5% Tuesday, shaking off early weakness that came after B. Riley analyst Susan Anderson warned investors that they should sell, saying their recent rocket ride has led to “unrealistic” valuations. Through Monday, the meme stock had skyrocketed 248% over a 14-day stretch in which it rose in 13 of the days.
How are other assets faring
- U.S. WTI oil futures CL tipped down 1.1% to trade below $88.50 a barrel.
- The ICE U.S. Dollar index DXY fell 0.2%.
- Gold GC00 was down 0.4% below $1,792 an ounce.
- Bitcoin BTCUSD fell 1.7% to trade below $23,750.
- Asia markets were mildly mixed and in Europe the Stoxx 600 XX:SXXP was flat, while London’s FTSE 100 UK:UKX rose 0.4%.