>>> US Close Dow -3.03% S&P-3.37% Nasdaq -3.94% Russell -3.30%

Closing Stock Market Summary

After some whipsaw action immediately following Fed Chair Powell's speech today, the market trended decidedly lower into the close. The market opened to only modest losses after a welcomed moderation in the July PCE Price Index before Mr. Powell's comments fueled a negative disposition. Market participants got the impression that the Fed is going to keep raising rates to a restrictive level and won't be pivoting to a rate-cut cycle anytime soon. Notably, Mr. Powell said the effort to reduce inflation "will also bring some pain to households and businesses."

The major indices logged most of their weekly losses during this session. The S&P 500 closed down 4.0% on the week; the Dow Jones Industrial Average closed down 4.2% on the week; the Nasdaq closed down 4.4% on the week.

Most stocks sold off today leading every S&P 500 sector to close with losses that ranged from 1.0% (energy) to 4.1% (information technology). The technology sector was driven lower by its semiconductor components, which sold off more sharply than the broader market. The PHLX Semiconductor Index closed down 5.5%.

Energy had the slimmest losses with WTI crude oil futures settling 0.1% higher at $93.13/bbl. Notably, it's the only sector with gains on the week, up 4.3%.

Mega caps and growth stocks closed with somewhat steeper losses than their peers, but selling interest was broad-based and left the major indices down by 3.0% or more. Notably, the Dow Jones Industrial Average fell more than 1,000 points today.

The Vanguard Mega Cap Growth ETF (MGK) closed down 4.1% versus a 3.2% loss in the Invesco S&P 500 Equal Weight ETF (RSP). The Russell 3000 Growth Index closed down 3.6% versus a 2.7% loss in the Russell 3000 Value Index.

While most stocks trended lower, the CBOE Volatility Index moved markedly higher, up 17.5% or 3.80, to 25.58.

Market breadth showed a strong skew towards decliners with the margin increasing throughout the session. Shortly after Fed Chair Powell's speech concluded, decliners led advancers by a 5-to-1 margin at the NYSE and a roughly 3-to-1 margin at the Nasdaq. At the close, decliners led advancers by a nearly 7-to-1 margin at the NYSE and a greater than 4-to-1 margin at the Nasdaq.

The Treasury market had a volatile session. Participants first reacted positively to relatively pleasing PCE Price Index data before they had a less bullish reaction to Mr. Powell's comments. The 2-yr note yield rose one basis point on the day, and 15 basis points on the week, to 3.40%. The 10-yr note yield rose one basis point on the day, and five basis points on the week, to 3.04%. 

There is no U.S. economic data of note on Monday.

Reviewing today's economic data:

  • Personal income increased 0.2% month-over-month in July ( consensus +0.6%) following an upwardly revised 0.7% increase (from 0.6%) in June. Personal spending rose just 0.1% month-over-month ( consensus +0.4%) following a downwardly revised 1.0% increase (from 1.1%) in June.
  • The PCE Price Index declined 0.1% month-over-month ( consensus +0.1%), which left it up 6.3% year-over-year versus 6.8% in June. The core PCE Price Index, which excludes food and energy, increased 0.1% month-over-month ( consensus +0.3%), which left it up 4.6% year-over-year versus 4.8% in June.
    • The key takeaway from the report was the disinflation seen in the PCE Price Indexes, and the boost, albeit a small one, in real spending that will be positive for Q3 GDP forecasts.
  • The final August University of Michigan Index of Consumer Sentiment checked in at 58.2 ( consensus 55.1). That was better than the preliminary reading of 55.1 and up from the final July reading of 51.5. In the same period a year ago, the Index of Consumer Sentiment stood at 70.3.
    • The key takeaway from the report is that the gains in sentiment were broad based and aided by the recent deceleration in inflation that coincided with falling gasoline prices.

Dow Jones Industrial Average: -11.2% YTD
S&P 400: -12.0% YTD
S&P 500: -14.9% YTD
Russell 2000: -15.4% YTD
Nasdaq Composite: -22.4% YTD

