U.S. stocks had their best day in weeks after data from the U.S. Labor Department this morning showed job openings fell in July to their lowest level in years, possibly easing some of the pressure a tight labor market is putting on prices.
The Nasdaq enjoyed its best day in a month, rising 1.7%. The S&P 500 rose 1.45%, the most it's gained in a single day since early June, and the Dow Jones Industrial Average climbed 0.9%.
Investors were encouraged by the July job openings and labor turnover survey(JOLTS), which showed job openings and quits declined in July, raising hopes Fed officials will lean dovish at their next policy meeting in September.
Foreign equities were in the green Tuesday, with Chinese stocks gaining more than 1% after the government ordered state-owned banks to cut interest rates on existing mortgages and deposits in a further attempt to stimulate the economy. European stocks also gained.
Stocks shook off their August funk and rose yesterday. The Nasdaq gained 0.8% while the Dow and the S&P 500 rose 0.6%.
Dow Jumps on Jobs Data, Verizon Upgrade
The Dow Jones Industrial Average moved higher for the third straight session, gaining 0.85%, or 292 points, as part of a broad stock market rally.
Verizon Communications (VZ) moved higher by 3.4% after it was upgraded by Citi analysts to “Buy” from “Hold” after it said that cleanup costs for lead-wrapped cables could be less than feared.
Apple (AAPL) shares rose 2.2% after it set a Sept.12 date for its “Wonderlust” event, where the company is expected to unveil the iPhone 15. The tech sector as a whole rose 2.1%, helped by a 2.1% rise from Intel (INTC) and a 1.4% gain for Microsoft (MSFT).
Nike (NKE) shares gained 2.2%, the retailer’s third straight day of gains. The stock is recovering from an 11-session losing streak earlier this month prompted by a pullback in discretionary spending among consumers and a slowdown in the Chinese economy.
Johnson & Johnson (JNJ) shares were unchanged after several of its drugs were included in a list of the 10 drugs subject to Medicare price negotiations starting in 2026.
Chevron (CVX) was one of only three of the Dow 30 stocks to lose value, falling 0.2% on news that workers at its Australian liquid natural gas operations voted to authorize a strike.
Shares of McDonald's (MCD) were effectively unchanged after a U.S. appeals court revived claims that the fast food restaurant violated antitrust laws by requiring franchisees to avoid hiring employees away from each other.
Bonds Rally on Softening Job Market, Odds of Interest Rate Pause
Bond prices jumped immediately after the release of data this morning showing the U.S. labor market is returning to pre-pandemic norms after years of historically high job openings and wage growth.
The 10-year Treasury yield, which moves inversely to its price, sank from 4.212% before the release to 4.165% mere minutes later. The 5-year Treasury’s yield dropped from 4.398% to 4.305% over the same period.12
Yields change in response to investors’ expectations for future interest rates, which shifted dramatically with this morning’s report. The labor market has been of particular concern for the Federal Reserve lately, as evidenced by the minutes of the central bank’s July policy meeting. Median hourly wages grew 6% in the 12-month period ending in July, outpacing consumer prices, which were up 3.2% over the same period.3
After Powell’s follow-the-data messaging at Jackson Hole last week, investors are hopeful that today’s data supports arguments to pump the breaks on raising interest rates further.
Court Rules SEC Needs More Reasoning To Block Grayscale's Bitcoin ETF
The first bitcoin spot ETF is potentially closer to hitting the market after an appeals court ruled in favor of Grayscale in a highly anticipated case with the U.S. Securities and Exchange Commission (SEC) Tuesday.
The Court of Appeals for the Washington, D.C. circuit said the SEC did not provide sufficient reasoning for blocking crypto asset management firm Grayscale Investments' conversion of its Grayscale Bitcoin Trust (GBTC) into an exchange-traded fund (ETF) to be listed on NYSE Arca.4
Grayscale originally filed a lawsuit against the SEC in October 2022 after the regulatory agency denied the firm's application to launch a spot bitcoin ETF.5
In its original filing against the SEC, Grayscale argued a spot bitcoin ETF would not be sufficiently different or more dangerous from the sorts of futures-backed bitcoin ETF products that have already been approved. Most notably, Grayscale argued that the spot and futures markets for bitcoin are 99.9% correlated.
In response to the court's opinion on the Grayscale bitcoin ETF lawsuit against the SEC, the price of bitcoin jumped more than 7% to about $28,000.
