Stocks Lose Steam as US Housing Data Disappoint: Markets Wrap

(Bloomberg) -- Stocks lost traction at the end of a strong week after a disappointing reading on the housing market, with traders awaiting data on US consumer sentiment.

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Equities fell in early New York trading, with the S&P 500 poised to snap a six-day winning streak. New-home construction in the US fell in July to the lowest level since the aftermath of the pandemic as builders respond to weak demand that’s keeping inventory levels high. Treasuries climbed across the curve. The dollar slipped, on course for a third week of declines, the longest such losing streak in more than five months.

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“Residential investment for the third quarter is off to a very slow start — and will not likely contribute to GDP growth this quarter,” said Jeff Roach at LPL Financial. “Housing prices will likely stay elevated despite a broader economic slowdown. However, we do expect mortgage rates to drop throughout this year as the Federal Reserve starts cutting rates.”

Traders dialed back bets of fast and steep Fed rate cuts other data points this week suggested the economy is far more resilient than markets have expected. Later Friday, Wall Street will wade through a fresh reading on consumer sentiment.

“These numbers could be disappointing,” said Matt Maley at Miller Tabak + Co. “Let’s face it, it’s not like the consumer is suddenly booming again. In other words, the positive news from this week has been that the concerns over a recession have been alleviated to a certain degree. But there’s no question that the economy is still slowing.”

Federal Reserve Bank of Chicago President Austan Goolsbee said the labor market and some leading indicators on the economy are flashing warning signs, adding there are concerns unemployment will continue to rise.

S&P 500 futures dropped 0.5%. The US equity benchmark was still poised for its best week this year. Nvidia Corp. led losses in megacaps. Applied Materials Inc., the largest US maker of chip-manufacturing equipment, slumped after its sales forecast disappointed investors who’d been looking for a bigger payoff from artificial intelligence spending.

Treasury 10-year yields fell four basis points to 3.87%. The dollar dropped against most major peers.

No borrowers will look to sell US investment-grade bonds Friday, according to an informal survey of debt underwriters, but issuers are lining up for what could be an uncharacteristically busy next week.

Historically, the last two weeks of August have seen sparse issuance. The second to last week of August 2023, for example, had just three deals price for a total of $3.45 billion. This year could be different, though, with around $20 billion of new sales expected, with most coming Monday and Tuesday.

Corporate Highlights:

Texas Instruments Inc. is set to receive $1.6 billion in Chips Act grants and $3 billion in loans, the Biden administration announced Friday, marking the latest major award from a program designed to boost American semiconductor manufacturing.
Rivian Automotive Inc. has paused production of the electric commercial van it makes for Amazon.com Inc. due to a parts shortage in the latest supply chain snafu for the EV maker.
Bayer AG shares jumped following a significant win for the German company in the long-running cancer litigation over its Roundup weedkiller.
BHP Group and union leaders in Chile reached a preliminary wage agreement on Friday, setting the stage for a resumption of normal production at the world’s biggest copper mine.
A combination Covid-flu vaccination developed by Pfizer Inc. and BioNTech SE missed on one of its goals in a final-stage trial, a disappointment for the companies trying to make further use of the technology that succeeded in the pandemic.

Some of the main moves in markets:

Stocks

S&P 500 futures fell 0.5% as of 8:59 a.m. New York time
Nasdaq 100 futures fell 0.5%
Futures on the Dow Jones Industrial Average fell 0.3%
The Stoxx Europe 600 was little changed
The MSCI World Index rose 0.3%

Currencies

The Bloomberg Dollar Spot Index fell 0.3%
The euro rose 0.2% to $1.0994
The British pound rose 0.3% to $1.2897
The Japanese yen rose 1.1% to 147.69 per dollar

Cryptocurrencies

Bitcoin rose 2.1% to $57,873.26
Ether rose 1% to $2,576.7

Bonds

The yield on 10-year Treasuries declined four basis points to 3.87%
Germany’s 10-year yield declined four basis points to 2.23%
Britain’s 10-year yield declined two basis points to 3.90%

Commodities

West Texas Intermediate crude fell 2.2% to $76.47 a barrel
Spot gold rose 1.4% to $2,492.33 an ounce

This story was produced with the assistance of Bloomberg Automation.

--With assistance from John Viljoen.

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