Stocks rallied on Thursday, looking to recover some losses after the Fed's higher-for-longer stance on interest rates drove markets lower over the past week.
With the question of whether the Fed can nail a "soft landing" for the economy still a key debate, a fresh estimate for second quarter GDP came in unchanged at 2.1%. Also, official figures showed jobless claims last week rose slightly from the week prior to 204,000, compared with 215,000 expected. And data from the National Association of Realtors showed pending home sales for August plunged 7.1% down from a 0.9% monthly increase in July.
The Federal Reserve's message that rates will remain higher for longer has rattled markets, though stocks are showing some resilience after several days of steep losses. In bonds, the rapid rise in the 10-year Treasury yield (^TNX) cooled off slightly, but still remained near 4.6%.
Both markets are under pressure from the surge in the price of oil, which hit fresh 2023 highs on Wednesday and is up over 35% since the end of June. That increase is seen as likely to drive up fuel prices, posing a challenge to the Fed's efforts to cool inflation — and in turn to the chances of a rate cut.
Oil prices turned lower on Thursday, as West Texas Intermediate futures (CL=F) fell under $92 a barrel after topping $95 earlier in the morning. Brent crude futures (BZ=F) were lower around $95, having neared $97 in the session.
Friday brings the week's data highlight, the reading on PCE inflation, the Fed's preferred gauge. However, some believe it won't be persistent price increases that prompt central bankers to act, but insatiable American shoppers and an economy that stays too hot.
Stocks close higher as oil and yields fall
Stocks ended a choppy day of trading in the Green on Thursday as investors digested economic data that showed second quarter economic growth wasn't as robust as initially thought.
The 10-year Treasury yield (^TNX) slid slightly to just below 4.6%. Oil prices cooled off too after recently hitting new 2023 highs. West Texas Intermediate (CL=F) fell about 2%, below $92 per barrel. Brent International (BZ=F) futures also slipped, trading down about nearly 1.5% to below $96 per barrel.
Trending tickers in afternoon trade
Advanced Micro Devices (AMD) led the Yahoo Finance trending tickers page as the chipmaker's stock rose more than 5%. On Wednesday, CEO Dr. Lisa Su indicated at the 2023 code conference the AI field is more open than it might appear.
Shares of Peloton (PTON) rose more than 6% after the company announced a five-year deal with Lululemon (LULU). The deal will make Peloton the at-home exercise brand the exclusive digital fitness content provider for Lululemon and also includes a clothing partnership.
GameStop (GME) shares were down more than 1% after initally rising over 7% on the announcement that Ryan Cohen will be the new CEO. Wall Street analysts questioned whether the Chewy founder's inexperience managing a retailer will help with the turnaround at GameStop.
Workday (WDAY) fell more than 8%, it's worst intraday performance since 2020. The workplace technology company now sees subscription sales increasing in a range of 17% to 19% over the next three fiscal years, down from a previous outlook of "sustained" 20%.
2023 is looking bullish into year-end after a disappointing August and September
September is nearly in the bag, and the major indices are down 3% to 5% with a little over one day to go. But prospects for each of the months in the fourth quarter are looking up.
Seasonality studies that look at all years in the S&P 500 going back 20, 30 or even 50 years all finger September as the weakest month of the year. But to be fair, at the end of August, we were expecting bullish results for September. At the time, we noticed that when stocks were up big through July, they exhibited strongly bullish tendencies for each of the four remaining months of the year.
However, 2023 decided to follow the 1975 and 1985 playbooks, in which September headed south before rallying in the fourth quarter.
For those keeping track, there are only two years in our sample (1975 and 1985) that now fit the original criteria.
To increase the sample size while focusing on the negative back-to-back red months of August and September that we just experienced, we relaxed the original requirement such that January through July be merely positive (as opposed to up more than 10%).
As a result, the years 1990, 1999, 2011, 2015 and 2016 come into play -- with bullish results (on average) into year-end.
The average three-month return for the seven years is 9.6% (7.9% median), with each of the months individually exhibiting strong bullish tendencies.
Mortgage rates hit a 23-year high
Buying a house is getting increasingly for Americans as mortgage rates continue to trek higher.
The rate on the average 30-year fixed mortgage increased to 7.31% from 7.19% the week prior, according to Freddie Mac. That’s the highest rate since mid-December 2000, when it averaged 7.42%.
Rates tracked the 10-year Treasury yield, which spiked to its highest point since 2007 on Wednesday as concerns over a potential US government shutdown grew stronger. The development also comes a week after the Federal Reserve suggested that it would keep its benchmark interest rate higher for longer.
For homebuyers, the uptick in rates again eroded their purchasing power and offered a good reason to stick to the sidelines. Meanwhile, those still on the hunt may face even higher rates down the road.
