Shares fall after four consecutive weeks of S&P 500 gains

Energy leads to decline

Energy stocks led decliners in early morning trade, with the sector down more than 4%.

Shares of names such as Halliburton, Marathon Oil and Diamondback Energy fell more than 5% each.

Financial stocks Wells Fargo, Bank of America and Citigroup were down 1%. Materials also fell 1%, with Nucor and Mosaic down more than 3% each. Freeport-McMoRan fell 4.6%.

– Samantha Subin

Shares open lower

Stocks opened lower on Monday, led by energy and financial stocks, which fell more than 3% and 1[ads1]%, respectively. The Dow Jones Industrial Average fell 169 points, or 0.5%, while the S&p 500 and Nasdaq Composite fell 0.46% and 0.23%, respectively.

– Samantha Subin

Production records in the New York area dropped startlingly in August, the survey shows

Manufacturing activity has collapsed in the New York area, according to a report released Monday.

The New York Fed’s Empire State Manufacturing Survey for August plunged to a reading of minus-31.3, a 42-point plunge driven by sharply lower new orders and shipments. The index measures the difference between companies that see expansion and contraction. Economists surveyed by Dow Jones had been looking for a reading of 5.

It was the lowest reading since May 2020 and both the second-lowest reading overall and the second-largest plunge in history for a data series going back to July 2001. In addition to the massive decline in general conditions, the shipping index was minus-49.4 and the new order index was minus-35.8.

Employment also remained weak in expansion, with the index at 7.4, but it was a drop of 10.6 points from July.

There was some hope for the future, as the general business conditions index six months from now rose to 2.1, an 8.3-point gain.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, cautioned against taking too much from the gloomy report.

“As always, remember that the Empire State is a small regional survey and it is not definitive proof of anything,” he wrote. “It is not a reliable indicator of the national ISM manufacturing index. We are now very curious about the other regional reports for August, due in the next few weeks. Our bet is that none of them will be as spectacularly awful as this one . . .

-Jeff Cox

Energy and technology will open lower

Few stocks remained in positive territory in the premarket on Monday, with energy and technology leading those declines.

A drop in oil prices weighed on energy stocks as weak data from China, the world’s biggest crude importer, fueled concerns of a slowdown.

Most technology names also remained in the red, led by shares of Apple, Microsoft and Amazon. Despite the downtrend, shares of Analog Devices rose about 2.7% in the premarket.

On the banking front, shares of Goldman Sachs, Bank of America and Morgan Stanley were all around 1% lower.

– Samantha Subin

Stock futures fall

Stock futures fell on Monday before the market opened. Futures tied to the Dow Jones Industrial Average lost 224 points, or 0.66%, while S&P 500 and Nasdaq 100 futures fell 0.7% and 0.5%, respectively.

– Samantha Subin

Further pain ahead despite summer bounce, Canaccord Genuity says

A strong summer rally saw the S&P 500 bounce 16% from its June low, but investors should refrain from chasing “whooshes” or “outsized rallies,” Canaccord Genuity says.

Heavily oversold conditions and fears of both the Fed and an economic recession made a strong case for a summer rally, analyst Tony Dwyer said in a note to clients on Monday. That said, further uncertainty lies ahead and investors should look to cut back on increased risk brought on by the summer rally.

“The strength of the summer rally has led some momentum-based indicators to suggest that the worst of the bear market is over, but the macro backdrop of yield curve inversions, real liquidity and further Fed rate hikes argues otherwise,” he said.

– Samantha Subin

A ‘Goldilocks’ in recent weeks

While the rally looks set to take a break on Monday, the bulls have had some good news of late. At last check, the S&P 500 was up more than 17% from its mid-June low, cutting losses for the year by more than half with the benchmark now down 10% for 2022.

