US stocks lost steam on Wednesday after markets hit all-time highs, with the three major gauges closing mixed as investors debated the health of the economy and the chances of another jumbo rate cut.
The Dow Jones Industrial Average (^DJI) reversed earlier gains to close down about 0.7%, while the S&P 500 (^GSPC) also slipped into negative territory, declining around 0.2% on the heels of record closes for both indexes. The tech-heavy Nasdaq Composite (^IXIC) finished the day just above the flat line.
The question now becomes whether or not the US economy could find itself in a recession, with concerns fanned by a surprisingly weak reading on consumer confidence. The debate centers on whether the Federal Reserve lowered rates by a bigger-than-usual 0.5% in response to a slowing economy and what further malaise means for another hoped-for deep cut.
On the data front, new home sales declined in August following a sharp increase the month prior as ultra-high mortgage rates and lofty prices kept buyers mostly on the sidelines.
Mortgage applications, however, jumped to the highest level since 2022, according to MBA data released before the bell. The growth was driven by homeowners seeking to refinance loans as rates drop.
But the spotlight is firmly on Thursday's second quarter GDP print and Friday's crucial reading on the PCE index — the inflation gauge favored by the Fed.
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Alexandra Canal
Micron surges after Q4 earnings beat
Micron stock (MU) surged around 10% in after-hours trading on Wednesday after the memory chipmaker reported earnings that surprised to the upside.
Earnings per share came in $0.06 ahead of estimates at $1.18 while adjusted gross margins also beat estimates at 36.5%.
Guidance came in strong, with the company forecasting Q1 revenue between $8.5 billion and $8.9 billion, higher than the estimated $8.32 billion. The Q1 adjusted earnings per share forecast was also ahead of expectations — a positive signal to investors that chip demand remains strong.
Alexandra Canal
Stock rally loses steam
The market rally hit the pause button on Wednesday as the Dow Jones Industrial Average (^DJI) and the benchmark S&P 500 (^GSPC) slipped back from all-time highs.
The Dow closed down about 0.7%, while the S&P 500 (^GSPC) fell around 0.2%. The tech-heavy Nasdaq Composite (^IXIC) finished the day just above the flat line.
Dani Romero
KB Home stock sinks on earnings miss — but rate cuts could boost buyer confidence
KB Home (KBH) stock slumped nearly 5% after the homebuilder reported earnings per share and net orders for the third quarter that fell short of analyst expectations the previous day.
The homebuilder posted adjusted earnings per share of $2.04 in Q3, lower than Wall Street’s estimates of $2.06 a share, per Bloomberg data. Net orders reached 3,085 during the period ending Aug. 31, which disappointed compared to the consensus estimate of 3,345 homes.
“Buyers were hesitant as interest rates remained elevated and concerns about a slowing economy increased, and demand began to soften in late June through July. In this environment, we took steps to adjust pricing as necessary to hold our pace,” Jeffrey Mezger, KB Home CEO, told investors and analysts during the third quarter earnings call.
But Mezger noted that "rates moderated in August and demand strengthened with our weekly net orders improving sequentially in each of the last three weeks of August ... With the Federal Reserve lowering interest rates by 50 basis points last week, we believe this will further benefit consumer confidence and affordability."
That could bode well for KB and other homebuilders.
Josh Schafer
Gambling stocks rise on Flutter's boosted forecast
Flutter stock (FLUT) soared as much as 8% to an all-time high as the company announced a $5 billion share repurchase program and projected the US online gambling market will grow by nearly 60% more than it forecast two years ago.
The company, which owns online gaming giant FanDuel, projects gambling in North America will be a $70 billion total addressable market when it reaches its mature state around 2030, $63 billion of which will come from the US. This is a noted move up from the mature market reach of $40 billion Flutter projected for the US at its investor day in 2022. Globally, Flutter estimates the total addressable market will reach $368 billion by 2030.
"We are the No. 1 business here in America with FanDuel, No. 1 in sports, and No. 1 in iGaming, and it gives us a lot of confidence around projecting the size of the market," Flutter CEO Peter Jackson told Yahoo Finance.
Alexandra Canal
Disney+ password sharing crackdown is here
Disney's (DIS) password-sharing crackdown has officially begun.
