US stocks ended mixed on Wednesday, as the Nasdaq Composite failed to hold onto earlier gains. The index closed 0.2% lower.
The Dow ended up 0.3%, or 91 points, while the S&P 500 rose 0.2%.
Investors could take a breath Wednesday following another steep selloff in the prior session after Federal Reserve Chairman Jerome Powell said high inflation would stay for a little while longer.
Dollar Tree (DLTR) was by far the strongest stock in the S&P and closed up more than 16% after the company said it would sell more items for more than $1.
Dollar Tree for decades has sold most of its products for a dollar. Now it’s adding products for higher prices at thousands of stores.
The company said Tuesday that it will begin selling items at $1.25 and $1.50 at some locations for the first time. It will also add $3 and $5 items to more stores, expanding on a prior strategy in recent years to move away from only offering goods for $1.
Dollar Tree (DLTR) has a treasure hunt-like atmosphere in stores and caters to suburban, middle-income shoppers. It carries primarily seasonal goods, toys, stationary, home decor, kitchenware and party items. The company said its latest moves to raise prices will allow it to expand its assortment and introduce new products.
Dollar Tree CEO Michael Witynski also told the Wall Street Journal that the addition of items above $1 was in part a response to rising costs the chain is facing.
Well that didn’t last long…
The Nasdaq Composite is back in the green, up 0.3%. That means all three major Wall Street indexes are higher, trying to retrace some of yesterday’s lost ground.
The Dow is up 0.7%, or some 240 points, and the S&P 500 is trading 0.6% higher as well.
With only two hours left in the trading day, the three major indexes are mixed.
The Nasdaq Composite had given up its earlier gains and is down 0.1%.
The Dow remains up 0.4%, or 120 points, and the S&P 500 is up 0.3%.
Dollar Tree (DLTR) is the strongest gainer in the S&P, up 16% after the company announced it would raise prices.
The stock market’s past few sessions have been a rollercoaster.
“I think the volatility has been a long time coming,” said Katie Nixon, chief investment officer at Northern Trust Wealth Management.
The relative calm in the market in the months preceding the current wobbles were a setup for the recent turbulence. But Nixon believes the current perfect storm of economic and political issues might be just a pause for stocks to climb higher, she said on the CNN Business digital live show Markets Now.
So what are investors to do? Stay steady, diversify, and know what you own seems to be the answer.
“We have always said it’s not a question of either/or with value and growth [stocks],” said Nixon. For example, she anticipates that “cyclicals can do well at the start of next year.”
But she added, “at the same time we cannot overlook the resilience of some of these large tech companies.”
So if you want to be more balanced in your investments, own both. Bond allocations are driven by how much protection and access to cash a portfolio needs in times of stress.
Looking ahead to 2022, Nixon believes earnings will be strong, strong enough to offset worries about expected tax increases coming from Washington.
Washington is in midst of a dramatic debt showdown with lawmakers grappling to lift the debt ceiling to keep the government from running out of cash next month.
But Greg Valliere, chief US policy strategist at AGF Investments, doesn’t believe a shutdown is looming.
“I think there’ll be a deal in the next 24 hours,” he said on the CNN Business’ digital live show Markets Now. “Not that the market would sell off if there wasn’t.”
The chance that America would default on its debt obligations is “very slim, 5% or something like that,” Valliere said.
“I think there’ll be a deal,” he added, “and if not, I think the Fed still has some more tricks up its sleeve.”
That said, if the Federal Reserve did have to step in, that wouldn’t fully resolve the issue and might well roil the markets.
Meanwhile, President Joe Biden’s spending plans might well get a haircut, even though the infrastructure plan is popular among Republican policy markers. Even with a lower sticker price, however, the government will still end up spending a lot of money, Valliere said.
“Governor Bailey, what is happening in the UK?”
Yes, we would all like to know. Especially the people in line at the gas stations who can’t fuel their cars.
“It’s a form of a supply-side shock. We’ve had a number of shortages and supply-side shocks,” the Bank of England Governor said during the ECB policy panel. Some of these issues are domestic and some are international, he added.
As to the long lines at British gas stations, he commented: “I think we’ve already passed the peak on that because we’re not actually short on fuel.” However, what the UK doesn’t have enough of is drivers who can ferry that fuel to gas stations. So it’s not the fuel shortage, but that driver shortage…
As to the shortage of global chips, that’s a scarcity that’s complicated to solve. “Monetary policy can’t reduce supply-side shocks,” Bailey said. “Monetary policy can’t produce computer chips.”
Poor Jerome Powell.
Once again, the Federal Reserve boss had to explain why on Earth he thinks the high pandemic-era inflation is only temporary, or in his words “transitory.”
“The current inflation spike will not lead to a new inflation regime in which inflation will remain high year after year,” Powell said during the ECB policy panel.
In June and July, consumer price inflation stood at a 13-year high before coming off the peak in August.
But if this period of higher inflation lasts long enough it could change the way people think about inflation and their own spending, so the Fed is keeping a close eye on that. So far, that’s not the case though, according to Powell.
The introductions at the European Central Bank’s panel discussion were all about threats to the economic outlook. Oof.
ECB boss Christine Lagarde said that how long the supply chain bottlenecks would last is a big question mark, but they seem to be continuing in some sectors. She cited the recent significant increase of the price of energy as a risk for the European economy going forward.
