Yahoo Finance What you need to know in markets on Wednesday
Stocks on Tuesday logged a mixed close, but the closing numbers hid a messy day underneath the surface.
On Tuesday, the Dow and S&P 500 closed lower while the tech-heavy Nasdaq got a slight reprieve from their recent sell-off while the biggest action was found in materials stocks.
Materials and industrials were under pressure Tuesday after industrial coatings giant PPG (PPG) late Monday said it would miss third and fourth quarter earnings citing inflation pressures, softening demand in China, and the negative impact from a strong dollar.
All told, PPG’s warning serves a reminder that though the impacts of Trump’s trade war and the surging price of oil haven’t yet become part of the Fed’s calculus in thinking about economic growth or a major feature of earnings commentary, these impacts are quickly becoming part of how executives judge their current quarters.
The S&P Materials sector dropped 3.4% on Tuesday while industrials were off 1.5%.
Meanwhile, a few big consumer names were among the winners on Tuesday with both Starbucks (SBUX) and Walmart (WMT) gaining more than 2% on positive headlines.
Shares of Walmart rose 2.5% to lead the Dow after analysts at Deutsche Bank upgraded Walmart to Buy from Hold and put a $113 price target on the stock while also cutting their rating on Kroger (KR).
Deutsche Bank said that Kroger is in a “position of weakness” now and said Walmart, “ is reaping returns on the many years of investment in e-commerce and customer service, and we believe the company is now in position to accelerate market share gains in grocery.”
Starbucks shares rose in afternoon trading on Tuesday after hedge fund manager Bill Ackman revealed he’d amassed a $900 million stake in the coffee chain. “This is one of the most dominant companies in the industry that I’ve ever seen,” Ackman said, adding, “This is an extremely dominate business.”
Starbucks shares over the last three years have been basically flat while the S&P 500 is up over 45%, and Ackman said he thinks Starbucks stocks can double. This investment is the latest foray by Ackman into consumer-facing investments, as his Pershing Square fund scored a roughly $100 million win on Nike (NKE) — a position he closed out earlier this year — and has also taken a large stake in Chipotle (CMG), with that stock up 52% so far this year.
Ackman’s largest holding according to his latest 13F filing with the SEC is Restaurant Brands (QSR), which owns Burger King, Popeye’s, and Tim Horton’s.
Now turning the calendar for Wednesday, on the economic data side the only notable release will be the September reading on producer prices, which are expected to rise 0.2% over last month after a 0.1% drop in August.
And on the earnings side, Fastenal (FAST) is the only company scheduled to report earnings out of the S&P 500.
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Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland
