Markets Remain Resilient

U.S. equities continued their advance despite a jump in gasoline prices amid the impact of Hurricane Harvey, as well as a mixed bag of economic news and continued anxiety surrounding political and global monetary policy uncertainty. Treasury yields were little changed and the U.S. dollar was modestly lower, while crude oil prices and gold were solidly higher.

The Dow Jones Industrial Average (DJIA) advanced 60 points (0.3%) to 21,952, the S&P 500 Index gained 14 points (0.6%) to 2,472, and the Nasdaq Composite rallied 60 points (1.0%) to 6,429. In moderately heavy volume, 905 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq. WTI crude oil rose $1.27 to $47.23 per barrel and wholesale gasoline jumped $0.14 to $1.78 per gallon. Elsewhere, the Bloomberg gold spot price was $14.36 higher at $1,322.96 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—declined 0.2% to 92.69. 

Campbell Soup Co. (CPB $46) reported fiscal Q4 earnings-per-share (EPS) of $1.04, or $0.52 ex-items, versus the $0.55 FactSet estimate, as revenues declined 1.0% year-over-year (y/y) to $1.7 billion, roughly in line with expectations. The company noted that the packaged foods industry remains challenging. CPB issued full-year EPS guidance that came in below the Street’s forecasts. Shares were solidly lower. 

Dollar General Corp. (DG $73) posted Q2 EPS of $1.08, or $1.10 ex-items, compared to the estimated $1.09, with revenues growing 8.1% y/y to $5.8 billion, mostly matching expectations. Q2 same-store sales rose 2.6% y/y, versus the projected 1.6% increase. DG raised the low end of its full-year profit outlook and noted that it expects same-store sales growth will be toward the upper end of its previous guidance. However, shares were sharply lower as the company’s gross margin declined more than expected, due to higher markdowns and sales of lower margin products. 

Costco Wholesale Corp. (COST $157) announced August same-store sales grew 7.3% y/y, above the forecasted 6.1%. Excluding the impact of changes in gasoline prices and foreign exchange, same-store sales increased 5.9%. COST traded higher. 

Shares of Ciena Corp. (CIEN $22) came under heavy pressure as the network strategy and technology company issued Q4 revenue guidance that came in noticeably below estimates, which overshadowed its stronger-than-expected Q3 results. 

Personal income and spending data mixed 

Personal income (chart) was 0.4% higher month-over-month (m/m) in July, above the Bloomberg forecast of a 0.3% gain, and compared to June’s unrevised flat reading. Personal spending rose 0.3% last month, below expectations of a 0.4% gain, and versus June’s upwardly revised 0.2% gain. The July savings rate as a percentage of disposable income was 3.5%. The PCE Deflator expectedly moved 0.1% higher, after the prior month’s unrevised flat reading. Compared to last year, the deflator was 1.4% higher, matching estimates and June’s unrevised figure. Excluding food and energy, the PCE Core Index was 0.1% higher m/m, in line with expectations, and the index was 1.4% higher y/y, matching estimates. June’s y/y figure was unrevised at a 1.5% increase.

Weekly initial jobless claims (chart) rose by 1,000 to 236,000 last week, below forecasts of 238,000, with the prior week’s figure revised higher by 1,000 to 235,000. The four-week moving average declined by 1,250 to 236,750, while continuing claims fell 12,000 to 1,942,000, south of estimates of 1,951,000.

Pending home sales declined 0.8% m/m in July, versus projections of a 0.3% increase, and following June’s downwardly revised 1.3% gain. Compared to last year, sales were 0.5% lower. Pending home sales are used as a gauge of the pipeline of existing home sales, which unexpectedly fell in July. 

The Chicago Purchasing Managers Index (chart) continued to show solid expansion (above 50) for August, after remaining at July’s unrevised 58.9 level, versus expectations calling for a decrease to 58.5. 

Treasuries were little changed, as the yields on the 2-year and 10-year notes, along with the 30-year bond, were flat at 1.33%, 2.13% and 2.73%, respectively. Bond yields have been quiet though the U.S. Dollar Index has rebounded from recent pressure on eased concerns toward flared-up tensions toward North Korea, lingering global monetary policy and U.S. political uncertainties, and the impact of Hurricane Harvey.