Fed Vice Chairman Stanley Fischer announces plans to resign from central bank
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U.S. stock benchmarks traded tentatively higher Wednesday as Wall Street attempted to power beyond a barrage of headwinds. Those include lingering concerns over North Korea, a "potentially catastrophic" Hurricane Irma, doubts about President Donald Trump's business-friendly agenda, news that a key Federal Reserve official is resigning, and persistent worries about elevated stock valuations.
A reading on services activity, meanwhile, came in better than expected, providing an added lift to the outlook for the health of the U.S. economy. ISM services were at 55.3 in August, compared with 53.9 in the prior period. A reading of at least 50 indicates expansion.
Meanwhile, Federal Reserve Vice Chairman Stanley Fischer said Wednesday that he plans to resign (http://www.marketwatch.com/story/fed-vice-chairman-fischer-announces-resignation-citing-personal-reasons-2017-09-06) from his post in mid-October. His term was set to end in June. In a letter to President Donald Trump, Fischer, 73, said he was leaving for personal reasons.
The Dow Jones Industrial Average rose 56 points, or 0.3%, at 21,808, led by gains in Exxon Mobil Corp. (XOM), up 1.9%, while the S&P 500 index climbed 5 points, or 0.2%, at 2,463, powered by a rebound in energy sector, up 1.5%, and real estate, 0.4% higher.
Meanwhile, the technology-laden Nasdaq Composite Index lost early gains and traded flat at 6,371.
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The market's reaction to news that Fischer was set to resign as early as next month has been muted so far.
John Manley chief equity strategist at Wells Fargo Funds Management said that one or two people leaving the Fed shouldn't make a substantive difference in the central bank's game plan.
"One person in and of themselves, or herself, won't make a difference. Checks and balances [in the Fed] are intended to slow things down," Manley said. "I see the Fed moving slowly and you are looking at nuances rather than massive changes in direction," he said.
Still, Fischer's expected departure raises the question of whether Chairwoman Yellen continues on as the Fed's chief and how the central bank will proceed with monetary policy as sluggish inflation has befuddled policy makers so far.
Wednesday's slight gains come after the market experienced its most severe selling since Aug. 17, with investors focused on heightened geopolitical tensions after North Korea said it had successfully tested its biggest-ever nuclear bomb (http://www.marketwatch.com/story/north-korea-hails-perfect-success-of-latest-nuclear-test-triggering-magnitude-63-earthquake-2017-09-03). The S&P 500 index snapped a six-day winning run (http://www.marketwatch.com/story/wall-street-stocks-set-for-downbeat-open-as-north-korea-standoff-intensifies-2017-09-05), closing 0.8% lower, while the Dow average finished down 1.1% and the Nasdaq Composite Index dropped 0.9%.
Randy Frederick, managing director of trading and derivatives at Schwab Center for Financial Research, pointed to a rebound in U.S. traded crude-oil prices near $50 a barrel as a bullish sign for the overall market in the wake of Hurricane Harvey which pummeled the Gulf Coast region at the end of August with floodwaters and destructive winds.
"Today's bounce is encouraging but it is not as robust as you might expect given how far we were down yesterday," Frederick said.
Signs of lingering jitters in the market on Wednesday, however, were being expressed in ultralow yields in the benchmark 10-year Treasury note at around 2.06% in most recent trade, marking the lowest yield since November (http://www.marketwatch.com/story/treasury-yields-mostly-flat-ahead-of-ism-services-gauge-2017-09-06). Bond prices move inversely to yields.
"The bond market is telling us that it doesn't expect another rate hike this year," Frederick noted. Federal-funds futures are showing that the market is pricing in a 36.2% probability of a rate hike by December, according to CME Group data (http://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html).
North Korea is feared to be preparing to launch a new intercontinental ballistic missile as soon as Sept. 9, when the isolated country celebrates its founding day.
Hand-wringing about lofty stock valuations, with the benchmarks not far from record levels despite Tuesday's slide, combined with seasonal volatility in August and September are expected to contribute to choppy trade ahead, market participants said.
