Why Is the Stock Market Down Today? Weak Oil Prices and Softer China Data. - Barron's

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An elderly man pushes a dog in a wheelchair across a road as he buys vegetables at a market in Shenyang, in China's northeastern Liaoning province on July 9, 2021.

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Stocks were lower on Thursday, as China data showed growth slowing, energy prices fell, and investors watched another appearance on Capitol Hill by Federal Reserve Chairman Jerome Powell.

Weekly jobless claims fell to 360,000, the Labor Department reported Thursday, a new pandemic low.

In afternoon trading, the  Dow Jones Industrial Average  was down 64 points, or 0.2%, while the S&P 500  fell 0.6%, and the  Nasdaq Composite  declined 1.1%. Equities finished mixed on Wednesday after Powell began two days of testimony on the state of monetary policy and the economy, on Capitol Hill.

China reported growth slowed to 7.9% over a year earlier in the three months ending in June, an indication that the powerful strong rebound from the pandemic was starting to normalize. The GDP reading also missed estimates of 8.2%. But the data was still robust, and China’s CSI 300 index finished up 1.3%. A mostly positive day for Asian stocks was bucked by a 1.1% drop for the Nikkei 225 .

The data out of China comes as investors are concerned that economic growth in the U.S. has peaked. Consistent with that thesis, the 10-year Treasury yield has dipped to 1.32% Thursday from as high as 1.43% this week.

Although several factors indicated more tepid macroeconomic expectations, the stock market began to signal otherwise. In premarket trading, the more economically-sensitive stocks were falling the most. That trend reversed after the opening bell. The  Industrial Select Sector SPDR Fund (XLI) rose 0.2% and the  SPDR S&P Metals & Mining ETF (XME) rose 1%. The  Materials Select Sector SPDR Fund (XLB) rose 0.1%. Technology stocks, which tend to perform well when the market is jittery about economic growth, performed poorly. The  Technology Select Sector SPDR Fund (XLK) fell 1%. 

Oil prices extended losses from Wednesday amid speculation that Saudi Arabia and the United Arab Emirates have made progress toward a compromise on production levels. Not helping was data showing a drop in U.S. gasoline demand. WTI crude oil prices were down 0.5% to $72.76 a barrel Thursday.

Jerome Powell acknowledged sharp gains in inflation that have been showing up in recent data, but indicated it was too soon to ratchet down support for the economy.

Investors continue to keep an eye on rising cases of the more contagious Delta variant of Covid-19 that are increasing around the world, including the U.S. Spain’s Balearic Islands were moved to the U.K.’s amber list on Wednesday, which means residents returning from vacations as of Monday must quarantine unless they have had a full set of vaccination.

Shares of renewable energy companies slid in Europe, with Spain’s Siemens Gamesa Renewable Energy slumping 14% after it warned of a fiscal 2021 loss as third-quarter provisions hit profitability. That had a ripple effect on Siemens Energy whose shares fell 10% after the Germany energy group said it would miss full-year margin guidance, following disappointment from its Spanish subsidiary.

Taiwan Semiconductor Manufacturing reported second-quarter net profit rose 11% from a year earlier, as chip demand remained elevated from the pandemic. The profit missed analysts forecasts, but shares were largely unchanged.

American International Group  (ticker: AIG) stock rose 3.4% as private equity giant Blackstone will acquire a 9.9% equity stake in AIG’s life and retirement business for $2.2 billion. Blackstone (BX) shares rose 3.3%. 

Morgan Stanley  (MS) stock rose 1% after reporting a profit of $1.85 a share, beating estimates for $1.65 a share, on revenue of $14.8 billion, above expectations for $13.9 billion. 

Advanced Micro Devices  (AMD) stock slipped 2.1% after getting upgraded to Neutral from Sell at Citigroup. 

Old Dominion Freight Line  (ODFL) stock rose 0.6% even after getting downgraded to Peer Perform from Outperform at Wolfe Research. 

NXP Semiconductors  (NXPI) stock dropped 4.4% after getting downgraded to Neutral from Buy at Mizuho. 

Write to Jacob Sonenshine at jacob.sonenshine@barrons.com

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Why Is the Stock Market Down Today? Weak Oil Prices and Softer China Data. - Barron's
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