Wall Street slides, Apple weighs

<html xmlns="http://www.w3.org/1999/xhtml"><head><title>LIVE MARKETS-Wall Street slides, Apple weighs</title></head><body>

Main U.S. indexes end red: S&P off ~0.5%

Info tech biggest S&P sector loser; cons disc leads gains

Dollar, bitcoin down; gold up; crude rallies >1%

U.S. 10-Year Treasury yield slides to ~4.04%

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Wall Street slides, Apple weighs (1620 EDT/2020 GMT)

Shares on Wall Street finished in the red, erasing gains on the S&P 500 .SPX of about 1% earlier in the session, with losses in Apple AAPL.O shares weighing on the index. Analysts say investors took profits on earlier job-related gains.

The losses came after a U.S. jobs report that showed employment gains of 187,000, lower than the consensus forecast of 200,000. The June jobs number was also revised downward.

Stocks rallied after the report as the numbers suggested that jobs gains were solid enough that the U.S. economy could avoid recession. But sentiment turned in the afternoon amid thinner, summer volumes that likely exaggerated moves, traders say.

The weekly declines for the S&P and Nasdaq .IXIC were their biggest since March. This, after five months of gains, investors booked profits due to economic data, disappointing earnings and rising Treasury yields.

Here is the closing snapshot of assets across financial markets:

(Gertrude Chavez-Dreyfuss)



Rising Treasury yields are contributing to tighter monetary conditions, and that may reduce the need for the Federal Reserve to continue hiking rates, according to ING.

The benchmark 10-year yield US10YT=RR reached an almost nine-month high of 4.206% on Friday as investors digest still strong economic data, forecasts of higher U.S. government debt issuance and following Fitch Ratings downgrade of the United States’ credit rating from the top AAA on Tuesday.

But investors remain unconvinced that the U.S. central bank will continue hiking rates, and fed funds futures are pricing in only a partial chance of an additional 25 basis points increase this year. FEDWATCH

“The move higher in Treasury yields only adds to our conviction that the Fed won’t need to hike interest rates further,” ING analysts James Smith and James Knightley said in a report on Friday.

Yields “could go higher over the next week as the extra bond supply hits the market. This, coupled with the stronger dollar and rising market volatility, is tightening monetary conditions and will put up mortgage rates and corporate borrowing costs,” they said.

The U.S. Treasury Department this week raised its borrowing estimate for the coming quarter to $1 trillion and said it would increase auction sizes across the board in coming quarters.

Next week it will sell $103 billion in coupon-bearing debt, including $42 billion in three-year notes, $38 billion in 10-year notes and $23 billion in 30-year bonds.

(Karen Brettell)



Optimism rose, and remained above average for the ninth-straight week in the latest American Association of Individual Investors (AAII) Sentiment Survey. With this, both bearish and neutral sentiment came in lower. In fact, bearishness is at its lowest point since June 2021.

Meanwhile, a majority of investors agreed with the FOMC's decision to raise interest rates at its late-July meeting.

AAII reported that bullish sentiment, or expectations that stock prices will rise over the next six months, gained 4.1 percentage points to 49.0%. This is the ninth consecutive week that bullish sentiment is above its historical average of 37.5%. This has been the longest streak of above-average readings since a 13-week stretch from February to May 2021. Bullish sentiment is "unusually high for the second time in three weeks."

Bearish sentiment, or expectations that stock prices will fall over the next six months, declined 2.8 percentage points to 21.3%. At nine consecutive weeks, this is the longest that pessimism has been below its historical average of 31.0% since a 23-week streak from February to July 2021. Pessimism is "right on the cusp of being unusually low."

Neutral sentiment, or expectations that stock prices will stay essentially unchanged over the next six months, dipped 1.3 percentage points to 29.7%. Neutral sentiment is below its historical average of 31.5% for the seventh time in 12 weeks.

With these changes, the bull-bear spread rose to +27.7 percentage points from +20.8 percentage points last week. The bull-bear spread reached "an unusually high level for the second time in three weeks and remains above average for the ninth consecutive week."