Adding to the downbeat tone was Hurricane Irma, which was barreling toward U.S. territory (http://www.marketwatch.com/story/potentially-catastrophic-hurricane-irma-makes-landfall-in-the-caribbean-2017-09-06) in the Caribbean and potentially Florida, where a state of emergency has been declared (http://www.marketwatch.com/story/florida-declares-state-of-emergency-as-hurricane-irma-heads-for-region-2017-09-05). Irma was Tuesday upgraded to a Category 5 storm as it gathered strength in the Atlantic Ocean. On Wednesday morning, it made landfall in the Caribbean, with the eye passing over Barbuda.
Cruise operators have been forced to cancel or reroute sailings (http://www.marketwatch.com/story/irma-forces-cruise-operators-to-cancel-sailings-2017-09-06) as Irma heads toward popular Caribbean destinations. Norwegian Cruise Line Holdings Ltd.(NCLH) has canceled trips, while Carnival Corp.(CCL) has revised the itineraries of four ships. Royal Caribbean Cruises Ltd.(RCL) is evaluating five sailings.
Read:One way Irma could affect the U. S.--even if it misses Florida (http://www.marketwatch.com/story/one-way-hurricane-irma-could-affect-the-us-even-if-it-misses-florida-2017-09-05)
Another tropical storm, Jose, is gathering strength in the Atlantic and may shape up as another major storm. The weather threats come after Hurricane Harvey caused devastating flooding in Texas, forcing the temporary closure of oil refineries.
Economic news: On the economic front, the trade deficit rose slightly in July, keeping the U.S. on track to post a larger gap in 2017 than in 2016. The deficit edged up to $43.7 billion in July from $43.5 billion in June.
The Institute for Supply Management said its nonmanufacturing index rose to 55.3 (https://www.instituteforsupplymanagement.org/ISMReport/NonMfgROB.cfm?SSO=1) last month from 53.9 in July, which was the lowest reading in the past year. A similar ISM survey of manufacturing firms also showed the fastest growth in six years (http://www.marketwatch.com/story/ism-manufacturing-index-jumps-to-six-year-high-in-august-2017-09-01). Last month, 15 of the 17 service sectors tracked by the ISM grew.
See: MarketWatch's economic calendar (http://www.marketwatch.com/economy-politics/calendars/economic)
Stock movers: U.S.-listed shares of Trivago NV(TRVG) plunged 21% after the German hotel search platform cut its guidance (http://www.marketwatch.com/story/german-hotel-search-site-trivago-issues-profit-warning-shares-tumble-18-premarket-2017-09-06), saying earnings for the third quarter and full year would be lower than previously expected.
Shares of Dave & Buster's Entertainment(PLAY) slumped 9% after its second-quarter results disappointed Wall Street expectations and trimmed its fiscal full-year outlook late-Tuesday (http://www.marketwatch.com/story/dave-busters-shares-fall-after-second-quarter-sales-miss-2017-09-05).
Voyager Therapeutics Inc.(VYGR) soared 17.5% after the drugmaker announced positive trial results for a treatment for advanced Parkinson's disease.
JinkoSolar Holding Co. (JKS) lost 3% after earnings missed views, while Navistar International Corp. (NAV) gained 4% after swinging to a profit (http://www.marketwatch.com/story/navistar-swings-to-profit-that-beats-expectations-2017-09-06).
Shares of Hewlett Packard Enterprise Co.(HPE) slipped less than 1%. The company late Tuesday reported earnings that beat forecasts (http://www.marketwatch.com/story/hewlett-packard-enterprise-beats-on-earnings-after-spin-off-shares-gain-2017-09-05) after the spinoff of some software assets.
Other markets:Asian stocks (http://www.marketwatch.com/story/nikkei-hits-4-month-low-as-asian-markets-continue-selloff-2017-09-05) closed mainly lower, while European stocks continued lower (http://www.marketwatch.com/story/european-stocks-head-for-3rd-straight-loss-as-irma-weighs-on-insurers-2017-09-06) for a third straight day.
Oil prices (http://www.marketwatch.com/story/crude-oil-rises-to-4-week-high-as-hurricane-irma-makes-landfall-2017-09-06) rose, while gold prices were flat. The dollar was 0.3% lower against other major currencies, with the ICE Dollar Index at 92.009.
(END) Dow Jones Newswires
September 06, 2017 12:02 ET (16:02 GMT)