Equities extend gains on signs of cooling US economy

US equities rose again Tuesday, with the Nasdaq Composite posting its highest close in over three weeks, after weaker-than-expected consumer confidence and job market numbers raised investors’ hopes that a colling economy could help end the Federal Reserve’s interest rate-hiking campaign.  Equities also got a boost from stronger-than-expected earnings from retailers including Best Buy and Big Lots.  The S&P 500 was up 1.5%, the Dow Jones Industrials Average gained 0.9% while the Nasdaq Composite rallied by a further 1.7%.  Elsewhere, European shares rose for the second consecutive session yesterday, with the Euro Stoxx 50 Index surging by 0.8%. 

Summary for 30.08.2023 

• Asian equity markets extended gains on Wednesday, with the Australian market-leading gains on a softer-than-expected inflation reading. 
• European shares are poised to extend their run of gains, bolstered by optimism for China and the Fed’s outlook.  Similarly, US equity futures edged higher this morning. 
• Oil prices extended gains this morning after industry data showed a large draw in crude inventories in the US and as concerns about a hurricane in the Gulf of Mexico kept investors on edge.   

• The monthly Consumer Price Index (CPI) indicator in Australia increased by 4.9% in the year to July, slowing from a 5.4% gain in June and below the market consensus of a 5.2% rise.  This was the lowest inflation rate since February 2022, mainly due to a slowdown in housing and food prices.  The monthly, CPI indicator excluding volatile items and travel advanced by 5.8% in July, down from the rise of 6.1% in June. 
• In the US, the Conference Board said yesterday its Consumer Confidence Index fell to 106.1 in August from a downwardly revised 114 in July.  The August figure was well under expectations for a number closer to 116, based on consensus expectations. 
• The number of job openings in the US declined by 338,000 from the previous month to 8.827 million in July, marking the lowest level since March 2021 and falling below the market consensus of 9.465 million.  It also represented the third consecutive month of decline in job openings, indicating that the labour market is gradually slowing after months of unprecedented monetary policy tightening by the Fed. 
• US Treasury yields slumped to the lowest levels in more than a week after bigger-than-expected declines in gauges of job creation and consumer confidence prompted bond traders to assign lower odds to another Federal Reserve interest-rate hike this year.  Short-maturity yields, more sensitive to changes in the Fed’s rate, led the move.   Markets are now pricing in an 89% chance of the Fed standing pat at its meeting next month and are now pricing in a 50% chance of another pause at the November meeting. 
• AT&T shares rose 4% and Verizon shares rose 3.4% on Tuesday after Citi analyst Michael Rollins upgraded both shares to “buy” from “neutral”, citing a “more constructive investment case” for large-cap telecommunications companies and signs of stabilisation in the wireless competitive environment. 

• Airbnb shares rose 4.7% yesterday after Berstein reiterated its “outperform” rating on the equity, saying a recent pullback presented a buying opportunity. 
• Big Lots shares soared nearly 27% Tuesday after the company exceeded expectations on earnings and revenue for the previous quarter.  Meantime Best Buy shares rose nearly 4% after the electronics retailer’s quarterly results topped analysts’ expectations.