According to a blog post, Disney+ expanded its crackdown to the US and other regions this week "to give its users ways to enjoy their Disney+ subscription along with a family member or friend, through the management of devices within a household."
Disney defines a household as "a collection of devices associated with your primary personal residence that are used by the individuals who reside there."
For users who share an account with someone outside of their household, the account holder can add an “Extra Member” for $6.99 per month for Disney+ Basic (with ads) or $9.99 for Disney+ Premium (ad-free.)
Only one extra member is available per account. The company noted the add-on is not available for subscribers to the Disney bundle, which also includes ESPN+ and Hulu.
Warren Buffett further trims stake in Bank of America
Warren Buffett's Berkshire Hathaway (BRK-A, BRK-B) sold more of its holdings in Bank of America (BAC).
Yahoo Finance's David Hollerith reports:
Late Tuesday, Berkshire Hathaway said it further trimmed its stake in the country’s second-largest bank by 21.6 million shares, making approximately $862.7 million in profits from the sales.
Berkshire has sold BofA stock in 10 of the past 11 weeks starting in mid-July, unloading a total of 218.5 million shares and earning $8.9 billion on those sales.
Berkshire still holds a 10.5% stake in the country's largest bank and the price of Bank of America’s stock has fallen roughly just as much since Buffett began selling his firm's longest-held bank stock position.
BofA is still up 16% so far this year, trailing rivals Goldman Sachs (GS), JPMorgan Chase (JPM), and Citigroup (C). Its stock was down slightly Wednesday morning.
Utilities (XLU) led Wednesday's sector action, up about 0.7%. The sector, which encompasses one of the most defensive segments of the economy, has seen more of a boost in recent months amid the artificial intelligence boom. It's also been viewed as a hedge against a possible economic downturn.
Technology (XLK), Real Estate (XLRE), and Communication Services (XLC) followed to trade mostly in the green, while Energy (XLE) served as the day's biggest laggard, down about 1.6%.
Crude oil (CL=F) fell more than 2% on Wednesday to trade around $70 a barrel, reversing positive trends from the day prior, as investors bet on new China stimulus to boost demand. Brent (BZ=F), the international benchmark price, also fell Wednesday to hover north of $72.
The analyst said the forecast “could calm buy-side worry/uncertainty over sustainability of large cloud [capital expenditures] and AI investment spending well beyond 2025."
The AI darling's stock is also moving higher on reports that CEO Jensen Huang is done selling his shares in the company. Huang has sold more than $700 million worth of the company's stock over the past few months.
The country's currency, the renminbi (CNH=X), dropped 0.6% — the most since the Japanese yen imploded in early August.
In the US, stocks rose, but the biggest effect was felt in commodities. Silver futures (SI=F) skyrocketed over 4.5% to a decade-plus high. Copper futures (HG=F) — already on a nine-day tear — notched a 10th straight win as it surged to a two-month high.
The stimulus, China’s latest attempt to pull its economy out of a slump caused by a shaky property market and deflationary pressures, includes over $325 billion in measures, mostly via monetary — as opposed to fiscal — channels.
On Wednesday, Chinese shares extended their rally, with the Shanghai Composite (000888.SS) finishing up 1.2%. However, there remains growing skepticism about whether the steps will successfully turn around its economy.
New home sales declined in August following a sharp increase the month prior as ultra-high mortgage rates and lofty prices kept buyers mostly on the sidelines.
New single-family home sales slid 4.7% month-over-month to an annualized rate of 716,000, according to government data released Wednesday morning. Sales did fall less than expected, however, as economists had been anticipating a decline of 5.3%.
The median sales price decreased 4.6% to $420,600, marking the seventh straight month of year-over-year price declines. Mortgage rates are also declining as rates have fallen for eight consecutive weeks.
Mortgage applications jumped to the highest level since 2022, according to MBA data released before the bell. The growth was driven by homeowners seeking to refinance loans as rates drop.
Alexandra Canal
S&P 500, Dow open higher
The S&P 500 and Dow opened in positive territory on Wednesday after each hit an all-time high the day prior.
The benchmark S&P 500 (^GSPC) rose about 0.1%, while the Dow Jones Industrial Average (^DJI) inched up roughly 0.2%. The tech-heavy Nasdaq Composite (^IXIC) hugged the flat line.