Tavis McCourt, institutional equity strategist for Raymond James, summed it up this way in a note Sunday:

“An absolute ‘Goldilock’ two weeks for those who pay attention to economic data, as last week’s ridiculously strong July jobs numbers were followed by weaker-than-expected CPI, PPI (headline and core), export and import prices, sending the S&P 500 up another ~3.2% with small/mid-caps even more. As central bankers took to the airwaves to try to tighten financial conditions, stock markets continued to rally and credit spreads continued to tighten, as inflation seems likely to have peaked barring another dramatic offer We’ll note that in the post-World War II world in the 1940s, which we still think is the closest historical economic analogy to today, stocks bottomed out when inflation peaked, but remained largely range-bound for about 4 years before hitting new highs. “

Oil slips on concerns about global growth

Oil prices fell on Monday after weak economic data from China fueled concerns about a slowdown in demand.

West Texas Intermediate crude, the US oil benchmark, fell 4.5% to trade at $87.94 a barrel. Global benchmark Brent crude fell 4.5% to $93.71 a barrel.

“The numbers from China are really a concern,” said Oanda’s Craig Erlam.

“It does not bode well for oil demand, especially when the country remains so committed to zero Covid. And with cases continuing to rise, the downward pressure on oil prices could intensify,” he added.

The Energy Select Sector SPDR Fund (XLE), which tracks the S&P 500 energy sector, fell 3% in premarket trading.

Halliburton, Valero, Devon Energy, Occidental and Marathon Oil were all down more than 3%.

—Pippa Stevens

China’s central bank cuts interest rates unexpectedly

The People’s Bank of China, the country’s central bank, surprised investors overnight by cutting the interest rate on its one-year medium-term loan facility of 400 billion yuan ($59.3 billion) to 2.75% from 2.85%. The PBOC also cut another key rate, its seven-day reverse repo rate, by 10 basis points to 2%.

Fred Imbert, Abigail Of

Disappointing data from China

Sentiment was dampened somewhat on Monday after the Chinese government released economic data that missed the mark.

Overnight, China’s National Bureau of Statistics said retail sales rose 2.7% in July. A Reuters forecast of a 5% gain is probably low. It is also a decline from June’s progress of 3.1%. Industrial production, meanwhile, rose 3.8%, also missing an estimate of 4.6%.

Fred Imbert, Evelyn Cheng

European markets mixed after cautious gains last week

European markets were muted on Monday morning, struggling to build on a positive trend seen at the close last week.

The pan-European Stoxx 600 soared 0.1% higher in early trade, with health care up 0.7% while autos fell 0.9%.

European stocks closed higher last Friday as investors digested economic data from the region, including a preliminary second-quarter GDP reading in the UK, July inflation prints from France, Spain and Italy, and eurozone industrial production for June.

– Elliot Smith

CNBC Pro: Fund managers say bear market rally won’t last and reveal how to position for it

CNBC Pro: Top tech investor Paul Meeks reveals whether it’s time to go all-in on tech

Technology shares were among the hardest hit in the first half of the year as investors fled for safety amid a broad market sell-off. But investor interest in the sector seems to be picking up again, asking: is it time to jump back into the sector?

Top tech investor and portfolio manager Paul Meeks shared his strategy for trading the sector, what he sees in the market and his best ideas in the space.

Find out more at CNBC Pro.

— Zavier Ong

The earnings season is coming to an end soon

More than 90% of companies in the S&P 500 have now reported earnings, and about 78% of those names have delivered better-than-expected earnings, according to Refinitiv. These results have put overall S&P 500 earnings on pace to have grown 9.7% from the same period last year.

– Tanaya Machel

What to expect from retail sales this week

As investors await quarterly financial results from retail giants, Wall Street expects more missed revenue and annual cuts in its outlook as companies continue to grapple with macro headwinds such as high inflation, global economic uncertainty and supply chain issues.

Walmart and Home Depot will be the first to report, on Tuesday. Last quarter, Walmart cut its profit estimates due to rising food prices, while Home Depot raised its full-year outlook.

Check out CNBC Pro for more on what to expect from retail earnings this week.

– Tanaya Machel

The S&P 500 is testing the bear bag

On Friday, the S&P 500 closed above 4,231, a 50% decline from top to bottom. BTIG technical analyst Jonathan Krinsky has said that a close above this level would mean this is another bull market and not just a bear market.

The broad market index also traded above this level on Thursday, but did not close above it.

The S&P 500 rose 9% in July, and at Friday’s close it was up 3.6% for the month.

– Tanaya Machel

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