A softer-than-expected reading on the labor market just days ahead of the monthly jobs report weighed on equities for a second straight day. Rising rate-cut bets, tumbling Treasury yields and a yield curve that uninverted briefly added to the market's growing sense of unease.
"Investors remained on high alert as indicated by elevated volatility, a brief de-inversion across two-year and 10-year Treasurys, plunging oil prices, a strengthening yen and a weakening greenback," wrote José Torres, senior economist at Interactive Brokers.
Econ data disappoints
A day after some weak readings on manufacturing and construction activity spooked the bulls, a report on openings and quits likewise pointed to cooler economic conditions.
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The Job Openings and Labor Turnover Survey (JOLTS) showed that job openings declined by 237,000 in July from June to 7.67 million, or a 42-month low. July's figure was 1.1 million lower than the year-ago period, the U.S. Bureau of Labor Statistics said.
"This latest JOLTS Report revealed a haggard but healthy labor market in the last mile of the Fed's tightening cycle," wrote Noah Yosif, chief economist at the American Staffing Association. "The numbers suggest an accelerated pace of cooling within the labor market, which, if confirmed by Friday's Jobs Report, could persuade the Fed to enact a [half-point] cut to the federal funds rate that shortens the economy's current timeline for relief."
An economic calendar loaded with releases of increasing import until the next jobs report lands Friday appears to have heightened market participants' rate-recalibration anxiety amid a historically rocky period for equities.
"The softening of labor conditions has yield watchers dialing up the odds of a half-percentage point reduction at the next Fed meeting, which is only 14 days away," Interactive Brokers' Torres wrote. "However, this week's main event will be this Friday's nonfarm payrolls as Wall Street shifts its focus from inflation risk to growth fears."
As of September 4, interest rate traders assigned a 43% probability to the Federal Open Market Committee (FOMC) cutting the federal funds rate by a half-percentage point later this month, up from 38% a day ago, according to CME Group's FedWatch Tool.
In other econ news, U.S. factory orders rose by 5% in July after falling 3.3% in June, according to the U.S. Census Bureau.
At the closing bell, the blue-chip Dow Jones Industrial Average was up less than a tenth of a percent at 40,974, while the broader S&P 500 slipped 0.2% to 5,520. The tech-heavy Nasdaq Composite retreated 0.3% to 17,084.
Stocks on the move
Nvidia (NVDA) stock fell 1.7% after Bloomberg reported that the U.S. Department of Justice subpoenaed the chipmaker and other technology companies as part of an antitrust probe into its dominance in the artificial intelligence (AI) processor market.
The subpoenas were issued to Nvidia and other technology companies to gather information and determine whether the California-based semiconductor firm is making it difficult for customers to switch suppliers and penalizing those who do not use its chips exclusively, Bloomberg said, citing people familiar with the matter.
The subpoenas reportedly put the Department of Justice one step closer to launching a formal complaint.
Dick's Sporting Goods (DKS) declined 5.0% despite beating top- and bottom-line expectations for its second quarter and raising its full-year outlook.
The company now anticipates comparable-store sales growth in the range of 2.5% to 3.5% and earnings per share of $13.55 to $13.90 this fiscal year. Dick's added that it continues to anticipate revenue will arrive between $13.1 billion to $13.2 billion.
However, the midpoints of Dick's outlook failed to meet analysts' high expectations. Specifically, Wall Street was forecasting earnings of $13.79 per share on revenue of $13.24 billion.
Dollar Tree (DLTR) stock plunged 22.2% after the discount retailer missed top- and bottom-line expectations for its second quarter.
As a result of its weak performance in the first half and "a more conservative sales outlook at Dollar Tree for the balance of the year," the company cut its full-year outlook. It now anticipates revenue in the range of $30.6 billion to $30.9 billion, comparable-store sales growth in the low-single-digits and earnings per share to arrive between $5.20 to $5.60.
This compares with Dollar Tree's previous outlook of revenue in the range of $31 billion to $32 billion, comparable-store sales growth in the low-to-mid-single digits, and earnings per share of $6.50 to $7.00.
Verizon comes calling
Verizon Communications (VZ), the only telecom among all 30 Dow Jones stocks, saw its shares lose 3.5% to lead the average lower. At only $41.43 a share, VZ isn't the most important stock in the price-weighted average, but that's still a notable decline for a company with a market cap of $175 billion.
The proximate cause for the selloff would appear to be a report in The Wall Street Journal that VZ is in "advanced talks" to acquire Frontier Communications Parent (FYBR) in order to bolster its fiber optic network.
It's not unusual for an acquiring company's stock to drop on deal rumors or news, so this doesn't necessarily represent the market giving Verizon a thumbs down on the idea. FYBR, for its part, was up 38% on the report, but then it sported a market cap of just $7 billion as of yesterday's close.
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