Stocks struggled for direction Wednesday as investors digested a dreary update on the labor market. This comes ahead of the annual Jackson Hole Economic Symposium, where Fed Chair Powell will deliver a keynote address on Friday morning.
Amid a relatively light economic calendar, preliminary data from the Bureau of Labor Statistics showed the U.S. added 818,000 fewer jobs than previously expected in the 12 months ending March 2024. This means the U.S. gained an average of 173,000 jobs per month over that time frame vs the previous estimate of 242,000.
At the same time, the downward revision to the labor market data means that productivity, which drives higher living standards, was greater than previously thought.
Also in focus were the minutes from the Federal Reserve's July meeting, where the central bank left interest rates unchanged but Powell noted in his subsequent presser that the committee had discussed a possible September rate cut.
Indeed, according to the minutes, almost all participants were encouraged by recent data showing inflation is easing, and "the vast majority observed that, if the data continued to come in about as expected, it would likely be appropriate to ease policy at the next meeting."
According to CME Group's FedWatch Tool, futures traders are now pricing in a 61.5% chance the Fed will cut interest rates by a quarter-percentage point in September. While this is down from yesterday's 71% probability, the odds of a 50 basis-point cut (0.50%) jumped to 38.5% from 29% one day ago.
Target pops after beat-and-raise quarter
In single-stock news, Target (TGT) shares surged 11.2% after the big box retailer beat top- and bottom-line expectations for its second quarter and raised its full-year profit forecast.
"Discretionary sales continue to improve, with apparel as the biggest standout this quarter," says CFRA Research analyst Arun Sundaram. "Operating margins hit 6.4%, an important milestone on TGT's journey back to 6% full-year operating margins, due to cost savings, mix, and improvements in shrink."
The analyst reiterated his Buy rating on the name, citing TGT's "earnings growth potential and relatively underwhelming valuation."
TJX jumps as consumers seek value
TJX Companies (TJX) stock was another post-earnings winner, gaining 6.1% after the parent company of TJ Maxx, HomeGoods, HomeSense and Sierra beat expectations for its fiscal second quarter and raised its full-year outlook.
"Discount retailers continue to benefit from budget-conscious consumers seeking bargains," says José Torres, senior economist at Interactive Brokers.
Ford shifts EV strategy
Looking outside of the earnings calendar, Ford Motor (F) stock rose 1.5% after the automaker announced that it would shift its electric vehicle (EV) strategy to boost profitability. The plans include canceling its three-row all-electric sports utility vehicle and delaying production of its electric truck to 2027 from 2025.
It's been a rough stretch for Ford stock, which is down about 11% for the year to date on a price basis. UBS Global Research analyst Joseph Spak attributes Ford's struggles to basic fundamental weakness.
"We believe the market still lacks faith in Ford's EV and software strategy, which compounds the higher cash balance and lack of higher cash returns issue as investors are concerned about the return they will see on that cash," Spak says. The analyst has a Neutral rating on F stock, which is the equivalent of a Hold.
Nike nabs longest daily win streak in 17 years
Elsewhere, Nike (NKE) rose 0.5% Wednesday, bringing its daily win streak to 17 – the longest stretch since February 2007. Helping boost the Dow Jones stock was news from earlier this month that Bill Ackman's Pershing Square Capital Management initiated a stake in the footwear and apparel retailer.
According to Brian Mulberry, client portfolio manager at Zacks Investment Management, not only did Ackman scoop up Nike at an attractive valuation, but the position gives the activist investor "a chance to make a positive impression on the future direction of the company."
As for the main indexes, the Dow Jones Industrial Average closed up 0.1% at 40,890, the S&P 500 added 0.4% to 5,620, and the Nasdaq Composite gained 0.6% to 17,918.