In this week's special question, AAII asked its members for their view on the Federal Reserve’s decision to raise interest rates by 25 basis points at its most recent meeting. Here are the responses:

It was the right decision: 63.1%

They should have kept interest rates unchanged: 21.9%

They should have raised rates by a larger amount: 6.9%

They should have cut rates: 2.0%

Not sure/no opinion: 6.1%

(Terence Gabriel)



The STOXX 600 .STOXX eked out gains on Friday following a mixed payrolls report, but the index still fell for the first week in four as rising bond yields and downbeat earnings had investors questioning the attractiveness of global equities.

The pan-European benchmark closed up 0.3% on Friday, but for the week was down 2.4%, its first weekly loss since the start of July.

Germany's DAX .GDAXI, France's CAC 40 .FCHI and Britain's FTSE 100 .FTSE all ended the week lower by between 1.7%-3.1%.

Italy's FTSE MIB .FTMIB underperformed on Friday after a fall in Interpump ITPG.MI shares after earnings and as index heavyweight STMicroelectronics STMMI.MI declined.

"Concerns over earnings guidance downgrades and rising long term yields weighed on broader market sentiment," said Michael Hewson, chief market analyst at CMC Markets UK.

"A mixed US jobs report appears to have stabilized sentiment after another slowdown in jobs growth ... spoke to the idea that central bank rate hikes have done their job," Hewson added.

Here's your closing snapshot:

(Samuel Indyk)



Most countries moved in tandem when COVID-19 broke out, with both manufacturing and services on their knees, and post-pandemic inflation hitting all markets.

However, as the dust settles, growth and inflation dynamics are starting to diverge, with the U.S. moving higher, China lower and the Euro area not showing sings of relevant acceleration, BofA economists said in a note on Friday.

The broker currently expects a soft landing for the U.S. economy rather than a mild recession in the first half of 2024, as price pressures are diminishing amid solid growth and low unemployment.

The labor market report on Friday showed that the U.S. economy added fewer-than-expected jobs in July, but the unemployment rate declined to 3.5%, pointing to continued tightness.

BofA believes the labor market should continue to cool, but not as much as it forecasted previously, with the unemployment rate expected to rise to a peak of 4.3% in the first quarter of 2025.

Meanwhile, China is having troubles getting up again after the pandemic slump, leading the Politburo - a top decision-making body of the ruling Communist Party - to describe economic recovery as "tortuous".

BofA insisted on the need of a stronger fiscal stimulus to reverse the slowdown in the world's second largest economy, but investors, who have been anxiously awaiting specific measures, seem to remain skeptical.

Finally, the recession drum beat is getting louder in the eurozone after data showed this week that manufacturing activity contracted in July at the fastest pace since COVID-19 with demand in factories struggling to recover.

(Matteo Allievi)



The rise in U.S. Treasury yields has negatively impacted stocks, and is likely to weigh on sentiment until the benchmark 10-year yield falls back below its former resistance level at 4.05%, according to Wells Fargo.

Forecasts of higher U.S. government debt issuance, still strong economic data and Fitch Ratings' downgrade of the United States’ top credit rating have contributed to a bond selloff that propelled the 10-year yield to an almost nine-month high of 4.206% on Friday. US10YT=RR

This “has spooked stocks,” Wells Fargo equity analysts including Christopher P. Harvey noted in a report. Negative reactions from Microsoft MSFT.O, Netflix NFLX.O, Tesla TSLA.O, Uber Technologies UBER.N and Advanced Micro Devices AMD.O “suggests optimism has been tempered.”

Near-term, sentiment may remain subdued.

Risk aversion groups such as utilities, staples and low-volatility stocks “have been pushed toward oversold technical levels,” the analysts said. And, “high beta, while rebounding, is not quite at 2021's frothy levels. This suggests many have 'rushed to one side of the boat,' and an oversold bounce is in the making.”

“However, we do not believe we are staring at an inflection point; that likely comes post-summer when the calendar fills out and September's conference season whips up optimism/risk seeking,” Wells Fargo concluded.