>>> US Research Calls

Research Calls

  • Upgrades:
    • FactSet (FDS) upgraded to Buy from Hold at Deutsche Bank; tgt $507
    • First Solar (FSLR) upgraded to Buy from Neutral at BofA Securities; tgt raised to $141
    • Hibbett (HIBB) upgraded to Buy from Neutral at Seaport Research Partners; tgt $75
    • VTEX (VTEX) upgraded to Buy from Neutral at BofA Securities; tgt raised to $6.50
  • Downgrades:
    • AltaGas (ATGFF) downgraded to Neutral from Outperform at Credit Suisse
    • Arco Platform (ARCE) downgraded to Neutral from Outperform at Credit Suisse; tgt lowered to $18
    • Centene (CNC) downgraded to Equal Weight from Overweight at Wells Fargo; tgt lowered to $99
    • Comp Siderurgica (SID) downgraded to Underperform from Neutral at BofA Securities
    • GDS Holdings (GDS) downgraded to Sector Perform from Outperform at RBC Capital Mkts; tgt lowered to $33
    • Intercontinental Hotels Group (IHG) downgraded to Neutral from Overweight at JP Morgan
    • Open Text (OTEX) downgraded to Neutral from Sector Outperform at CIBC
    • Ternium S.A. (TX) downgraded to Neutral from Buy at BofA Securities; tgt lowered to $40
    • Union Pacific (UNP) downgraded to Neutral from Outperform at Daiwa Securities; tgt raised to $242
    • Woolworths Ltd. (WOLWF) downgraded to Underweight from Neutral at JP Morgan
  • Others:
    • Altra Industrial Motion (AIMC) initiated with a Buy at Loop Capital; tgt $58
    • Burlington Stores (BURL) resumed with an Outperform at William Blair
    • Byline Bancorp (BY) initiated with a Mkt Perform at Raymond James
    • Despegar.com (DESP) assumed with a Buy at Citigroup; tgt lowered to $12
    • Forge Global Holdings (FRGE) initiated with a Mkt Perform at William Blair
    • Middleby (MIDD) initiated with a Buy at The Benchmark Company; tgt $190
    • MindMed (MNMD) initiated with an Outperform at Oppenheimer; tgt $3.50
    • Patrick Industries (PATK) initiated with a Neutral at DA Davidson; tgt $65
    • Verona Pharma (VRNA) initiated with an Overweight at Piper Sandler; tgt $31

>>> US Gapping down

Gapping down
In reaction to earnings/guidance:

  • DOMO -16.1%, AFRM -12.9%, DELL -5.1%, ESTC -4.3% (also names AWS exec as chief product officer), MRVL -3.1%, SUMO -2.3%, VMW -1%

Other news:

  • DNMR -10.4% (files for $100 mln mixed securities shelf offering)
  • OTEX -8.5% (OTEX to acquire MFGP)
  • TVTX -5% (to present abstracts at upcoming conference)
  • RIDE -1.4% (California will ban sale of new gas vehicles in 2035 according to CNBC)
  • LRCX -1.1% (increases dividend)
  • NIO -1.1% (Announces Substantial Completion of Independent Internal Review)

Analyst comments:

  • CNC -3.4% (downgraded to Equal Weight from Overweight at Wells Fargo)
  • IHG -2.9% (downgraded to Neutral from Overweight at JP Morgan)
  • GDS -1.9% (downgraded to Sector Perform from Outperform at RBC Capital Mkts)
  • UNP -0.8% (downgraded to Neutral from Outperform at Daiwa Securities)

>>> US Gapping up

Gapping up
In reaction to earnings/guidance:

  • FTCH +14.3%, WDAY +11.5%, GPS +6.2%, ULTA +3.6%, JKS +3.3%

Other news:

  • MFGP +94.6% (OTEX to acquire MFGP)
  • ETNB +7.4% (results from Entrigue phase 2 trial of pegozafermin)
  • BBBY +2.7% (confirms it will hold strategic update call on Aug 31)
  • ALSN +2.1% (wins $6.55 mln US Army contract for electrified transmissions for armored combat vehicles)
  • XRAY +2% (names new CEO)
  • APLD +1.6% (expects to have three data centers operating by 1H23 also reports earnings)
  • BCRX +1.4% (Presents Data Demonstrating >99 Percent Suppression of Alternative Pathway Complement Activity with BCX9930 in C3G Patients)
  • PRG +0.9% (responds to PA attyy general decision to file a complaint)

Analyst comments:

  • VTEX +4.9% (upgraded to Buy from Neutral at BofA Securities)
  • FSLR +2.3% (upgraded to Buy from Neutral at BofA Securities)
  • HIBB +2.1% (upgraded to Buy from Neutral at Seaport Research Partners)
  • FDS +0.4% (upgraded to Buy from Hold at Deutsche Bank)

>>> US Early premarket gappers

Early premarket gappers

  • Gapping up:
    • MFGP +93.9%, FTCH +15.2%, ETNB +10.6%, WDAY +10.4%, GPS +8%, APLD +7.8%, ULTA +3%, ALSN +2.1%, XRAY +2%, BBBY +1.4%, TMUS +1.3%, PRG +0.9%, HBI +0.9%, ITUB +0.8%, PBA +0.7%
  • Gapping down:
    • DOMO -16.1%, AFRM -13.4%, DNMR -7.8%, OTEX -6.4%, ESTC -5.3%, TVTX -5%, DELL -4.3%, MRVL -3.4%, SUMO -2.3%, NIO -1.5%, LRCX -0.8%, MYGN -0.6%, DASH -0.5%