Midday Market Movers
Big Lots Inc. (BIG): Shares of the discount retailer gained more than 30% after its second-quarter earnings and revenue beat analyst estimates. The company lost $3.24 a share on $1.4 billion in revenue, while Wall Street expected a loss of $4.11 per share on sales of $1.1 billion.
Marathon Digital Holdings Inc. (MARA), Riot Platforms Inc. (RIOT), Coinbase Global Inc. (COIN): Shares of cryptocurrency stocks jumped after a court rejected the Securities and Exchange Commission’s (SEC) reasoning for denying crypto asset management firm Grayscale Investments’ application to launch a bitcoin spot ETF. Marathon gained 27%, while Riot and Coinbase rose 15%.
e.l.f. Beauty Inc. (ELF): Shares of the cosmetics company gained nearly 9% after said it would acquire skincare brand Naturium for $355 million.
3M Co. (MMM): The industrial conglomerate’s shares gained 2% after its board of directors approved a $6 billion settlement to resolve charges it provided the U.S. military with defective earplugs.
Ginkgo Bioworks Holdings Inc. (DNA): Shares of the biotech company jumped 23% after it announced a five-year partnership with Alphabet’s (GOOG; GOOGL) Google Cloud unit to develop AI tools for biology and biosecurity. Alphabet shares rose 2.5%.
Best Buy Tops Quarterly Expectations but Lowers Outlook on Falling Sales
Best Buy (BBY) on Tuesday reported better-than-expected earnings for its latest fiscal quarter but acknowledged a challenging sales backdrop as consumers bought fewer electronics and appliances.
The electronics retailer posted a profit of $274 million, or $1.25 per share, in the fiscal second quarter ended July 29. This was down more than 10% from $306 million, or $1.35 per share, in the year-ago quarter, but exceeded projections of $1.06. Revenue totaled $9.58 billion, down 7% from $10.33 billion in the same quarter last year.6
On the upside, gross margins for the domestic segment rose to 23.1%, up from 22% in the year-ago quarter, boosted by favorable product margins, growth in Best Buy membership offerings, and higher profits from the company's Health initiatives.
Shares of Best Buy jumped more than 5% in midday trading Tuesday. They're down 2% so far this year.
Shares of Wegovy Contractor Catalent Jump After Striking Deal With Activist Investor Elliott
Catalent (CTLT) shares surged more than 5% in early trading on Tuesday after the struggling drugmaker secured a deal with activist investor Elliott Investment Management.
As part of a turnaround effort, Catalent appointed four new members to its board, formed a strategic review committee, and entered into an agreement with activist investor Elliott Investment Management.7
Catalent is the main contract manufacturer of Danish healthcare company Novo Nordisk's (NVO) fast-growing weight loss drug, Wegovy, and a deal could give Elliott some degree of influence over its production.
Use of Wegovy in the U.S. has surged in recent months, with hundreds of thousands of patients using it as a weight-loss medication. Soaring demand for the drug, along with Catalent's recent financial struggles, have contributed to a production shortage and prompted Novo Nordisk to limit deliveries of the drug to wholesalers.8
Catalent shares have shed half their value over the past year, and are down two-thirds from their peak in September 2021.
Medicare Could Negotiate the Prices of These 10 Drugs Starting in 2026
The Department of Health and Human Services on Tuesday released a list of the drugs that Medicare will be able to negotiate the prices of under a new program established by the Inflation Reduction Act (IRA). The program could save both the government and patients money —and is being opposed in court by the pharmaceutical industry.9
The 10 drugs and their makers/marketers are as follows:
- Eliquis – Bristol-Myers Squibb (BMY) and Pfizer Inc. (PFE)
- Jardiance – Boehringer Ingelheim and Eli Lilly Co. (LLY)
- Xarelto – Bayer Healthcare AG and Johnson & Johnson (JNJ)
- Januvia – Merck & Co. Inc. (MRK)
- Farxiga – AstraZeneca Plc (AZN) and Bristol-Myers Squibb
- Entresto – Novartis AG (NVS)
- Enbrel – Amgen Inc. (AMGN)
- Imbruvica – Abbvie Inc. (ABBV) and Johnson & Johnson
- Stelara – Johnson & Johnson
- Fiasp; NovoLog – Novo Nordisk A/S (NVO)
Job Openings Declined in July to Lowest Level in Two Years
The number of job openings in the U.S. declined 4% to 8.8 million in July, its sixth month-over-month decline this year. The last time there were fewer than 9 million job openings was in March 2021.10
The number of people who quit their jobs also declined to 3.5 million in July from 3.8 million in June, indicating more workers feel insecure about leaving their current jobs or are struggling to find new ones.