(Karen Brettell)



The main U.S. indexes are posting slight gains after data showed a cooling U.S. job market, with the economy adding fewer-than-expected jobs in July, but still holding steady. It's a scenario likely to support expectations that the U.S. economy could avert recession despite aggressive tightening by the Fed.

Nonfarm payrolls increased by just 187,000 jobs last month, compared with expectations for 200,000 new jobs. Data for June was revised lower to 185,000 jobs added instead of the previously reported 209,000.

The more worrying factor though is the rise in wage inflation, with average hourly earnings growing 0.4% in July, unchanged from the previous month, but a tad higher than expectations. That kept the year-over-year increase in wages at 4.4%.

"It's like some of the data we got earlier this week, not too soft and not too hot," said Randy Frederick, managing director of trading and derivatives, at Charles Schwab. "It plays into the soft landing or the no landing narrative that the markets have been slowly trudging higher on."

Fed funds futures are now pricing in no more hikes for this year.

Meanwhile, Amazon.com AMZN.O shares are up big on the day after the company issued an upbeat outlook for the third quarter. Apple's AAPL.O shares, on the other hand, are down as the iPhone maker forecast a continued slide in sales.

Shares of FANG index .NYFANG members Microsoft MSFT.O, Alphabet GOOGL.O and Snowflake SNOW.N are trading higher after Amazon's cloud business segment beat sales estimates.

Here is a snapshot of assets across financial markets around 30 minutes after the open:

(Gertrude Chavez-Dreyfuss, Sruthi Shankar)



U.S. equity index futures are slightly positive in the wake of the release of the latest data on U.S. employment.

The July non-farm payroll headline jobs number came in at 187k, which was below the 200k estimate. The unemployment rate was 3.5% vs a 3.6% estimate. Wage data, on a month-over-month and year-over-year basis, was hotter than expected:

According to the CME's FedWatch Tool FEDWATCH, the probability that the FOMC sits on its hands and leaves rates unchanged at its September 19-20 meeting is now around 82% from around 78% just prior to the data coming out. The chance that the Fed increases rates by 25 basis points is now around 18% from around 22% just before the numbers were released.

E-mini S&P 500 futures ESc1 are up around 0.3%. The futures were up around 0.2% just before the numbers came out.

The U.S. 10-year Treasury yield US10YT=RR is now around 4.16% vs around 4.19% just before the payroll data was released. The decline puts the yield's three-day winning streak in jeopardy.

A majority of S&P 500 sector SPDR ETFs are lower in premarket trade, with tech XLK.P, off around 0.4%, taking the biggest hit. This with Apple AAPL.O trading down after its results. On the back of Amazon.com's AMZN.O rise after its results, consumer discretionary XLY.P is posting the biggest gain, up nearly 3%.

The SPDR S&P regional banking ETF KRE.P is off around 0.1%.

Regarding the jobs data, Brian Jacobsen, chief economist at Annex Wealth Management, said:

“Wage growth may have been a touch hotter than expected, but when combined with a shorter workweek the aggregate weekly income number was tepid."

Jacobsen added "There are broad indicators that the labor market is cooling. The diffusion index for manufacturing shows ongoing struggles for that sector. It’s a world with pockets of strength and areas of weakness. Based on this report alone the Fed doesn’t have a strong case to justify further fiddling with the federal funds rate."

Here is a premarket snapshot about 20 minutes after the data came out:

(Terence Gabriel, Chuck Mikolajczak)



Jul08042023LM https://tmsnrt.rs/3qg4856

premarket08042023 https://tmsnrt.rs/3QlhmIx

US morning snapshot https://tmsnrt.rs/3KrwTmo

Europe shares close 040823 https://tmsnrt.rs/3KrPoa5

AAII08042023 https://tmsnrt.rs/3OKxYIB

US closing snapshot https://tmsnrt.rs/3Onmf1d

(Terence Gabriel is a Reuters market analyst. The views expressed are his own)


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