Chinese gaming stocks have plunged over fears of a crackdown in Macau.
(Paul Yeung/Bloomberg)Stocks had a good Wednesday, lifted by strong production numbers that made investors feel more confident that the economic recovery is moving forward.
The gains were in stark contrast to the past couple of weeks; all three major indexes have been wobbly since the beginning of the month.
The Dow Jones Industrial Average gained 237 points, or 0.7%, to close at 34,814. The S&P 500 rose 0.9%, and the Nasdaq Composite advanced 0.8%. The S&P 500 is down more than 1% from its all-time high, hit Sept. 2. The 10-year Treasury yield rose slightly to 1.3%.
Industrial production rose 0.4% month over month in August, in line with estimates. Production rose 5.9% year over year.
“Stronger demand for durable goods suggest further upside to production after supply issues are resolved into next year,” wrote Andrew Hollenhorst, Citigroup economist.
The Industrial Select Sector SPDR Exchange-Traded Fund (XLI), many components of which benefit from strong spending on equipment, rose 1.1%.
As companies continue to invest in new equipment for longer-term growth, “industrial production and capital expenditures, that’s going to be working in the market’s favor,” said Yung-Yu Ma, chief investment strategist at BMO Wealth Management.
Overseas, Hong Kong’s Hang Seng Index fell 1.8% as Asian investors focused on a sharp slowing in Chinese retail sales. The consensus expectation was for August retail sales to grow 7% year over year, but the reading came in at just 2.5%. Industrial production rose 5.3%, below expectations for 5.8%.
“The no tolerance for Covid spread and the consumer reaction was clearly apparent in the retail sales figure out of China for August,” wrote Peter Boockvar, chief investment officer at Bleakley Advisory Group.
The pan-European Stoxx 600 declined 0.8%, with the spotlight falling on U.K. inflation, which rose to 3.2% in August in the biggest-ever yearly leap.
Analysts have noted that investor sentiment more broadly is mixed as concerns continued to center on whether a market correction is coming.
“Yesterday, the S&P 500 closed -0.32% away from its 50-day moving average, and the index has only closed below that trailing average on one occasion since March 8 (back on June 18),” noted Jim Reid, a strategist at Deutsche Bank. “Overall we haven’t seen a correction yet, as many expect, but we have seen a stalling.”
On Monday, Reid and his team published a monthly survey of more than 550 global finance professionals showing that 58% expect an equity correction of between 5% and 10% before the end of the year. Another 10% saw a market correction of more than 10% ahead.
Here are 13 stocks on the move Wednesday:
Gambling stocks exposed to Macau, the world’s largest gaming center, have plunged as Chinese regulators turned their attention to the sector. Wynn Resorts (ticker: WYNN) was down 6.3%. Las Vegas Sands (LVS) stock fell 2.2%. Potential regulation could include increased residential ownership of casinos in China, which could force U.S. shareholders to sell. Fortunately, “we believe valuation is largely de-risked for LVS, but we remain on the sidelines for WYNN,” wrote Goldman Sachs analyst Stephen Grambling.
Softbank (9984.Japan) fell 6% in Hong Kong as concerns continued over regulatory scrutiny on the Chinese technology sector, including Alibaba (BABA)—to which Softbank is heavily exposed.
Cyber security specialist Darktrace (DARK.U.K.) rose13.6% in London after posting upbeat quarterly results—its first since going public. The company raised forecasts for both revenue growth and profit margins next year.
The luxury-goods sector remains under pressure for a second day amid concerns over the spread of Covid-19 in Asia—the industry’s most critical market. LVMH (MC.France), Burberry (BRBY.U.K.), Richemont (CFR.Switzerland) and Kering (KER.France) all declined.
Yum China Holdings (YUMC) stock fell 5.9% after the company said its operating profit for the third quarter may fall 50% to 60% year over year, as Covid-19 outbreaks in China hit sales.
Regeneron Pharmaceuticals (REGN) stock gained 1.1% after the company said it is selling an additional 1.4 million doses of its monoclonal antibody treatment for Covid-19 to the U.S. government.
Sage Therapeutics (SAGE) rose 3.2% after the Food and Drug Administration gave the company a fast-track designation for its Huntington’s Disease treatment.
Microsoft (MSFT) stock gained 1.7% following news that the company is raising its dividend.
Write to Jacob Sonenshine at jacob.sonenshine@barrons.com
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