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US open: Stocks turn green following Dow's worst day of the year

By Iain Gilbert

Date: Thursday 15 Aug 2019

US open: Stocks turn green following Dow's worst day of the year

(Sharecast News) - Wall Street trading began on a positive note on Thursday as strong results from Walmart and some positive economic data helped offset worries around China vowing to counter the US' latest round of tariffs.
As of 1530 BST, the Dow Jones Industrial Average was up 0.34% at 25,567.16, while the S&P 500 was 0.51% stronger at 2,855.12 and the Nasdaq Composite came out the gate 0.29% firmer at 7,796.10.

The Dow Jones Industrials opened 87.74 points higher on Thursday after the index recorded its worst day of the year on Wednesday, driven by much weaker than expected economic data out of China and a report that Washington was not in fact easing back in its trade war with Beijing.

On Thursday morning, China's finance ministry said Washington's tariffs violated a consensus reached by the two countries' leaders at the 28 June G20 leaders' summit in Osaka, Japan.

Elsewhere, Hong Kong's government laid out plans for stimulus measures to help its struggling economy but also cut its growth forecast to flat for the rest of 2019, down from an already weak 0.5%.

Donald Trump said he had "no doubt" that Chinese President Xi Jinping could bring an end to the unrest by meeting face-to-face with the protesters.

The President tweeted: "If President Xi would meet directly and personally with the protesters, there would be a happy and enlightened ending to the Hong Kong problem. I have no doubt!"

Still on the macro front, efforts to defuse tensions with Tehran were disrupted on Thursday when the US applied to detain an Iranian tanker held in Gibraltar on suspicion of breaching international sanctions on oil shipments.

The vessel, the Grace 1, was carrying Iranian oil and seized by Royal Marines last month. Authorities alleged the cargo was destined for Syria in breach of an EU embargo.

Wednesday's massive sell-off on Wall Street was the result of a bond market phenomenon where the yield on the benchmark 10-year Treasury note breaks below that on the two-year note. While far from perfect, a so-called 'inversion' of the yield curve had preceded every economic recession in US history.

The curve was still around the inversion point at the time of writing, even as the yield on the 30-year Treasury bond fell to a new record low.

On the corporate front, Cisco shares were pounded ahead of the open after stating future earnings would be weaker than expected on the back of a "significant impact" from the US-China trade war, while General Electric shares slid more than 5% after Bernie Madoff whistleblower Harry Markopolos said he had discovered "an Enronesque business approach" that has left the group "on the verge of insolvency".

Retailer Walmart's shares, on the other hand, were up 5.5% in early trades on the heels of its latest quarterly update.

JC Penney and Williams-Sonoma will post earnings throughout the course of the day, as will chipmaker NVIDIA.

On the data front, the number of Americans filing for unemployment benefits rose more than expected last week, according to figures released by the Labor Department on Thursday.

Jobless claims came in at 220,000, up 9,000 from the previous week's level, which was revised up by 2,000. Economists had been expecting a level of 214,000. The four-week moving average came in at 213,750, up 1,000 from the previous week's average

Elsewhere, manufacturing activity in the US mid-Atlantic region held up better than anticipated in August, according to the results of one of the most closely-followed surveys of activity in the sector.

The Federal Reserve Bank of Philadelphia's manufacturing sector index slipped from a reading of 21.8 in July to 16.8 for August.

Heading east, manufacturing sector conditions in the Federal Reserve Bank of New York's jurisdiction picked up in August.

The so-called Empire State index rose from a reading of 4.3 for July to 4.8 in August (consensus: 2.2) on the back of improving trends for new orders and shipments.

Meanwhile, the American consumer continued to splash out at a faster than expected clip over the summer.

According to the Department of Commerce, US retail sales volumes grew at a 0.7% month-on-month pace in August to reach $532.35bn.

Economists had forecast an increase of 0.2%, although the previous month's rise was marked down by a tenth of a percentage point to 0.3%.

Lastly, labour productivity in the States grew more quickly than expected during the second quarter, although so did unit labour costs.

And even more so taking into account the revisions carried out to the historical data, which pointed to stronger core inflation pressures going forwards, some economists said.

According to the Department of Labor, non-farm labour productivity in the US grew at a quarterly annualised pace of 2.3% over the three months to June (consensus: 1.4%), while unit labour costs rose by 2.4% (consensus: 1.8%).


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