U.S. equities ended lower on Thursday as traders grew increasingly worried about the approach of Hurricane Harvey to the Texas coast, the implications of the now approved Amazon.com, Inc. (NASDAQ:AMZN) purchase of Whole Foods Market, Inc. (NASDAQ:WFM), and the increasingly strained relationship between President Donald Trump and Congressional Republicans heading into the debt ceiling deadline.
In the end, the Dow Jones Industrial Average lost 0.1%, the S&P 500 lost 0.2%, the Nasdaq Composite lost 0.1% and the Russell 2000 broke with recent trends to gain 0.3%. Treasury bonds were weaker, the dollar was stronger, gold lost 0.2% and crude oil fell 2% on worries Harvey would damage refinery facilities in Texas, thus worsening the oversupply situation.
Click to EnlargeBreadth was mixed and volume light, with New York Stock Exchange activity at 88.5% of the 30-day average. Healthcare led the way with a 0.3% gain while consumer staples were the laggards, down 1.3%, as grocers and retailers took a hit after AMZN announced price cuts at WFM starting on Monday.
Regulatory approval of the deal came yesterday, so Amazon is wasting little time. Kroger Co (NYSE:KR) fell 8.1%, Costco Wholesale Corporation (NASDAQ:COST) fell 5%, and Target Corporation (NYSE:TGT) fell 4%.
In other bad news, J M Smucker Co (NYSE:SJM) fell 9.5% after missing quarterly earnings estimates by around 7% on weaker revenues and margins as its Folgers coffee business struggled.
On the upside, Abercrombie & Fitch Co. (NYSE:ANF) gained 17.1% after reporting a second-quarter earnings beat with revenues 3% ahead of estimates.
Conclusion
The same themes are recurring: Horrible market breadth, widening selling pressure and growing concern about the path of fiscal and monetary policy. All eyes are on Federal Reserve Board Chair Janet Yellen’s speech regarding financial stability at the Jackson Hole symposium on Friday.
The most recent Fed meeting minutes — from the July powwow — suggests growing frustration with an easing of financial conditions over the past three years, despite steady short-term rate hikes. So despite soft inflation readings, watch for Yellen to talk up the financial stability angle rather than softer inflation. At least that’s what Deutsche Bank strategists are looking for.
UBS believes it will be a snooze fest, however, as policymakers have essentially already teed up the start of “quantitative tightening” at their September meeting.
However, the symposium may very well take a backseat to Hurricane Harvey, which already has driven U.S. gasoline prices 10% higher since Wednesday. Asian energy stocks enjoyed a lift ahead of Friday’s U.S. market open.
The hurricane has been upgraded to Category 2 and could deliver “life-threatening” amounts of rain, possibly as much as 35 inches. Some forecasters say this could be the largest storm to make landfall in the U.S. in over a decade. As a result, some Gulf of Mexico crude and natural gas output has already been halted.
Whether reality matches early forecast worries could have a significant effect on the market past just energy prices. I normally don’t participate in storm-watching, but this time around, I think it’s prudent to keep our eyes peeled.
Check out Serge Berger’s Trade of the Day for Aug. 25.
Today’s Trading Landscape
To see a list of the companies reporting earnings today, click here.
For a list of this week’s economic reports due out, click here.
Anthony Mirhaydari is the founder of the Edge (ETFs) and Edge Pro (Options) investment advisory newsletters. Free two- and four-week trial offers have been extended to InvestorPlace readers. Tell us what you think about this article! Drop us an email at editor@investorplace.com, chat with us on Twitter at @InvestorPlace or comment on the post on Facebook. Read more about our comments policy here.