“Are higher rates causing a significant impact on buyers? The answer is yes,” Jason Sharon, owner of Home Loans Inc., told Yahoo Finance. “Will it kill the housing market? Absolutely not. However, it is pumping hard on the brakes.
Stocks higher in afternoon trading
Stocks picked up steam and treasury yields fell off multi-year highs on Thursday afternoon after several downbeat days of trading.
The 10-year Treasury yield (^TNX) slid slightly to 4.61%. Oil prices cooled off too after recently hitting new 2023 highs. West Texas Intermediate (CL=F) fell about 1%, below $93 per barrel. Brent International (BZ=F) futures also slipped, trading down about 0.75% to below $96 per barrel.
Rising mortgage rates weigh on pending home sales in August
As the cost to take out a mortgage increases, more Americans are deciding right now is not the right time to buy a home.
Homebuyers in every corner of the country retreated from the market heading into the fall as rising mortgage rates drained their purchasing power.
Pending home sales for August plunged 7.1% from the month before, according to the National Association of Realtors, down from the 0.9% monthly increase recorded in July. The result was far worse than the 1.0% decline that Bloomberg economists had estimated and was widespread. Every region recorded a monthly and year-over-year drop.
On a yearly basis, pending transactions were down by 18.7%.
The drop in the index, a leading indicator of the housing market’s health, further highlights how housing activity has been smothered by expensive mortgages, rising prices, and low inventory. Seasonality may also have played a role.
"Mortgage rates have been rising above 7% since August, which has diminished the pool of homebuyers," Lawrence Yun, NAR chief economist, said in a statement. "Some would-be home buyers are taking a pause and readjusting their expectations about the location and type of home to better fit their budgets."
Contract signings in the Northeast declined 0.9% from the last month and were down 18.2% from August 2022 levels. Pending sales also dropped 7.0% in the Midwest and fell 19.1% from a year ago.
The South recorded a monthly dive of 9.1% in pending sales in August, while also plunging 17.6% from the previous year. Activity in the West receded 7.7% and was down 21.4% from August 2022.
"The drop in pending home sales is due to a combination of higher mortgage rates and seasonal factors, with sales typically falling this time of year and the recent increases in rates have lowered mortgage demand and housing supply," Orphe Divounguy, senior economist at Zillow, told Yahoo Finance.
Thursday's economic data revisions mean little for the Fed, economist says
A slew of data from the Bureau of Economic Analysis out Thursday revealed a slightly cooler US economy during the second quarter than initial data showed.
The third reading of second quarter US gross domestic product (GDP) showed the economy grew at an annualized pace of 2.1% during the period, unchanged from the second reading but down from the initial reading of 2.4%. Economists surveyed by Bloomberg had expected the third reading to come in at 2.2%.
Personal consumption growth was revised down to 0.8% from 1.7%, indicating Americans consumed less in the second quarter than previously believed.
Notably, personal consumption expenditures index (PCE), the Fed's preferred inflation gauge, grew 3.7% over the quarter, unchanged from the previous estimate.
"The revisions do not have major implications for the Fed because they leave in place the narrative of a resilient economy, and the recent inflation data were unrevised," Oxford Economics lead US economist Michael Pearce wrote in a note on Thursday. "The focus remains on what happens from here.
"In contrast to Fed officials, we see a sharp slowdown into year end which we think will keep policymakers on the sidelines, rather than following through with an additional rate hike as planned."
Ryan Cohen named GameStop CEO
GameStop (GME) has a new chief executive.
The video game distributor turned meme stock favorite named Ryan Cohen CEO and president on Thursday, according to a press release. The move comes after GameStop fired CEO Matthew Furlong in early June and Cohen was named executive chairman.
Cohen, the founder of Chewy (CHWY), whose net worth is estimated above $1 billion, won't be paid for his role, according to the release.
GameStop shares rose more than 3% in early trading on the news before falling back nearly flat less than an hour into the trading day.
Stocks open mixed
Stocks were mixed just after the opening bell on Wall Street as investors digested fresh data that revealed economic growth came in slightly weaker in the second quarter than economists had projected.
The 10-year Treasury yield (^TNX) rose to 4.66%. Meanwhile, oil slipped after hitting new 2023 highs on Wednesday. West Texas Intermediate (CL=F) fell about 1%, below $93 per barrel. Brent International (BZ=F) futures also slipped, trading down about 0.75% to below $96 per barrel.
CarMax, GameStop, and Peloton: Stocks trending in premarket trading
Here are some of the stocks leading Yahoo Finance’s trending tickers page in premarket trading on Thursday:
Peloton (PTON): Shares rose by 14% premarket on Thursday. On Wednesday, Peloton and Lululemon announced they have entered a five-year partnership that will make the at-home exercise brand the exclusive digital fitness content provider for Lululemon.