Monday, August 22, 2016
U.S. stocks opened lower on Monday as investors looked ahead to a key speech from the top Federal Reserve official and digested falling oil prices.
The Dow Jones industrial average opened about 70 points lower, with Goldman Sachs and Chevron contributing the most losses. The S&P 500 began Monday trading about 0.3 percent lower, with energy leading nine sectors lower. The Nasdaq composite fell 0.2 percent, with Apple falling approximately half a percent, while the iShares Nasdaq Biotechnology ETF (IBB) rose more than 1 percent.
“It’s good to see the market sit tight here,” said Adam Sarhan, CEO at Sarhan Capital. “It shows the market is taking a pause to set up for the next move higher.”
Stocks posted new record highs last week, despite the S&P notching its 30th straight session without a 1 percent move on a closing basis, its longest streak since 2014.
Fed Chair Janet Yellen is scheduled to deliver a speech Friday on the U.S. economy and monetary policy at the Economic Policy Symposium at Jackson Hole, Wyoming.
“Now we don’t know for sure if Mr. Dudley and Mr. Fischer alerted Mrs. Yellen to the content of their thoughts before they expressed them or if she even agrees with them but if Yellen concurs on Friday, the short term rate markets will have to adjust, along with many other markets, especially the brain washed equity markets,” said Peter Boockvar, chief market analyst at The Lindsey Group.
Market expectations for a September rate hike were just 18 percent, according to the CME Group’s FedWatch tool. However, expectations for a December hike were near 50 percent.
“This has been the Fed’s MO: The [talk up a rate hike] and then they back off. I expect the same from Janet Yellen,” said Sarhan.
Meanwhile, in oil markets, U.S. crude dropped more than 2.5 percent to trade at $47.24 a barrel, as analysts cast doubt the upcoming producer talks would lead to a curtailing oversupply.
“I think the [stock] market is going to take its cue from energy, and that’s going to be a problem,” said Art Hogan, chief market strategist at Wunderlich Securities. “I think we’re in a wait-and-see mode until 11 a.m. Friday.
There are no major economic data reports due Monday, but the second read on second-quarter GDP is scheduled for release Friday.
In corporate news, Dow-component Pfizer agreed to buy U.S. drug company Medivation for $81.50 a share, or about $14 billion. Medivation shares surged more than 20 percent in the premarket, while Pfizer’s stock fell nearly 1 percent.
U.S. Treasurys traded mixed, with the two-year note yield holding around 0.75 percent and the benchmark 10-year yield near 1.55 percent. The dollar rose about 0.1 percent against a basket of currencies, with the euro near $1.131 and the yen near 100.32.
In Europe, stocks traded lower, with the Stoxx 600 index falling 0.1 percent. In Asia, stocks closed mostly lower, with the Shanghai composite slipping 0.75 percent and the Nikkei 225 gaining 0.32 percent.
On tap this week:
*Planner subject to change.
Earnings: Nordson, Premier
Earnings: Bank of Montreal, Best Buy, Toll Brothers, J.M. Smucker, Intuit, Trina Solar
10 a.m. New home sales
1 p.m. $26 billion 2-year note auction
Earnings: HP, Royal Bank of Canada, Guess, Express, WPP Group, Heico, Williams-Sonoma, Workday
9 a.m. FHFA home prices
9:45 a.m. Manufacturing PMI
10 a.m. Existing home sales
1 p.m. $34 billion 5-year note auction
Earnings: Toronto-Dominion Bank, Canadian Imperial Bank, Tiffany, Movado, Burlington Stores, Dollar General, Dollar Tree, Michaels Cos, Autodesk, GameStop, Pure Storage, Splunk
8:30 a.m. Initial claims, durable goods
1 p.m. $28 billion 7-year note auction
Earnings: Big Lots
Fed Chair Janet Yellen speaks at Jackson Hole, Wyoming
8:30 a.m. Real GDP Q2 (second); international trade
9:45 a.m. Services PMI
10 a.m. Consumer sentiment