US Stocks Hold Steady as Investors Await Inflation Report and Retail Earnings
US stocks were in a holding pattern on Tuesday after a pullback from all-time highs, with retail earnings on tap to occupy investors counting down to a crucial inflation report. The Dow Jones Industrial Average fell about 0.5%, while the S&P 500 slipped more than 0.1% in the wake of a retreat from record levels. The Nasdaq Composite gave up earlier gains to trade flat by the afternoon.
Investors are currently regrouping after the tumultuous run-up last week and as focus sharpens on the health of the US economy. Looming over investors is the PCE index report due Thursday, a key inflation input into the Federal Reserve’s rate-setting decisions.
Given the market’s preoccupation with the timing of a rate cut, the PCE print is seen as a potential catalyst for stocks to move in either direction. In the meantime, consumers appear less confident about the US economy.
Consumer Confidence Index Falls
The Conference Board’s Consumer Confidence Index for February came in at a reading of 106.7, down from a revised 110.9 in January. This decline interrupted a three-month rise and reflects persistent uncertainty about the US economy. The drop in confidence was broad-based, affecting all income groups except households earning less than $15,000 and those earning more than $125,000.
Economists had expected a reading of 115 for February, but the actual reading fell short of expectations. The Expectations Index, which measures consumers’ short-term outlook for income, business, and labor market conditions, also fell to 79.8 in February from a revised 81.5 in January. A reading below 80 in this category historically signals a recession in the coming year.
Retail Earnings Reports
Early morning earnings reports from major retailers provided insight into how the consumer is faring. Macy’s shares slipped as it revealed plans to shutter 150 stores in a turnaround bid and reported another quarter of sales. Lowe’s downbeat 2024 sales and profit outlook weighed on the home improvement chain’s stock.
Macy’s plans to close 150 “underproductive” stores, with 50 shutting down this year, in an effort to boost profit margins and cash flow. This move could potentially push the stock price higher. However, it also indicates the impact of the shift to digital shopping on legacy retailers like Macy’s.
The closures are likely to benefit discounters such as Walmart, Target, and TJX Companies in the long term. Macy’s exit from certain neighborhoods in the United States will send market share to competitors both in stores and online. Amazon is also expected to benefit from the closures, as it continues to put pressure on department store retailers.
Bitcoin Soars to Two-Year High
While US stocks remained mostly muted, the price of bitcoin soared to two-year highs, breaking above $57,000 per token. This surge was fueled by a big investment from MicroStrategy. Shares of bitcoin miners and crypto exchanges such as Coinbase also rose alongside the leading digital currency.
Bitcoin has gained nearly 35% so far in February, marking its largest one-month gain since January 2023. The recent approvals of spot bitcoin exchange-traded funds (ETFs) in the US have contributed to the positive momentum.
Hess and Chevron Merger Hits Roadblock
Shares of Hess and Chevron slumped on Tuesday after their planned merger hit a snag. Oil giant ExxonMobil and China National Offshore Oil Corporation (CNOOC) said they are considering pre-emption rights related to their project in Guyana, a key asset in Chevron’s planned acquisition of Hess.
ExxonMobil and CNOOC own stakes in the project, and their pre-emption rights could potentially delay or impede the merger. Chevron stated that it has been engaged in constructive discussions with ExxonMobil, CNOOC, and Hess and believes these discussions will not prevent the consummation of the merger.
The planned acquisition of Hess by Chevron, valued at $53 billion, would give Chevron 30% ownership of more than 11 billion barrels-equivalent of recoverable resources in Guyana. However, the potential roadblock has caused shares of Hess to slump more than 3% and Chevron to dip about 2%.
Conclusion
US stocks held steady on Tuesday as investors awaited the crucial inflation report and digested retail earnings reports. The market’s focus is currently on the health of the US economy and the timing of a potential rate cut. The Consumer Confidence Index fell in February, reflecting persistent uncertainty among consumers.
Meanwhile, bitcoin surged to two-year highs, driven by a big investment from MicroStrategy and recent approvals of spot bitcoin ETFs. The closure of 150 Macy’s stores indicates the impact of digital shopping on legacy retailers, benefiting competitors like Walmart, Target, and TJX Companies.
The planned merger between Hess and Chevron hit a roadblock as ExxonMobil
