Stocks came off early lows Wednesday, resisting declines on global markets over concerns over U.S.-China trade and rising violence Hong Kong. Federal Reserve Chairman Jerome Powell will defend the Fed's indpendence and current monetary stance in late morning testimony. JPMorgan (JPM) and Goldman Sachs (GS) traded sharply lower on the Dow Jones today.
XThe Nasdaq, S&P 500 and the Dow Jones industrials opened down about 0.4%. The Nasdaq narrowed its loss to 0.3%. The Dow and S&P 500 quickly pared back to to 0.2% declines. Specialty chemicals maker Dow (DOW) led the early declines on the Dow. JPMorgan and Goldman Sachs fell more than 1% each.
Chips were under early pressure, with Skyworks Solutions (SWKS) down 5% as analysts downgraded and cut price targets after a mixed third-quarter report late Tuesday. Israel's Tower Semiconductor (TSEM) toppled almost 8% as both third-quarter earnings and fourth-quarter guidance undercut expectations. Qorvo (QRVO) fell 2.6% on an analyst downgrade. The VanEck Vectors Semiconductor ETF (SMH) moved down 0.6% at the open.
Skyworks posted the largest early loss among S&P 500 and Nasdaq 100 stocks. Expedia (EXPE) topped both indexes with a 2% gain. Tesla (TSLA) more than 1%, moving it higher in a buy range above a 340.94 buy point.
Software IPOs gained some early attention. Educational software developer 2U Inc. (TWOU) reversed an early 6% and dived more than 3%, after third-quarter revenue rocketed 44% and losses were less than expected. Datadog (DDOG), a developer of cloud-monitoring tools, vaulted 18% higher as revenue soared 88% and losses decreased in its third quarter.
A number of China stocks posted early earnings-based moves. Luckin Coffee (LK) soared more than 12% as powerful third-quarter growth suggested the company could grow larger than Starbucks (SBUX) by the end of the year. YY (YY) climbed 4%. Huya (HUYA) shed a premarket gain and dropped a fraction.
Gear up for Wednesday's market action by reading IBD's Investing Action Plan.
Powell's View Of The Economy; Trump's Tariffs
Powell goes before Congress both Wednesday and Thursday. He is scheduled to testify before the the Joint Economic Committee at 11 a.m. ET, and is expected to release prepared testimony at 9:30 a.m. ET.
"We see the current stance of monetary policy as likely to remain appropriate as long as incoming information about the economy remains broadly consistent with our outlook," Powell will trell lawmakers, according to prepared testimony released early Wednesday.
"Sluggish growth abroad and trade developments have weighed on the economy and pose ongoing risks," Powell's statement said, and added "Congress has given us an important degree of independence so that we can effectively pursue our statutory goals based on facts and objective analysis."
President Donald Trump laid out his view of the economy and argued for a negative interest-rate Federal Reserve strategy on Tuesday. But Powell and the Fed in October said further cuts — after three consecutive rate cuts through September — would require more significant shifts in economic data. Fed strategy aims to lift inflation back to near the 2% level.
Any changes on either of those fronts, in its $60 billion of monthly bond purchases or in how Powell frames the Fed's view of the current economy, have the potential to move Wednesday's market.
Trump also said in his speech to the Economic Club Of New York on Tuesday the U.S. may or may not be amenable to reduced tariffs as part of a preliminary China trade deal. He floated the possibility of new, additional tariffs if China did not accede to U.S. demands.
October Consumer Prices Rise
The Labor Department's Consumer Price Index gained 0.4% in October. That was sharply above September's flat performance, outpacing economist forecasts for a 0.3% advance.
Minus food and energy, core prices rose 0.2% — in line with economist projections.
Dow Jones Today: Hovering Near High
The Dow Jones today sits on a three-day series of tight closes that inched the index forward no more than a fraction of a percent in each session. The Nasdaq and S&P 500 have sloshed back and forth, ticking off new highs in the process — and with the Nasdaq taking its first peek above the 8,500 level on Tuesday. The Dow on Tuesday closed less than 0.3% off its 27,774 record high, set on Thursday.
As it approaches mid-month, the Dow has a 2.4% gain for November. That is well ahead of October's pace, but lagging slightly the five-year November average. The Dow Jones industrials have averaged an 8.3% gain in November over the past five years.
The Nasdaq has a 2.3% gain since the start of the month, and needs to hustle to its 9.6% average for November. The S&P 500 has gained 1.8%, vs. a five year average for the full month of 7.1%.
For more detailed analysis of the current stock market and its status, study the Big Picture.
China Dives; Europe Narrows Losses
China stocks led markets across Asia lower on Wednesday, on Tuesday's trade comments from Trump and as five months of protests in Hong Kong turned increasingly violent. Concerns of intervention from central Chinese authorities in Beijing increased as demonstrators shut down public transit and clashed with police. Hong Kong authorities closed all schools for the first time due to the violence.
Hong Kong's Hang Seng Index tumbled 1.8%, its third dive in four days. The Shanghai Composite edged 0.3% lower. In Japan, Tokyo's Nikkei 225 skidded 0.9% lower, blunting its advance to retake its October 2018 high.
Stocks in Europe pared losses in afternoon trade, with Frankfurt's DAX down 0.6%. The FTSE 100 in London was down 0.4% and Paris' CAC-40 trimmed its decline to 0.2%.
Find Alan R. Elliott on Twitter @IBD_Aelliott
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