US open: Stocks slightly higher as investors await Jackson Hole

dl wall street st new york city nyc nyse stock exchange ny dow jones nasdaq sp finance us usa united states of america — Wall StreetSharecast photo / Josh White

Wall Street’s main market gauges were all tentatively higher in early trading on Wednesday, as investors sifted through the latest data on durable goods and housing sales.

At 1039 EDT (1549 BST), the Dow Jones Industrial Average was up 0.06% at 32,929.53, while the S&P 500 added 0.18% to 4,136.06 and the Nasdaq Composite was ahead 0.26% at 12,413.20.

“While the downward momentum of the past few days has eased off, particularly in US markets, there remains an underlying nervousness about the Jackson Hole meeting later in the week,” said IG chief market analyst Chris Beauchamp.

“The inflation shock-driven selloff from Monday and Tuesday has abated for now, as investors begin to think that the sheer size of expected price increases will need government intervention of a substantial sort.

“But buyers have yet to show up, and they are unlikely to do so until the contents of Powell’s speech are released.”

On the economic front, new orders for long-lasting goods undershot economists' forecasts in July, partly as an expected surge in civilian aircraft orders failed to materialise.

According to preliminary data from the Department of Commerce, durable goods orders were unchanged last month at $273.5bn, against market expectations for a 0.6% improvement.

Helping to offset the shortfall, the rise in total orders for June was revised higher by 20 basis points, to 2.2%, while excluding transportation, orders increased by 0.3%, beating the consensus for growth of 0.1%.

“The most important number in the report, nondefense capital goods orders ex-aircraft, rose a modest 0.4%, but the May and June orders were revised up, by a total of 0.4%,” noted Ian Shepherdson at Pantheon Macroeconomics.

“The trend is still rising at a decent pace, though it has slowed since the turn of the year.”

Shepherdson said orders were “hugely outperforming” the ISM manufacturing survey, with the gap widening in recent months.

“This might just be a question of lags, or it might be mirroring the story in the consumer sector, where people report to surveys that they are miserable and anxious about the state of the economy, but they keep spending anyway because the huge pile of pandemic savings allows them to cushion the hit to their real incomes from high inflation.

“Businesses’ excess cash piles likely are still north of $700bn.”

Elsewhere, pending home sales were down 1% in July, beating consensus forecasts for a fall of 2.8%, according to the National Association of Realtors.

The new data meant pending sales were now 27% below their most recent peak in October, as demand for mortgages falls as interest rates rise.

“Mortgage demand appears to be stabilising now that rates are no longer rising - our August estimate based on the available weekly data is broadly unchanged,” explained Pantheon’s Ian Shepherdson.

“Accordingly, home sales will likely reach a floor before the end of the year, but no recovery is in sight.”

In the past two months, Shephedson said existing home sales had fallen below the level implied by pending sales, presumably because a larger proportion of buyers than usual had pulled out of transactions.

“If this continues, existing home sales will dip a bit further in August.

“But whatever happens to sales, home prices have much further to fall.”

In equities, fashion retailers were in focus amid headlines from two of the bigger players, with Nordstrom tanking almost 20% after it lowered its sales and profit expectations for the year.

The high-end department store chain blamed a recent drop in footfall for the move, particularly at its off-price Nordstrom Rack brand, even though it beat second-quarter expectations.

Urban Outfitters was also in the red after its quarterly earnings failed to meet investors’ expectations in an after-hours announcement on Tuesday.

On the upside, Peloton rocketed over 17% after it announced it had inked a deal to sell its exercise bikes and other gear through e-commerce giant Amazon.

Reporting by Josh White at Sharecast.com.

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