S&P 500, Nasdaq close higher after three straight weekly declines – MarketWatch
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Market Snapshot
Last Updated: Aug. 21, 2023 at 4:29 p.m. ET First Published: Aug. 21, 2023 at 4:59 a.m. ET
Stocks end higher Monday, after coming off a three-week losing streak.
Getty Images/iStockphoto
[] The S&P 500 and Nasdaq Composite finished with their first gains of the past five sessions on Monday, despite another surge in long-dated Treasury yields and lingering concerns about China’s economy.
What happened
- The Dow Jones Industrial Average DJIA ended down by 36.97 points, or 0.1%, at 34,463.69 after dropping by as much as 252.2 points earlier in the day.
- The S&P 500 SPX closed up by 30.06 points, or 0.7%, at 4,399.77.
- The Nasdaq Composite COMP finished up by 206.81 points, or 1.6%, at 13,497.59.
[]On Friday, the S&P 500 booked a third straight week of losses, with the large-cap benchmark down more than 4.6% in August. The Nasdaq Composite and Dow also finished Friday with weekly losses.
[]See: Rising yields put S&P 500 on pace for biggest monthly loss of 2023 as investors brace for Fed Chair Powell’s Jackson Hole speech
What drove markets
[]A continuing rise in long-term Treasury yields was back in focus again on Monday, as 10- and 30-year rates reached fresh multiyear highs. The 10-year yield BX:TMUBMUSD10Y ended the New York session at 4.339% or its highest closing level since Nov. 6, 2007. And the 30-year yield BX:TMUBMUSD30Y finished at 4.455%, the highest since April 27, 2011.
[]“We’re seeing the bond-market selloff intensify here in advance of Fed Chairman Jerome Powell’s Jackson Hole speech, which shows you how the market wants to position ahead of that,” said Edward Moya, a senior market analyst for the Americas at OANDA Corp. “The Fed is likely to remain hawkish, suggest it will remain aggressive in fighting inflation, and signal more rate hikes are possible.”
[]Citing the rise in short-term T-bill rates that’s also occurring, Moya said via phone that “stocks are going to struggle, not necessarily because higher rates are going to kill the economy, but because a lot of investors are saying they can get a lot more on a three-month investment, with a lot more attractive yields than we have seen in the past several decades.”
[]See: Stocks offer ‘overwhelming’ long-term advantages to bonds, says Wharton’s Jeremy Siegel. Here’s his math to back this up.
[]Investors also were monitoring deteriorating economic conditions in China and weak seasonal trends, strategists said. A trimming of interest rates by China’s central bank underwhelmed the market, with China’s CSI 300 index XX:000300 finishing down 1.4% to start the week.
[]Read: Another Wall Street bank cuts China growth forecast as rate moves disappoint
[]Rising yields have been a particular problem for some of the big technology stocks that tend to lead the market. They can make equities look less attractive to investors. This is particularly true for tech stocks, in which lofty valuations are typically based on expected earnings far into the future.
[]Though the tech sector held on to gains on Monday, it has led the way lower for stocks in August and is off 5.9% for the month. The 2023 stock-market rally has been largely led by a small cohort of megacap, tech-oriented shares.
[]With that in mind, the reception afforded Nvidia’s results, due on Wednesday, may shape market sentiment for a while, analysts said. Nvidia has been one of the S&P 500’s biggest winners in 2023, and remains up more than 200% for the year.
[]Also see: Nvidia earnings to offer first true glimpse of the AI windfall
[]The chip maker, which sparked a frenzy for artificial-intelligence-oriented stock-market plays after an upside earnings surprise earlier this year, is among the last to report in an earnings season that has generally beaten forecasts but failed to deliver additional bullish propulsion to the market.
[]Need to Know: The history of companies with Nvidia-like valuations isn’t a good one
[]Monday’s losses for the Dow were paced by declines in Johnson & Johnson JNJ, -2.98%, which finished down by 3% after the company said that its $35 billion exchange offer for Kenvue that expired last Friday was substantially oversubscribed. Shares of Dow component Goldman Sachs Group Inc. GS, -0.88% closed down by 0.9%.
[]See: Goldman Sachs may sell unit with $29 billion in assets
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[]And Lee thinks the Fed is worried by the surge in 10-year yields, too, considering that an earlier rise seen in February triggered a financial crisis among regional banks.
[]“I think the Fed likely says something dovish-ish [sic]. Why? Does [the] Fed want to risk another ‘something breaking’ ala Feb 2023? While some look back at August 2022 when Fed Chair Powell’s statement was hawkish and marked the local top in 2022 (stocks fell -19% next 8 weeks), we think the context is the opposite,” Lee wrote in a note.
[]Check out: Jackson Hole: Fed’s Powell could join rather than fight bond vigilantes as yields surge
Companies in focus
- Shares of Palo Alto Networks Inc. PANW, +14.84% finished up by 14.8% after the cybersecurity company’s Friday report of earning results that topped expectations, as did its forecasts for profit and billings.
- Tesla Inc.‘s TSLA, +7.33% shares closed up by 7.3% after Baird analyst Ben Kallo highlighted positive developments for the electric vehicle maker in the second half.
- Nikola Corp.‘s NKLA, -22.96% shares finished down by 23% after the electric truck maker said it plans to offer $325 million in senior convertible bonds in a registered direct offering. Nikola also updated its recent voluntary recall of more than 200 of its electric vehicles after investigating their battery packs.
- Shares of AMC Entertainment Holdings Inc. AMC, -23.72% ended down by 23.7% ahead of the company’s planned stock conversion. The conversion of AMC Preferred Equity units APE, -6.61% will result in the trading of a single AMC common share class. AMC is also planning a reverse 1-for-10 split of its common stock and an increase in its authorized common shares.
[]Jamie Chisholm contributed.
U.S. stocks may bounce this week, but summer selloff is only halfway done, analysts warn
[] U.S. stocks might find some relief this week, analysts say, but that doesn’t mean this late-summer selloff is over.
[]Vivien Lou Chen is a Markets Reporter for MarketWatch. You can follow her on Twitter @vivienlouchen.
[]William Watts is MarketWatch markets editor. In addition to managing markets coverage, he writes about stocks, bonds, currencies and commodities, including oil. He also writes about global macro issues and trading strategies. During his time at MarketWatch, Watts has served in key roles in the Frankfurt, London, New York and Washington, D.C., newsrooms.
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