US Stocks Jump as Weak Industrial Data Flames Hopes of Rate Hike Delay
New York (Sept 15) Stocks extended highs by mid-morning Tuesday after weak industrial and retail data flamed hopes the Federal Reserve would delay a rate hike until later this year.
The S&P500 was up 0.61%, the Dow Jones Industrial Average gained 0.76%, and the Nasdaq added 0.59%.
U.S. retail sales rose at a slower-than-expected pace in August, up 0.2% from a 0.7% jump in July. Consumers spent less on gasoline over the month and more on cars and trucks. Excluding auto sales and gasoline, sales rose 0.4%. Economists had expected the headline number to climb 0.3%.
"For the Fed, this will be seen as an encouraging sign that underlying growth momentum remains quite firm," said Millan Mulraine, deputy chief U.S. macro strategist at TD Securities. "Nevertheless, it will be some time before they get a full accounting on the impact on domestic economic activity from the global growth concerns and strong dollar."
Industrial production in the U.S. fell 0.4% in August, as economists had expected. The decline in industrial production was driven by reduced output from automakers. Auto production fell 6.4%, the fastest drop in three years. Industrial production in July was revised up to growth of 0.9% from a previous reading of 0.6%.
Business conditions in the New York region remained weak in September, according to the Empire State Manufacturing Survey. The index narrowed to negative 14.7 from negative 14.9 in August, clawing back from its lowest level since 2009.
U.S. business inventories rose just 0.1% in July, the smallest increase since March. Inventories in June were downwardly revised to 0.7% growth from a previous 0.8% reading. The July increase was as expected, though suggested businesses were dialing back on inventory which could have a negative knock-on effect on manufacturing.
Fed members will convene for a two-day meeting on Wednesday in which they could decide to hike rates for the first time in nearly a decade. On one side of the argument, economists said recent domestic economic strength warrants liftoff from crises-level rates. On the other, some argued that recent global market turmoil should give the Fed pause in tinkering with monetary policy.
Cheniere Energy (LNG - Get Report) shares were on watch after activist investor Carl Icahn increased his stake in the company to 9.59%, up from 8.18% in August. Icahn now owns more than 22 million shares in the company and believes the company is "undervalued" despite the fact it hasn't earned a profit in more than 20 years.
Twitter (TWTR - Get Report) may be without a permanent CEO for a little longer. A recent board meeting indicates an announcement may not be made until October or November, according to Re/code. Former CEO Dick Costolo stepped down on June 11 and co-founder Jack Dorsey has since temporarily assumed the position.
Alcoa (AA - Get Report) shares were slightly higher after Ford (F - Get Report) said it would start using advanced Alcoa aluminum alloy for parts of its F-150 pickup. The companies have also agreed to collaborate on using "Micromill" process aluminum in other Ford models.
Fiat Chrysler (FCAU) and the United Auto Workers union have yet to agree on a deal even after enduring all-night negotiations. Bargaining over the existing collective agreement, which has been extended on a temporary basis, will resume at midday.
Source: TheStreet
