Rising oil prices pressure cruise, airline stocks
Factory orders decline less than forecast
Factory orders decreased in July, though not by as much as expected, the Commerce Department reported Tuesday.
New orders for manufactured goods declined 2.1% on the month, which was better than the Dow Jones estimate for a drop of 2.3%. A 5.2% slide in durable goods demand was the big driver behind the decrease as orders for transportation equipment tumbled 14.3%.
Orders rose 2.3% in June and had been up for four straight months.
—Jeff Cox
Recent data suggest central bank can ‘proceed carefully’ on interest rates, says Fed Governor Waller
Recent economic data is boosting the case that the central bank can “proceed carefully” in its rate hiking campaign to tame inflation, according to Federal Reserve Governor Christopher Waller.
“That was a hell of a good week of data we got last week, and the key thing out if it is it’s going to allow us to proceed carefully,” told CNBC’s Steve Liesman during a “Squawk Box” interview. “We can just sit there, wait for the data, see if things continue.”
The comments from Waller come on the heels of Friday’s U.S. nonfarm payrolls report, which showed the unemployment rate hit its highest level in more than a year and average hourly wages rise less than expected.
— Jeff Cox
Strong finish to August is a sign of heightened investor optimism, says Roth MKM’s O’Hara
The rally for the S&P 500 in the final week of August was a sign of increased optimism for investors, according to Roth MKM chief market technician JC O’Hara.
“The soft-landing scenario seems to have moved into consensus thinking among market participants. The futures market is currently pricing in a 93% chance the Fed leaves rates unchanged during its September 20th meeting. Falling yields helped to fuel the gains within the equity market,” O’Hara said in a note to clients on Monday.
The rally also looked strong underneath the surface even as trading volumes were low, O’Hara said.
“Looking at the cumulative advancers to decliners on the S&P 500, we find the line remains constructive. This is an indication that under the surface conditions are still favorable for the average stock,” the note said.
— Jesse Pound
Barclays upgrades Oracle to overweight
Shares of Oracle have surged nearly 48% in 2023 and close to 62% over the past 12 months. And Barclays thinks the company is set to maintain high levels of growth in the near future as its tailwinds have yet to fully take effect.
Analyst Raimo Lenschow upgraded shares to overweight from equal weight.
“We see a multi-year opportunity for solid growth at high margins driven by an ongoing positive mix effect of better [software-as-a-service] and [Oracle Cloud Infrastructure] outweigh the lower growth parts of the business,” Lenschow wrote in a Tuesday note.
CNBC Pro subscribers can read more about his upgrade here.
Shares rose about 0.5%.
Oracle stock
Oil prices gain after Saudi Arabia extends voluntary oil production cut
Oil prices popped on Tuesday morning after Saudi Arabia extended its 1-million-barrels-per-day voluntary oil production cut until the end of the year, according to the state-owned Saudi Press Agency.
Brent crude futures for November were up $1.49, or 1.67%, at $90.49 a barrel, while U.S. West Texas Intermediate crude October futures edged $1.95 higher, or 2.28%, to $87.50 a barrel.
Riyadh first applied the 1 million-barrels-per-day reduction in July and has since extended it on a monthly basis. This cut adds to another 1.66 million barrels per day of voluntary crude output declines that some other OPEC members have put in place until the end of 2024. Read more here.
— Pia Singh, Ruxandra Iordache
Stocks open little changed after Labor Day holiday
Stocks opened little changed to kick off a shortened week of trading.
The Dow Jones Industrial Average hovered near the flatline, while the S&P 500 slipped 0.1%. The Nasdaq Composite lost about 0.3%
— Samantha Subin
RBC upgrades American Express to outperform
RBC expects investor sentiment to be more mixed as credit quality and spending trends normalize in the near-to-medium term, and student loan payments restart next month.
Amid this environment, the firm said it favors American Express due to its limited revenue reliance on late fees.
“In this environment, we believe top-of-wallet players are best positioned to outperform,” analyst Jon Arfstrom wrote in a Tuesday note.
Shares of American Express gained 1% Wednesday premarket.
CNBC Pro subscribers can read more about his call here.
— Hakyung Kim
Wall Street looks beyond winning week
The market is coming off a strong week.
The Dow and Nasdaq Composite finished last week about 1.4% and 3.3% higher. Both performances were the best for each respective index since July
The S&P 500, meanwhile, gained 2.5% last week. That marked the best week for the broad index since June.
— Alex Harring
Stocks making the biggest moves premarket
Check out some of the companies making headlines in premarket trading.
Oracle — The software stock added 1.8% in premarket trading following an upgrade to overweight from equal weight by Barclays. The firm said the company’s cloud business should feel tailwinds from artificial intelligence.
Brady Corporation — Shares climbed nearly 11% after the company reported quarterly results. Brady posted an adjusted $1.04 profit per share, while analysts polled by FactSet forecast 93 cents.
Warner Bros. Discovery — Shares dipped 1.4% after the company warned that strikes from writers and actors could negatively impact cash flow by a range of $300 million to $500 million.
Read the full list here.
— Brian Evans
Goldman Sachs upgrades Lamb Weston shares to buy
Goldman Sachs encourages investors to buy shares of potato products maker Lamb Weston, anticipating a comeback for the stock after a difficult few months.
Analyst Adam Samuelson upgraded shares to buy from neutral.
“We see recent underperformance providing an attractive entry point,” Samuelson wrote in a Monday note. He added that the company’s stronger-than-expected fiscal fourth-quarter and 2024 fiscal year outlook suggest “a balance of risks skewed to the upside.”
