U.S. stock benchmarks on Thursday finished at or near the best levels of the session — helping the S&P 500 and Nasdaq indexes turn positive for the week — as jitters over a potential trade and currency clash between Beijing and Washington gave way to greed for beaten-down assets.
Setting the stage for the market’s bullish advance was China’s onshore currency fix, with the government setting the yuan at the weakest level since 2008 but slightly higher than feared, helping to stabilize a market that has swooned over global economic growth fears.
How did benchmarks perform?
The Dow Jones Industrial Average
DJIA, +1.43%
rose 371.12 points, or 1.4% to 26,378.19, the S&P 500 index
SPX, +1.88%
climbed 54.11 points, or 1.9%, to close at 2,938.72, led by a gain in the energy sector
XLE, +2.87%,
up 2.9% and information technology
XLK, +2.45%,
rising 2.4%. Meanwhile, the Nasdaq Composite Index
COMP, +2.24%
climbed 176.33 points to finish at 8,039.16, a rise of 2.2%.
The gains represented the best day for the three main indexes since June 4.
For the week, the Nasdaq is on track for a weekly gain of 0.4% and the S&P 500 is set to end the week 0.2% higher. The Dow is down 0.4% so far this week. All three benchmarks tumbled by around 3% on Monday.
What’s driving the market?
Markets are still focusing on the currency fix in China as a Sino-American tariff dispute has shifted into a potential currency clash between the world’s largest economies. However fears of the worst outcome were at least temporarily quelled on Thursday after the People’s Bank of China set the onshore yuan’s
USDCNY, +0.0014%
reference rate at 7.0039 against one U.S. dollar.
Although that is the weakest point for the currency against the dollar since April 21, 2008, it is higher than the market had feared. The PBOC allows the yuan to fluctuate up to 2% higher or lower than that level.
A weakening of the yuan below 7 on Monday, widely viewed as a line in the sand for the market and Beijing, sent global markets tumbling amid fears it was the first step in a currency war. Yuan weakness has been viewed by some as a tactic by China to combat the yearlong clash over trade between the U.S. and China.
Despite Wednesday’s bounce back for equities many investors are still uneasy over the possibility of a test of the week’s lows. “Yesterday’s roller coaster provides further evidence that volatility is very much back in markets, and while the near-term trends in both equities and Treasury yields have begun to stabilize slightly, trends remain sharply lower and it wouldn’t take much to turn both trends back to the downside for a retest of recent lows,” wrote Mark Newton, technical analyst at Newton Advisors in a Thursday research note.
William A. Delwiche, investment strategist at Baird concurred with that sentiment, in a Thursday research note. “Sentiment surveys show a big build in investor pessimism, though longer-term studies still show more complacency than fear. Low bond yields and stock market nervousness are supporting strength in gold,” he said.
Meanwhile, Chinese exports climbed 3.3% in July from a year earlier, better than expectations of a 1.0% decline, according to FactSet, and comes after a 1.0% drop a month ago.
Volatility in currencies in the past few days also spurred a sharp decline in yields on government debt but the 10-year Treasury note
TMUBMUSD10Y, -1.44%
rose 3.5 basis points to 1.710%, compared with a 3 p.m. Eastern Time level at 1.675% on Wednesday, marking its lowest yield since Oct. 3, 2016, according to Dow Jones Market Data.
Separately, a report on the number of people who applied for U.S. unemployment benefits in early August fell back near post 2008 recession lows, signaling the labor market remains strong. Initial jobless claims, a rough way to measure layoffs, dropped by 8,000 to a seasonally adjusted 209,000 in the seven days Aug. 3, the government said Thursday.
Meanwhile, data on wholesale inventories in the U.S. were unchanged in June, the government said Thursday. Sales slipped 0.3% in the month. The ratio of inventories to sales was also unchanged at 1.36, representing the number of months it would take to sell all the inventory on hand. One year ago, the inventory-to-sales ratio was much lower at 1.26.
Which stocks are in focus?
Shares of Caterpillar Inc.
CAT, +1.03%
gained 1%, even after Goldman Sachs analysts lowered a price target for the industrial equipment maker to $130 from $156.
Roku Inc.
ROKU, +20.86%
shares jumped 21% after the company late Wednesday topped expectations with its second-quarter results and issued and encouraging outlook.
Read: Why Roku thinks Apple and Disney will give the streaming platform a big boost
IAC/InterActiveCorp.
IAC, -0.57%
is considering the distribution of its stakes in both Match Group Inc.
MTCH, -5.01%
and ANGI Homeservices
ANGI, -25.32%
to shareholders, the company disclosed Wednesday. It also reported better-than-expected quarterly earnings. IAC owns about 80% of Match, a collection of dating sites like Tinder and OkCupid, and about 84% of ANGI. Shares of ANGI closed down 25.3%, those for Match fell 5%, while IAC’s stock fell 0.6%.
Shares of Lumentum Holdings Inc.
LITE, +10.33%
rose 10.3% Thursday, after the optical equipment and Apple Inc.
AAPL, +2.21%
supplier reported fiscal fourth-quarter profit and revenue that beat expectations, and provided an upbeat full-year earnings outlook.
Shares of Kraft Heinz Co.
KHC, -8.58%
retreated 8.6% Thursday after the snack company said it expects an impairment charge of $474 million for the second quarter.
Sarepta Therapeutics Inc. shares
SRPT, -6.52%
fell 6.5% Thursday after the gene therapy company said an adverse event report was sent to the Food and Drug Administration in error over a muscular dystrophy treatment.
What other assets are in focus?
Gold for December delivery
GCZ19, +0.25%
pulled back on Thursday to settle lower after the precious metal firmly breached a psychological level above $1,500 per ounce.
Oil futures rebounded, amid reports that Saudi Arabia is discussing options to stop the price fall by possibly capping production. U.S. oil prices
CLU19, +0.30%
rose 2.8% to finish at $52.54 a barrel after tumbling 4.7% on Wednesday on the New York Mercantile Exchange, pushing the commodity into bear-market territory, commonly defined as a drop of at least 20% from a recent peak.
In Asia, Japan’s Nikkei 225 Index
NIK, +0.53%
gained 0.4%, Hong Kong’s Hang Seng Index
HSI, +0.48%
HSI, +0.48%
rose 0.5%, while the CS1 300 index
000300, +1.32%
climbed 1.3%.
The pan-European Stoxx 600
SXXP, +1.66%,
meanwhile, headed 0.9% higher.
Source : MTV
