The Dow Is Sliding, Kohl’s Is Cratering—and What Else Is Happening in the Stock Market Today
Chinese manufacturing in September has been damped by an energy crunch.
AFP via Getty Images
Stocks were ending a rough month of September with more declines, as heavy selling action set in to close out the third quarter. Earnings estimates have also been declining, as supply chain constraints persist.
By midafternoon, the Dow Jones Industrial Average
was down 450 points, or 1.3%, while the S&P 500 was falling 0.9%. The Nasdaq Composite was down 0.3%, reversing earlier gains.
The S&P 500 is on pace to end September down more than 4%, its worst monthly performance this year, even as it remains in positive territory for the third quarter of 2021. The month’s decline is worse than the average 0.8% decline in the last 20 Septembers, according to Instinet. Historically, when the index declines more than 2% in September, it sees a 0.4% decline in October, on average. The index is on pace to end the third quarter up about 1.5%.
The Dow, on pace to end the quarter down more than 1%, would see its largest quarterly point and percentage decline since the the first quarter of 2020. The index, comprised heavily of more economically sensitive stocks, has had a rough quarter, as markets worried that the spread of Covid-19, supply chain constraints and reduced Federal Reserve support, would put a dent into economic growth.
The harsh selling began hours after the opening bell, at which point stocks were in the green.
One major potential contributor: portfolio window dressing. That’s when portfolio managers sell out of the worst performing stocks for the quarter to paint a brighter picture of what clients are invested in. The Dow was the worst performer of the three major U.S. indexes for the third quarter and it’s also falling the most Thursday.
“It’s the last day of the quarter,” said Peter Boockvar, chief investment officer of Bleakley Advisory Group. “Sometimes, a portfolio manger, you may want to sell stocks that didn’t work that quarter.”
Economically-sensitive, or “cyclical” stocks on the S&P 500 have seen earnings estimates fall more often than rise in recent weeks, according to RBC Capital Markets. The group has seen a much higher rate of downward earnings estimate revisions than other groups within the index.
Supply chain constrains are hampering companies’ ability to meet demand and creating higher costs, which are pressuring profit margins.
With many companies still yet to report earnings for the third quarter, “It’s clear that company profit margins are going to be under pressure,” Boockvar said.
The technology-heavy Nasdaq was outperforming the other two major U.S. indexes in part because bond yields were pausing their recent surge for a second straight day. The 10-year Treasury yield wasn’t moving much Thursday even after weekly jobless claims were 362,000, higher than the expected 330,000 and worse than last week’s 351,000. The yield had surged to as high as 1.54% from a low last week of 1.31%, but is now yielding 1.52%.
Overseas, Hong Kong’s Hang Seng Index fell 0.4%. An energy crunch in China has hit industrial production, weighing on sentiment. China’s official manufacturing purchasing managers index fell more than expected to 49.6 in September, from 50.1 in August, amid underperformance from high-energy consuming industries. That is the lowest level since February 2020, when the Covid-19 pandemic most rocked Chinese industry.
The dollar remained near its highest level in a year, with the U.S. Dollar Index at 94.3.
Here are 8 stocks on the move Thursday:
CarMax (ticker: KMX) stock fell 11% after reporting a profit of $1.72 a share, missing estimates of $1.88 a share, on sales of $7.99 billion, above expectations for $6.91 billion.
McCormick & Company (MKC) stock fell 1.9% after reporting a profit of 80 cents a share, beating estimates of 72 cents a share, on sales of $1.55 billion, above expectations for $1.54 billion.
Snowflake (SNOW) stock rose 2.6% after getting upgraded to Buy from Neutral at BTIG Research.
Kohl’s (KSS) stock dropped 13% after getting downgraded to Underperform from Buy at Bank of America.
Starbucks (SBUX) stock fell 1.3% after getting downgraded to Neutral from Overweight at Atlantic Equities.
Perrigo (PRGO) was up 10% after the pharma group settled an Irish tax dispute Wednesday.
Virgin Galactic (SPCE) rocketed up 12%. The Federal Aviation Administration cleared the company after an investigation into a flight deviation during the trip that carried founder Richard Brandon into space this summer.
Gene-sequencing specialist Oxford Nanopore (ONT.U.K.) rose more than 45% in its London initial public offering valuing the biotech company at $4.6 billion.
Write to Jacob Sonenshine at [email protected]
