US close: Stocks slip ahead of key inflation reading

By Sharecast News

Sharecast News | 28 Feb, 2024

23:29 06/09/24

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Wall Street stocks closed Wednesday in negative territory, as investors braced for upcoming inflation reports.

The Dow Jones Industrial Average dipped 0.06%, settling at 38,949.02 points by the closing bell, while the S&P 500 declined 0.17% to 5,069.76 points, and the Nasdaq Composite saw a downturn of 0.55% to 15,947.74 points.

In currency markets, the dollar was last unchanged against sterling at 78.98p, while it experienced a marginal decline of 0.01% on the euro, trading at 92.26 euro cents, and weakened 0.05% against the yen to change hands at JPY 150.62.

“Risk on sentiment has taken another, albeit slight, beating as China's embattled major property developer Country Garden faces a winding up petition in Hong Kong,” said IG senior market analyst Axel Rudolph earlier.

“US fourth quarter GDP growth being revised slightly lower also didn't help the bulls ahead of the Fed's preferred PCE inflation gauge on Thursday.

“Weaker-than-expected eurozone economic sentiment furthermore dragged stocks down, except for the German DAX 40 index which hit yet another record high as investors pile into it.”

Rudolph said the latest earnings season highlighted that European stocks remained undervalued compared to US stocks in terms of PE ratios, which was why investors were favouring investing in Europe's largest economy.

“New Zealand's central bank signalling a slightly less aggressive stance on, still possible, rate hikes and sticking to its 5.5% base rate for the fifth month in a row led to strong Kiwi dollar depreciation, dragging the Aussie down with it.

“While oil, gold and silver prices were little changed on the day Bitcoin decided to break through its psychological 60,000 barrier.”

US economic growth comes in slower than estimated

In economic news, the Department of Commerce reported that the American economy expanded at a slightly slower pace than initially estimated in the final quarter of 2023.

Gross domestic product (GDP) grew at a quarterly annualised rate of 3.2% over the three months ending in December, slightly below the preliminary estimate of 3.3%.

Upward revisions to household consumption, non-residential and residential investment, and government spending helped offset a downward revision to inventory growth.

Stockpiling, previously thought to contribute positively, was now estimated to have subtracted 0.27 percentage points from GDP growth.

On the price front, the headline price deflator for personal consumption expenditures (PCE) rose at an annual rate of 1.8% in the last quarter of 2023, with the core level increasing by 2.1%.

Both PCE readings were slightly higher than previously reported.

“Based on this data, the US consumer looks strong, and inflation is hovering around the Fed’s target rate,” said Kathleen Brooks at XTB.

“This is the second reading of GDP and there is one more release to go, but so far it looks like a soft landing has already happened for the US economy.

“But, far from making life easy for the Fed, it actually makes it harder, as this data doesn’t give a clear signal about when the Fed should cut rates.”

Elsewhere, mortgage applications saw a notable decline, sinking by 5.6% in the week ended 23 February, following a 10.6% drop in the prior week, according to the Mortgage Bankers Association.

Preliminary figures from the Census Bureau meanwhile indicated a 0.1% month-on-month decrease in wholesale inventories for January, contrasting with the prior month's 0.4% increase and falling short of consensus estimates for a 0.1% rise.

Investors were now awaiting Thursday’s core PCE reading, which serves as the Federal Reserve's preferred inflation measure.

Taser maker jumps on earnings, Urban Outfitters tumbles

In equities, online marketplace eBay jumped 7.88% after it announced an increase in its quarterly dividend payout.

The company also revealed plans to allocate an additional $2bn towards share buybacks.

Taser manufacturer Axon Enterprise surged 13.76% after the company unveiled better-than-expected earnings and optimistic forecasts for full-year sales and profits, surpassing Wall Street estimates.

On the downside, retailer Urban Outfitters tumbled 12.78% following the release of its fourth-quarter earnings report, which failed to meet expectations.

Alphabet, the parent company of Google, slid 1.8% amid news of a $2.3bn lawsuit filed by a group of 32 European publishers, targeted at the search giant’s advertising technology and practices.

Reporting by Josh White for Sharecast.com.

Dow Jones - Risers

Boeing Co. (BA) $207.00 2.78%
Walt Disney Co. (DIS) $110.89 1.26%
Visa Inc. (V) $285.63 0.87%
Goldman Sachs Group Inc. (GS) $393.18 0.61%
Caterpillar Inc. (CAT) $328.86 0.59%
Home Depot Inc. (HD) $377.61 0.55%
JP Morgan Chase & Co. (JPM) $184.16 0.51%
McDonald's Corp. (MCD) $295.19 0.49%
Procter & Gamble Co. (PG) $160.05 0.47%
Verizon Communications Inc. (VZ) $40.10 0.43%