U.S. stocks extend gains, with investors mulling Fed move after drop in job openings

What’s driving markets

The stock market has seen back-to-back gains this week in an otherwise downbeat trading month for August. Now investors are hoping for three in a row.

New numbers showed job openings retreating to a 28-month low while fewer workers were quitting. Job listings dropped to 8.8 million, lower than the forecast of 9.5 million.

Meanwhile, 3.5 million people quit their jobs in July, the lowest level in over two and a half years — a sign that job seekers are getting more cautious.

Consumer confidence also fell in August, dropping to 106.1 from 114, according to the Conference Board. Compared to July, slightly fewer people in August are saying jobs are “plentiful,” while slightly more people are saying a new job is “hard to get.”

The data points showing caution among consumers and employers could be fodder for investors hoping the Federal Reserve will ease off on any additional interest-rate hikes.

“Today’s JOLTS data show that the Great Resignation has come to an end and the path toward a soft landing remains open,” said Nick Bunker, head of economic research at Indeed Hiring Lab.

“This reduction in job-hopping signals that wage growth will continue to cool as employers face less pressure to attract new hires and retain current employees. This trend, plus the decline in job openings and dormant layoffs, is likely to please Fed policy makers,” Bunker said.

Stock-market moves of late have been quite tightly correlated inversely to vacillations in benchmark bond yields as investors strive to calculate the trajectory for Fed policy.

In mid-morning trading Tuesday, Treasury yields kept slipping. The 10-year Treasury yield
BX:TMUBMUSD10Y
fell to 4.15%. The yield hit its highest level since 2007 last week, FactSet data showed. At the recent high, it neared 4.37%.

Mark Newton, head of technical strategy at Fundstrat, remained wary, however: “If yields begin to move back to new monthly highs (although I expect any such move to prove short-lived) that would likely spook U.S. equities, and it’s important not to rule that out just yet,” he said.

“It’s been a really rates-driven market in the last five, six weeks,” Sonu Varghese, vice president and global macro strategist at Carson Group, told MarketWatch.

While anxiety over rising Treasury yields pushed stocks lower, Varghese said Tuesday’s JOLTS data and the consumer confidence numbers were data points for the doves who hope the Fed is done with rate hikes. Tuesday’s numbers are “not worrying, it’s just telling you the job market is getting a little less hot.”

After the Fed’s recent Jackson Hole retreat, Varghese’s view is that the central bank is “content waiting” to see how high rates continue to affect economic conditions.

There’s an 86.5% chance the Fed stands pat at its current federal funds rate during the September interest rate meeting, according to the CME FedWatch Tool.

Other catalysts could come later in the week. In particular, the Fed will be paying close attention to its preferred inflation measure, the July personal consumption expenditures price index, due on Thursday, followed by August employment data on Friday.

The recent focus on Treasury yields keeps the housing market in focus, where mortgage rates typically follow along with the yield on 10-year bond. Even with mortgage rates around the 7% mark or higher, new data Tuesday showed home prices increasing in June.

The S&P CoreLogic Case-Shiller 20-city house-price index climbed 0.9% in June, compared with May. But nationally, house prices were down 1.2% in June, year over year.

The stragglers of the second-quarter earnings reporting season are still coming in, with Best Buy
BBY,
+5.18%,
Bank of Montreal
BMO,
+0.12%,
J.M. Smucker
SJM,
+1.77%
and Hewlett Packard
HPE,

among those releasing results on Tuesday.

Companies in focus

• Coinbase Global Inc.
  COIN,
  +14.64%
  jumped 13% after a federal appeals court ordered the U.S. Securities and Exchange Commission to vacate its rejection of Grayscale Investments’ proposed bitcoin exchange-traded fund.

• Best Buy Co. shares
  BBY,
  +5.18%
  got a nearly 6% boost in early trading Tuesday, after the consumer-electronics retailer reported fiscal second-quarter results that beat expectations, while providing a mixed full-year outlook.

•  Nio Inc. shares
  NIO,
  -4.45%
   were off more than 3%, following second-quarter earnings Tuesday morning from the electric-car maker. Revenue fell in results that missed expectations, but the company offered an upbeat revenue outlook for the current quarter.

• Shares of AT&T Inc.
  T,
  +2.92%
  and Verizon Communications Inc.
  VZ,
  +2.82%
  each rose more than 2%, as Citi upgraded both telecommunications companies to buy/high-risk from neutral.

• Hawaiian Electric Industries Inc.’s stock
  HE,
  -1.90%
  is down more than 4%, after Monday’s 45% surge after the company denied being responsible for deadly wildfires.