Fed Chair Jerome Powell in a speech last week pointed to the tight labor market, the rebalancing of which he called “incomplete,” as one of the Fed’s primary concerns as it fights inflation.11
Today’s data suggests the Federal Reserve’s campaign of interest rate hikes is slowly cooling the labor market as intended. That has traders upping their bets that the Fed policymakers will hold interest rates steady at their next meeting in September, according to CME’s FedWatch tool, which calculates the odds of rate hikes using federal fund futures trading data.12
Technical Glitch Suspends Toyota's Japan Operations Until Wednesday
Shares of Toyota Motor Corporation (TM) slipped 0.5% Tuesday morning as it suspended operations across all 14 of its plants in Japan owing to a glitch in its production system.
The 14 factories experienced a glitch that halted production and are expected to be back online by Wednesday. The plants in Toyota’s home country account for as much as a third of global production.13 While the cause is under investigation, the Japanese auto giant does not suspect it to be a cyberattack.
The system malfunction prevented the company from ordering components, but the impact on output is unclear. In a domino effect, group firm Toyota Industries has also partially suspended operations at two engine plants.13
BYD Shares Surge on Strong H1 Sales, Profit
Shares of Chinese electric vehicle maker BYD Co. Ltd (BYDDY) gained more than 5% early Tuesday after the company said its first-half profit more than doubled from last year.
The company reported net profit for the six months ended in June of RMB10.95 billion ($1.5 billion), compared with RMB3.59 billion a year ago. Revenue rose 73% as electric vehicle sales held up an ongoing price war and signs of a slowdown in Chinese consumer spending.
Stocks Making the Biggest Moves Premarket
- PDD Holdings Inc. (PDD): Shares of the Chinese online retailer gained more than 12% after it reported a 66% increase in sales and a 47% increase in net income, both exceeding analysts’ expectations.
- Jackson Financial Inc. (JXN): The financial services firm’s shares gained 9% after it was tapped to join the S&P SmallCap 600.
- Catalent Inc. (CTLT): The pharmaceutical company’s stock gained 3% after it reached a deal with activist investor Elliott Management to explore strategic alternatives, including selling the company.
- U.S. Steel Corp. (X): Shares of America’s third-largest steel producer rose 2% after it said it was entering confidentiality agreements with bidders as the board considers takeover offers.
- VinFast Auto Ltd. (VFS): Shares of the Vietnamese electric vehicle maker lost 12% after soaring 20% yesterday, pushing its market cap up to nearly $200 billion and making it the world’s third most valuable car company.
- Nio Inc. (NIO): American depositary receipts of the Chinese EV maker fell 6% after it missed second-quarter earnings estimates, reporting a loss of 45 cents a share on $1.2 billion in revenue.
- Salesforce Inc. (CRM): Shares fell 2% after JPMorgan removed the software company from its U.S. focus list ahead of its quarterly earnings report tomorrow.
5 Things to Know Before Markets Open
Here's what investors need to know to start their day:
- The job openings and labor turnover survey (JOLTS), released at 10 a.m., is expected to show job openings decreased to 9.5 million in July from 9.58 million in June.
- 3M's (MMM) board of directors approved a $6 billion settlement to resolve suits over allegations it delivered faulty earplugs to the U.S. military.
- Shares of AT&T (T) gained 1.8% and Verizon Communications (VZ) added 1.7% in pre-market trading after Citi upgraded both telecom providers to “Buy/High-Risk” from “Neutral.”
- Catalent (CTLT) is reportedly near a settlement with activist investor Elliott Investment Management, which will include adding four new directors, along with a commitment to review strategic alternatives, such as a sale of the company.
- Shares of jet engine and aircraft part maker Heico Corp. (HEI) fell 5.2% following the release of its third-quarter earnings report that edged ahead of analyst expectations.
Futures Slip Ahead of Jobs Data
Futures contracts connected to the Dow Jones Industrial Average were down just less than 0.1% in premarket trading Tuesday.
S&P 500 futures were lower by 0.05%.
And Nasdaq 100 contracts also lost 0.1%.
Originally published on Investopedia.com