US close: Stocks finish weaker on growing China concerns

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Wall Street's main equity indices closed lower on Tuesday, despite a robust showing in US retail sales figures, as apprehensions over China's economic health took centre stage.

JP Morgan Chase & Co.

$246.52

04:45 22/11/24

0.72%

$1.76

The Dow Jones Industrial Average concluded the day's trading 1.02% lower at 34,946.39.

Similarly, the S&P 500 shed 1.16% to settle at 43,437.86, while the tech-heavy Nasdaq Composite ended at 13,631.05, reflecting a decline of 1.14%.

In currency markets, the dollar was last up 0.03% on sterling at 78.73p, while it remained unchanged against the common currency at 91.7 euro cents.

The greenback meanwhile edged up just 0.01% on the yen, changing hands at JPY 145.58.

“US markets have taken their cues from today’s weakness in European markets, even as retail sales for July came in at 0.7%, beating expectations of a rise of 0.4%,” said CMC Markets chief market analyst Michael Hewson earlier.

“The control group measure which goes into GDP rose by 1%, comfortably beating forecasts of 0.5%, and feeding into the narrative of a US economy that is still resilient, despite higher rates.”

Mixed fortunes for US, global economies in latest data

On the economic front, US retail figures presented a buoyant picture for July, with sales rising consecutively for the fourth month.

The primary catalyst was Amazon's Prime Day, a shopping event that gave retail numbers a significant push.

Data from the Commerce Department indicated a 0.7% seasonally adjusted rise in July, exceeding the previously revised 0.3% in June and outpacing the predicted 0.4% growth by economists.

When taking out auto sales from the equation, the growth surged to 1%, a notable rise from June's 0.2% and surpassing forecasts of a 0.4% uptick.

"Consumers’ spending appears to have made a strong start to the third quarter, and we cannot dismiss the conclusion that the trend in real consumers’ spending growth is reaccelerating," said Kieran Clancy, senior US economist at Pantheon Macroeconomics.

On the global front, the People's Bank of China (PBOC) took unexpected measures to rejuvenate economic demand, cutting the interest rate on CNY 401bn of one-year medium-term lending facility (MLF) loans.

The loans, provided to selected financial institutions, saw a rate drop of 15 basis points, now standing at 2.5% from the previous 2.65%.

According to the central bank’s official statement, the measure was instigated to offset various pressures, including tax payments, aiming to maintain a balanced liquidity in the banking system.

However, China's economic turbulence seemed far from over, with fresh data indicating that July's retail sales growth was a meagre 2.5% annually - a sharp contrast to the anticipated 4.5% surge.

Concurrently, industrial output saw a 3.7% rise, falling short of the predicted 4.4%.

The first seven months of the year also recorded a subdued 3.4% increase in fixed asset investments, lagging behind the 3.8% expected growth.

Adding to the concerns, the country's statistics bureau has halted the release of youth unemployment figures, sparking debates and speculation.

Contrastingly, Japan showcased a robust economic performance, with its economy now having expanded for three successive quarters.

Preliminary data released on Tuesday highlighted a 6% annual growth in the second quarter, a figure that doubled the forecasted 3.1% for the April-June period.

A depreciating yen played a pivotal role in this economic uptick, offering exporters a competitive edge as Japanese products became more affordable to global consumers.

Furthermore, Japan's GDP saw a 1.5% growth in comparison to the previous quarter, surpassing economists' 0.8% projections.

Banking stocks dip, Home Depot and DR Horton surge

In equity markets, banking stocks were a focal point as both Bank of America and JPMorgan Chase experienced significant drops, with declines of 3.2% and 2.55% respectively.

The root of the downward pressure was a statement from ratings agency Fitch, hinting at a potential downgrade of the entire banking industry.

Fitch signalled the possibility of revising its industry assessment from AA- to A+, a move that would place major banking establishments on the precipice of a ratings cut.

Elsewhere, credit card company Discover Financial Services declined 9.44% on the back of the announcement that its long-tenured chief executive and president, Roger Hochschild, would be stepping down.

On the upside, Home Depot ticked up by 0.66% in the wake of second-quarter results which exceeded both revenue and profit expectations, as well as the announcement of a $15bn share buyback programme.

The retailer did note a 2% dip in year-on-year sales to $42.92bn, however.

Home Depot reiterated its full-year revenue guidance, forecasting a decline ranging between 2% to 5%.

DR Horton jumped 2.89% on the news that Berkshire Hathaway, Warren Buffett's investment conglomerate, had taken a significant position in the housebuilder by investing $700m.

Reporting by Josh White for Sharecast.com.

Dow Jones - Risers

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Home Depot Inc. (HD) $332.14 0.66%
Dowdupont Inc. (DWDP) $0.00 0.00%
International Business Machines Corporation (CDI) (IBM) $141.87 -0.03%
McDonald's Corp. (MCD) $288.30 -0.18%
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Johnson & Johnson (JNJ) $172.94 -0.29%
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Microsoft Corp. (MSFT) $321.86 -0.67%