Wall Street closed with gains despite concerns about Chinese data

Wall Street’s stock indexes closed with gains at the start of the week, reversing early losses despite negative economic data from China that fueled concerns about a slowdown in global growth. Meanwhile, China’s central bank also unexpectedly cut interest rates, raising concerns about the country’s economic recovery.

In this climate, Mr Dow Jones gained 0.45% or 151.39 points to 33,912.44 points while S&P 500 strengthened by 0.35% or 14.85 points to 4,295 points. At the same time, Mr Nasdaq added 0.62% or 80.87 points to 13,128.05. It is noted that all three indices were earlier recording losses.

Of the 30 Dow Jones stocks, 22 closed with a positive sign and the rest in the red. In particular, the gains were led by the shares of Visa, Walt Disney and Procter & Gamble with a rise of 2.44%, 2.22% and 1.30% respectively. Conversely, losses were led by shares of Chevron, Dow Inc. and 3M Co., down 1.91%, 1.05% and 0.49% respectively.

It is noted that China’s economy showed unexpected slowing trends in July, with industrial activity and retail trade under pressure from the zero-Covid policy. Meanwhile, the People’s Bank of China (PBOC) unexpectedly cut the one-year medium-term lending facility (MLF) rate to some financial institutions by 10 basis points (bps) to 2.75% from 2.85%.

“Recession concerns are rising globally. China’s economy shrank in the second quarter. The US entered a ‘technical recession’. Natural gas flows to Western Europe are curtailing. Over the past three months, we have revised our forecast down for global growth to 2.5% in 2022, which is about 40 bp lower than in May,” Morgan Stanley’s Seth Carpenter said.

“I think this market does a very good job of making a lot of people very uncomfortable,” said Truist’s Keith Lerner. “The way the market trades, it’s already prepared for bad news, so once it gets it, it doesn’t hurt the market because the market is already prepared for it.”

It is recalled that last week the S&P 500 gained 3.25% and marked the fourth positive week in a row and the longest winning streak since 2021. The Nasdaq closed the week 3.08% higher, also for the fourth consecutive week. The Dow rose 2.9%.

Last week’s gains came after economic data showed that inflationary pressures may be easing a bit. The consumer price index was essentially unchanged from June to July, the producer price index showed a surprise decline and import prices fell more than expected.

Investors await a week of earnings from major retailers including Home Depot, Walmart and Target and are looking for clues about how their businesses were affected by inflation and other macroeconomic challenges in the most recent quarter. Retail sales data is also scheduled to be released this week.

By day’s end, construction sentiment in the single-family home market slipped into negative territory in August in the US as builders and buyers grappled with higher costs.

The National Association of Home Builders/Wells Fargo Housing Market Index fell 6 points to 49 this month, its eighth straight monthly decline. Anything above 50 is considered positive ground. The index has not been in negative territory since a very brief dip at the start of the coronavirus pandemic. Prior to that, it had not been in negative territory since June 2014.

“The Federal Reserve’s tighter monetary policy and persistently elevated construction costs have depressed the housing market,” said NAHB Chief Economist Robert Dietz.

Despite higher land, labor and material costs, about 1 in 5 manufacturers in August reported cutting prices in the last month in an effort to increase sales or limit cancellations. The average decline reported was 5%, CNBC reported.