Stocks stall as traders parse jobless claims, Fed policymakers' comments

Stocks wavered as traders weighed the latest economic reports for clues on the outlook for Federal Reserve rates in the run-up to Jerome Powell’s speech Friday.

Equities fluctuated — with the S&P 500 less than 1% away from its all-time high. Treasury yields and the US dollar rose slightly. Data showed jobless claims data showed the labor market is cooling only gradually — rather than rapidly slowing. US manufacturing activity shrank at the fastest pace this year on further weakness in production, orders and factory employment. And existing-home sales increased for the first time in five months.

Wall Street traders also waded through a raft of remarks from US policymakers. Fed Bank of Kansas City President Jeffrey Schmid said he wants to see more data before supporting rate cuts. His Boston counterpart Susan Collins says “a gradual, methodical pace” of cuts is likely to be appropriate.

“The script is clear — the Fed is going to ease in September, but no one is portraying a desire to raise 50 basis points at this time,” said Andrew Brenner at NatAlliance Securities.

The S&P 500 hovered near 5,620. Peloton Interactive Inc. rallied as a profit beat signaled the struggling fitness company’s turnaround efforts are starting to bear fruit. Snowflake Inc. plunged as a sales outlook failed to reassure investors that the company will gain ground in the market for artificial-intelligence software tools.

Treasury 10-year yields advanced five basis points to 3.85%

Chris Senyek at Wolfe Research says that the Fed Chair has historically used his remarks at the Jackson Hole symposium as a way to reset expectations surrounding upcoming Fed policy changes. 

“Our sense is Powell will maintain his dovish tone and signal a cutting cycle starting at the September meeting,” Senyek said. “However, contrary to what the futures market is pricing in for the remainder of 2024, we do not believe the Fed Chair will signal a cut larger than 25 basis points.”

Sam Stovall at CFRA also bets the next Fed-easing cycle will be initiated in a “more measured fashion” with a 25 basis point cut.

“This ‘slower to lower’ approach will likely be intended to signal that the Fed is not behind the curve, but will allow it to ensure that the embers of inflation have been fully extinguished before concluding that its mission has been completed,” he noted.

Corporate Highlights:

• Urban Outfitters Inc., the Anthropologie and Free People brands, posted quarterly sales growth that came in below Wall Street’s expectations.
• Carlyle Group Inc. is acquiring Advance Auto Parts Inc.’s Worldpac unit for $1.5 billion, striking the first major industrial investment for the firm in more than two years.
• Zoom Video Communications Inc. gave a sales forecast for the current quarter that beat analysts’ estimates, suggesting its expanded suite of products is making gains with business customers.
• Starboard Value LP urged Autodesk Inc.’s board to evaluate whether Chief Executive Officer Andrew Anagnost is the right person to lead the company following recent accounting issues.
• Toronto-Dominion Bank is setting aside $2.6 billion to cover fines it expects to pay for failures in its money-laundering controls, and the company sold part of its stake in Charles Schwab Corp. to fund it.
• Toronto-Dominion Bank posted its first quarterly loss in decades as the bank took a $2.6 billion provision for fines tied to US money-laundering investigations and saw results hurt by issues including extreme weather and wildfires.

Key events this week:

• Japan CPI, Friday
• BOJ’s Kazuo Ueda to attend special session at Japan’s parliament to discuss July hike, Friday
• US new home sales, Friday
• Jerome Powell speaks in Jackson Hole, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 was little changed as of 10:09 a.m. New York time
• The Nasdaq 100 was little changed
• The Dow Jones Industrial Average fell 0.2%
• The Stoxx Europe 600 rose 0.5%
• The MSCI World Index was little changed

Currencies

• The Bloomberg Dollar Spot Index rose 0.4%
• The euro fell 0.4% to $1.1104
• The British pound was little changed at $1.3093
• The Japanese yen fell 0.8% to 146.43 per dollar

Cryptocurrencies

• Bitcoin fell 1.2% to $60,511.51
• Ether fell 0.8% to $2,609.43

Bonds

• The yield on 10-year Treasuries advanced five basis points to 3.85%
• Germany’s 10-year yield advanced four basis points to 2.23%
• Britain’s 10-year yield advanced six basis points to 3.95%

Commodities

• West Texas Intermediate crude rose 1.1% to $72.73 a barrel
• Spot gold fell 1.3% to $2,480.81 an ounce