US stocks recover from lower open even as China raises concerns over global growth

US stocks rebounded on Monday afternoon as investors looked past soft data from China that led to a lower open for all three major indexes.

How Stocks Trade
  • The Dow Jones Industrial Average
    DJIA,
    +0.48%

    rose 135 points, or 0.4%, to 33,896.

  • The S&P 500
    SPX,
    +0.28%

    rose 12 points, or 0.3%, to 4,292.

  • The Nasdaq Composite
    COMP,
    +0.36%

    fell 54 points, or 0.4%, to trade at 13,102.

The S&P 500 advanced 3.3% last week 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 drives the markets?

Stocks began to rally late in the morning, reversing from the open after disappointing economic news out of China helped set a negative tone, with retail sales, investment and industrial production slowing and missing forecasts. China’s central bank has also reduced loan rates.

Meanwhile, the New York Fed’s Empire State Business Conditions Index, an indicator of manufacturing activity in the state, drop of 42.4 points at 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.”

Concerns over slowing demand from China put pressure on the energy sector, with WTI crude oil futures CL.1 falling 3.7% to trade near $88 a barrel. The Energy Select Sector SPDR ETF
XLE,
-2.03%

down 1.9%.

Lily: Energy remains a sweet spot for investors. Here is a list of “energized” actions to think about.

Stocks gained further upward momentum late in the morning after the S&P 500 ended a four-week winning streak on Friday that recorded its best percentage advance for such a period since November 2020.

Similarly, the tech-heavy Nasdaq Composite sits near a nearly four-month high after jumping 22.6% from its mid-June low on Friday. 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 pass by”.

Lily: Why BlackRock says the stock market’s big summer rally isn’t worth chasing

Technical indicators testify to the improving tone lately. The Cboe Volatility Index
VIX,
+2.00%
,
a gauge of expected market volatility that typically rises when investors are scared, hovered below its long-term average of 20 on Monday.

See: Can the stock market melt without Wall Street’s fear gauge reaching “panic” levels?

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. .

Source: Bespoke Investment

Also on Friday, the S&P 500 closed above 4,231, retracing more than 50% of the 2022 selloff from its Jan. 3 high near the June 16 low. Technical analysts noted that the S&P 500 over the past half-century failed to retrace 50% of a bear market selloff and then set new cycle lows, although they warned that there was still potential for significant losses and short-term volatility.

Lily: Why stock market bulls are cheering the S&P 500 close above 4,231

In other economic data, the National Association of Home Builders’ monthly confidence index fell 6 points to 49 in August, the professional group announced on 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.
    SAY,
    +2.69%

    rose 2.8% after Third Point LLC’s Dan Loeb, which liquidated a large stake in the entertainment giant earlier this year, revealed he had “bought a significant stake” in the company and would work with the Disney leadership team in pursuing strategic changes.

  • Tesla Inc.
    TSLA,
    +3.50%

    Chief Executive Elon Musk noted a company milestone on Sunday, tweeting that the electric vehicle maker has produced more than 3 million vehicles, with a third of them made in China. The shares rose 2.8%.

  • Shares of Bed Bath and Beyond Inc.
    BBBY,
    +8.92%

    rose 9.2%, putting the meme stock on track to a fourth consecutive win. The stock had climbed 21.8% on Friday and has climbed 32.3% since falling 14.2% on Aug. 9 to snap the longest winning streak in 15 years. The home goods retailer’s meme stock is heading for the 13th gain in 14 sessions.

How are the other assets doing?
  • The 10-year Treasury yield
    TMUBMUSD10Y,
    2.780%

    fell 7 basis points to 2.782%.

  • The ICE US Dollar Index
    DXY,
    +0.68%

    rose 0.7%, and the stronger dollar helped push gold
    GC00,
    -1.13%

    down 1.1% to trade near $1,795 an ounce.

  • Bitcoin
    BTCUSD,
    -0.62%

    rose above $25,000 for the first time since June, but then reversed, falling 0.4% to $24,233.

  • In Europe, the Stoxx 600
    SXXP,
    +0.34%

    ended up 0.3%, while London’s FTSE 100
    UKX,
    +0.11%

    ended up 0.1%.

  • In Asia, the Shanghai Composite
    SHCOMP,
    -0.02%

    ended slightly lower, while the Hang Seng index
    HSI,
    -0.67%

    ended down 0.7% in Hong Kong and Japan Nikkei 225
    Nick,
    +1.14%

    advanced by 1.1%.

Listen to Carl Icahn at the Best New Ideas in Money Festival September 21 and 22 in New York. The legendary trader will reveal his take on this year’s market madness.

— Jamie Chisholm contributed to this article.

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