To read more about his upgrade, click here.
— Hakyung Kim
Goldman cuts recession odds, sees no Fed hike this month
Goldman Sachs cut the odds of a recession in the U.S. to just 15% from 20% prior and said the Federal Reserve may keep rates the same when in it next meets on Sept. 19-20.
“We view Chair Powell’s promise at Jackson Hole to ‘proceed carefully’ as a signal that a September hike is off the table and the hurdle for a November hike is significant,” wrote Jan Hatzius, the bank’s chief economist in a note dated Monday.
CNBC PRO subscribers can read more about the bold Goldman calls here.
—John Melloy
Arm sets U.S. IPO between $47 and $51 per share
Chip designer Arm filed an updated regulatory filing for a U.S. initial public offering, setting a range between $47 per share and $51 per share. SoftBank, which owns Arm, plans to sell 95.5 million shares. This all implies a valuation of up to $54.5 billion.
— Fred Imbert.
Expect ‘good news’ on the economy to be ‘bad news’ for the market, Goldman warns
The market could be characterized by a somewhat counterintuitive trend in which seemingly positive news on the economy is interpreted on Wall Street as a negative for stocks, Goldman noted.
“‘Good news’ from growth has been ‘bad news’ for markets,” strategist Andrea Ferrario noted. “With fading recession risk, there is a risk that good news on growth might trigger more hawkish repricing of real rates if accompanied by stickier inflation.”
“This could ultimately weigh on risky assets, given risk premia are already low,” Ferrario noted.
— Fred Imbert, Michael Bloom
U.S. Treasury yields rise as investors weigh economic outlook
U.S. Treasury yields climbed on Tuesday as markets reopened after the Labor Day holiday and investors considered what could be next for the economy following last week’s key data releases, including the latest U.S. jobs report.
At 4 a.m. ET, the yield on the 10-year Treasury was up by over four basis points to 4.2163%. The 2-year Treasury yield was last at 4.8991% after having risen by more than three basis points.
Yields and prices move in opposite directions. One basis point equals 0.01%.
Australia holds interest rates at 4.1% for third straight month
The Reserve Bank of Australia held its benchmark policy rate at 4.1%, extending its pause to three straight months.
RBA Governor Philip Lowe said in a statement that inflation in Australia has passed its peak and the inflation rate for July showed a further decline. “But inflation is still too high and will remain so for some time yet,” Lowe added.
He also noted that the Australian economy is experiencing a period of below-trend growth, “and this is expected to continue for a while.”
Despite this, Lowe did not give an indication for rate cuts, instead saying that some further tightening of monetary policy may be required, but that will continue to depend upon the data and the central bank’s assessment of risks.
— Lim Hui Jie
Country Garden pays bond coupon due in August, avoiding default: Reuters
Chinese property developer Country Garden Holdings wired bond coupon payments that were due last month, Reuters reported, citing a source close to the company.
China’s largest private property developer failed to pay a $22.5 million coupon on two U.S. dollar bonds on Aug. 6, raising market fears of a default. Both payments had 30-day grace periods.
— Lim Hui Jie
China service sector activity logs slowest expansion in eight months: Caixin survey
China’s services sector recorded its slowest expansion since December 2022, according to a Caixin survey.
The Caixin purchasing managers index for August came in at 51.8, down from 54.1 in July.
The survey noted that this was amid a softer rise in overall new work, adding that “notably, new business from abroad fell for the first time in 2023 so far.”
Nevertheless, companies remained optimistic onthe 12-month outlook, and planned company expansions supported a further increase in employment across the sector, the report said.
— Lim Hui Jie
South Korea inflation rate quickens more than expected after six months of slowdowns
South Korea’s consumer price index climbed 3.4% year-on-year in August, the first rise recorded in the inflation rate since January.
The figure was sharply higher than the 2.3% gain in July and also higher than the 2.7% expected by economists polled by Reuters.
The consumer price index also rose by 1% month-on-month, higher than the 0.3% expected.
— Lim Hui Jie
UBS expects ‘clear signs of slowing’ for U.S. economy by November’s FOMC meeting
UBS is sticking by its view of a “softish” landing for the U.S. economy, saying inflation is moving closer to the Federal Reserve’s target without a recession this year.
“August was a tough month for investors,” said Mark Haefele, global wealth management chief investment officer at UBS, noting that the S&P 500 ended last month down 1.6%. “Contradictory evidence and conflicting interpretations of economic data, asset pricing, and the outlook for Fed policy have buffeted asset prices in recent weeks as expectations of a soft landing for the US economy have ebbed and flowed.”
Some remaining uncertainties could still keep market on edge, Haefele said in the Monday note. Last month’s increase in core PCE came out well above the Fed’s target, which could sustain the possibility of another rate hike, the analyst said. UBS is also watching for a potential rebound in savings rates and further cooling in the labor market.
“Our base case view is that by the November FOMC meeting, the economy will have shown clear signs of slowing, leading the Fed to finally put an end to its sharpest rate hike cycle since the 1980s. We expect US Treasury yields to fall by year-end as both US economic growth and inflation moderate,” Haefele wrote.
— Pia Singh
Stocks will try to keep momentum next month, but headwinds await
Investors are preparing for what history says is the weakest month for markets.
In September, traders will weigh fresh data from economic reports, including the personal consumption expenditures price index, which is the Federal Reserve’s preferred inflation measure. Traders also await September’s two-day Fed meeting, during which central bank policymakers will announce their interest rate decision Sept. 20.
CNBC Pro subscribers can read more here about what to expect in the week ahead.
— Pia Singh, Sarah Min