“These are base effects of what we saw last year,” Lagarde said. “We’ll see how long it takes until that fades away.”
Federal Reserve Chairman Jerome Powell said that “the outlook, while quite positive in the medium term, is uncertain,” although he has said that he expects a strong 2022. “Getting delta under control… still remains the more important economic policy that we have.”
But in something of a caveat he added, “it’s supply side constraints that are really holding back the economy.”
A panel discussion stacked with the world’s most powerful central bankers and hosted by the European Central Bank is underway.
On the stage are Federal Reserve Chairman Jerome Powell, Bank of England Governor Andrew Bailey, Bank of Japan Governor Haruhiko Kuroda, and the ECB’s Christine Lagarde.
Moderator and Reuters editor-in-chief Alessandra Galloni congratulated Bailey for making it to the panel despite the ongoing gas shortages in the UK.
America’s labor market has recovered a lot since the height of the pandemic. But we’re still a long way from being back to normal.
Among cities with a population above one million, Los Angeles-Long Beach-Anaheim, California had the highest August jobless rate at 8.8%, the Bureau of Labor Statistics reported Wednesday. In New York-Newark-Jersey City, the unemployment rate stood at 7.6%, while in Chicago-Naperville-Elgin it was 7.1%, rounding out the top three.
At 2.6%, Oklahoma City, Oklahoma, and Salt Lake City, Utah, had the lowest jobless rates for cities with populations over one million.
The national unemployment rate is 5.3%.
Overall, Nebraska cities Lincoln and Grand Island had the lowest unemployment rates in the country at 1.7% and 1.9%, respectively. Meanwhile, four cities had a jobless rate higher than 10%, including Bakersfield, El Centro and Visalia-Porterville in California, as well as Yuma, Arizona.
JPMorgan Chase CEO Jamie Dimon says America’s largest bank is once again preparing for a potential US default even though he expects Congress to avoid that “potentially catastrophic” event by lifting the debt ceiling.
In an interview with Reuters on Tuesday, Dimon said JPMorgan has begun scenario-planning for how a possible default would affect financial markets, capital ratios, client contracts and America’s credit ratings. That’s something Dimon has indicated the bank did during previous close calls with the debt ceiling.
“Every single time this comes up, it gets fixed, but we should never even get this close,” Dimon told Reuters. “I just think this whole thing is mistaken and one day we should just have a bipartisan bill and get rid of the debt ceiling. It’s all politics.”
Treasury Secretary Janet Yellen told lawmakers Tuesday that the federal government will run out of cash and extraordinary measures by October 18, setting the stage for a potential default if Congress does not raise the debt limit before then.
US stocks attempted a rebound on Wednesday, opening higher following a day of steep losses. Tuesday’s session was the worst day for the S&P 500 since May, while the Nasdaq Composite had its worst day since March. For the Dow, it was just the worst decline since last week’s selloff.
The turbulence came on the heels of Federal Reserve Chairman Jerome Powell’s comments about sustained high inflation that sent a mini taper tantrum through the market.
At Wednesday’s opening bell, the market attempted to reclaim some lost ground but the gains were moderate at best.
The 10-year US Treasury bond yielded 1.52% this morning, ever so slightly down from the roughly three-month high it hit Tuesday. Bond yields and prices move in opposition to each other.
Why were yields so hot yesterday? It all started with Federal Reserve Chairman Jerome Powell, who said “inflation is elevated and will likely remain so in coming months before moderating.”
Bond yields are sensitive to inflation expectations, which are in turn linked to forecasts for interest rates.
“The supply-side restrictions that are so much at the heart of the inflation we’re seeing … in some cases they’ve gotten worse,” Powell said during a hearing before the Senate Banking Committee.
The market read this to mean inflation will be high enough to lead to a quicker winding down of Fed stimulus, paving the way to higher interest rates.
The central bank has already signaled that it’s getting ready to hit the brakes on its massive pandemic era stimulus, which means the currently ultra-low interest rates will eventually go up. But yesterday’s comments brought that reality front and center for investors.
Evergrande has raised $1.5 billion in much needed cash. But that may do little to help it meet a new bond interest payment due Wednesday.
The Chinese real estate developer has agreed to sell off part of its stake in a local bank for nearly 10 billion yuan (about $1.5 billion). Evergrande made the announcement Wednesday, sending its shares up nearly 16% in Hong Kong.
The company will be selling a nearly 20% stake in Shengjing Bank to state-owned Shenyang Shengjing Finance Investment Group.
The US stock market took it on the chin Tuesday, sliding on worries about sustained high inflation that pushed bond yields higher. The debt ceiling debate raging in Washington didn’t help market sentiment either.
However, stocks are making a turnaround. Here’s where things stand as of 6:30 am ET:
Treasury Secretary Janet Yellen warned lawmakers that the federal government will likely run out of cash and extraordinary measures by October 18 unless Congress raises the debt ceiling.
The new estimate from Yellen raises the risk that the United States could default on its debt in a matter of weeks if Washington fails to act. A default would likely be catastrophic, tanking markets and the economy, and delaying payments to millions of Americans.
Previously, the Treasury Department estimated it would run out of cash and accounting maneuvers at some point in October.
