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Markets Lower on Tepid Factory Orders, Impressive Automakers
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All major market indices closed this first full trading day of 2H23 heading lower. Only the tech-heavy Nasdaq spent any time in the green today; all others started the day in the red and stayed there. The Dow closed down -124 points, -0.36%, while the Nasdaq was only marginally down, -0.16%, similar to the S&P 500’s -0.18% on the day. The small-cap Russell 2000 shed -1.03% for the session.
The indices are still riding higher over the past week of trading, however: today’s trading included, the Russell is +1.40% and the S&P is +1.80%, with the Dow and Nasdaq sandwiched between. Year to date, the Nasdaq is still the top-performing index, and the blue-chip Dow is the weakest, though still in the green from the first of the year. The Nasdaq and S&P struck fresh yearly highs as on Monday’s shortened session; a pullback today was not unexpected.
The minutes to the most recent Federal Open Market Committee (FOMC) meeting came out today, depicting a slightly more contentious conclusion than the reported June 15th meeting’s unanimous decision. “Almost all” Fed members wanted to keep rates steady at 5.00-5.25%, but some favored another quarter-point hike before joining the consensus. Currently, expectations are for another 25 basis-point raise at the next meeting — three weeks from today — which would take us to the highest interest rate levels since early 2001.
Factory Orders for May came in only half what analyst expectations were: +0.3% versus +0.6% consensus, matching the downwardly revised +0.3% the previous month. That said, it’s still the third straight month in positive territory for factory orders, after spending the previous four months with an average factory orders print of -1.0%. Volatility had been on the rise, particularly to the downside, going back to mid-last year, but orders are flattish now heading toward the mid-point of the year.
After Tesla (TSLA - Free Report) guided to a record-high yearly output for automobiles for 2023, other major automakers have gotten into the act today: General Motors (GM - Free Report) grew a higher-than-expected +18.8% in Q2, even with flat incentives and inventory. Toyota (TM - Free Report) grew nearly +15% from last June to this one, and EV upstart Rivian (RIVN - Free Report) reiterated its earlier guidance that it will produce 50K new autos this year. Consider these gains are being made amid higher loan costs (higher interest rates) and are not seeing slowing demand. As we’ve seen in housing of late, pent-up demand is winning the battle versus higher price points, at this stage.
Tomorrow brings us private-sector payrolls from ADP (ADP - Free Report) , JOLTS data on employment openings and the “quit rate,” and weekly Initial and Continuing Jobless Claims. Between Thursday’s platter of labor force data and Friday’s Employment Situation report, we’ll have a lot more color on how jobs numbers are keeping up with relative economic strength we’re seeing elsewhere. And this, in turn, will help inform what the Fed is feeling about putting that next rate hike on the board.
Image: Bigstock
Markets Lower on Tepid Factory Orders, Impressive Automakers
All major market indices closed this first full trading day of 2H23 heading lower. Only the tech-heavy Nasdaq spent any time in the green today; all others started the day in the red and stayed there. The Dow closed down -124 points, -0.36%, while the Nasdaq was only marginally down, -0.16%, similar to the S&P 500’s -0.18% on the day. The small-cap Russell 2000 shed -1.03% for the session.
The indices are still riding higher over the past week of trading, however: today’s trading included, the Russell is +1.40% and the S&P is +1.80%, with the Dow and Nasdaq sandwiched between. Year to date, the Nasdaq is still the top-performing index, and the blue-chip Dow is the weakest, though still in the green from the first of the year. The Nasdaq and S&P struck fresh yearly highs as on Monday’s shortened session; a pullback today was not unexpected.
The minutes to the most recent Federal Open Market Committee (FOMC) meeting came out today, depicting a slightly more contentious conclusion than the reported June 15th meeting’s unanimous decision. “Almost all” Fed members wanted to keep rates steady at 5.00-5.25%, but some favored another quarter-point hike before joining the consensus. Currently, expectations are for another 25 basis-point raise at the next meeting — three weeks from today — which would take us to the highest interest rate levels since early 2001.
Factory Orders for May came in only half what analyst expectations were: +0.3% versus +0.6% consensus, matching the downwardly revised +0.3% the previous month. That said, it’s still the third straight month in positive territory for factory orders, after spending the previous four months with an average factory orders print of -1.0%. Volatility had been on the rise, particularly to the downside, going back to mid-last year, but orders are flattish now heading toward the mid-point of the year.
After Tesla (TSLA - Free Report) guided to a record-high yearly output for automobiles for 2023, other major automakers have gotten into the act today: General Motors (GM - Free Report) grew a higher-than-expected +18.8% in Q2, even with flat incentives and inventory. Toyota (TM - Free Report) grew nearly +15% from last June to this one, and EV upstart Rivian (RIVN - Free Report) reiterated its earlier guidance that it will produce 50K new autos this year. Consider these gains are being made amid higher loan costs (higher interest rates) and are not seeing slowing demand. As we’ve seen in housing of late, pent-up demand is winning the battle versus higher price points, at this stage.
Tomorrow brings us private-sector payrolls from ADP (ADP - Free Report) , JOLTS data on employment openings and the “quit rate,” and weekly Initial and Continuing Jobless Claims. Between Thursday’s platter of labor force data and Friday’s Employment Situation report, we’ll have a lot more color on how jobs numbers are keeping up with relative economic strength we’re seeing elsewhere. And this, in turn, will help inform what the Fed is feeling about putting that next rate hike on the board.
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