Stocks opened sharply lower Wednesday, despite some strong early economic data, as tariffs imposed on U.S. goods by Turkey triggered selling across global markets.
XOil, copper and other commodities came under early selling pressure. So did China-based stocks, with Tencent Holdings (TCEHY), Huya (HUYA) and iQiyi (IQ) heading the declines. Marijuana stock Canopy Growth (CGC) spiked as Constellation Brands (STZ) raised its stake in the company.
Macy's (M) dived after its earnings results. Chipotle Mexican Grill (CMG) jumped on an analyst upgrade. In the oil patch, Energen (EGN) jumped on a buyout bid from Diamondback Energy (FANG).
The Nasdaq Composite led the early declines, down 0.8% at the open as NetEase (NTES) and JD.com (JD) posted the widest losses among Nasdaq 100 stocks. The Dow and S&P 500 opened to 0.6% declines. Caterpillar (CAT) dragged on the Dow. Macy's, Constellation and copper miner Freeport McMoRan (FCX) fell hardest on the S&P 500 list.
Retail Sales, Q2 Productivity, Empire State Survey Jump
Retail sales surged 0.5% in July, the Commerce Department reported, vs. analyst forecasts for a 0.1% increase. Estimates for June sales were trimmed to 0.2%, from the original 0.5% tally. July sales minus autos and gas gained 0.6%. That was double June's showing and above economist projections for a 0.4% gain.
Non-farm productivity rose 2.9% in the second quarter , according to Labor Department estimates. That was a huge surge above the first quarter's 0.4% advance, and above the 2.5% analyst target. Inflation pressure eased somewhat, with unit labor costs decreasing 0.9% during the quarter. That was down from the first quarter's 2.5% rise, and bigger than the 0.2% pullback expected by economists.
The New York Federal Reserve's Empire State Manufacturing Survey jumped to 25.6 for August, up from July's reading of 22.6. New orders and shipments showed strong growth, while delivery times lengthened and inventories held steady. Price indexes pointed to ongoing cost increases. Companies indicated optimism, and were stepping up capital spending plans.
Oil, Copper Dive As Turkey Hoists Tariffs
Oil and metals futures sold off Wednesday, adding to the premarket undertow. Markets were wary of the deepening trade conflict between the U.S. and Turkey, and uncertain regarding demand from China. West Texas Intermediate crude oil dropped 1.1% to below $67 a barrel.
Copper fell 2.4% and platinum futures tumbled nearly 3%, while silver traded 2.2% lower. Copper prices are down almost 22% since early June, placing them in bear market status.
Turkey on Wednesday hoisted stiff tariffs against a schedule of U.S. products ranging from automobiles to coal. The move signaled both sides were digging in along another front in the White House's global trade war. Turkey's lira rebounded for a second day, aided by central bank support. The U.S. dollar climbed. Bonds also advanced, trimming the 10-year yield 3 basis points to 2.87%.
China's markets skewed lower, with the Shanghai Composite toppling 2.1% and Hong Kong's Hang Seng Index down 1.6%. In Japan, Tokyo's Nikkei 225 slipped a more moderate 0.7%, aided somewhat by declines in the yen.
Europe's markets deepened their early losses in afternoon trade. London's FTSE 100 was down 1.2%, the CAC-40 in Paris also showed a 1.2% loss and Frankfurt's DAX was off 1%.
Chipotle Climbs, Macy's Dives, Canopy Spikes
On the Dow, Caterpillar shed 1.6%, tracking a general pullback among mining-related stocks as metals prices remain in a slump. Caterpillar is down 23% since the first shots of the trade war were fired in January.
Cannabis manufacturer Canopy Growth swept 28% higher after beer and wine maker Constellation Brands added $4 billion to its stake in the company. Constellation shares dropped 6.5%. Canopy also reported its fiscal first quarter results late Tuesday.
Chipotle Mexican Grill climbed more than 4%. Morgan Stanley upgraded the stock to overweight, from equal weight. The note also raised the stock's price target to 600, from 413. The target was 22% above Tuesday's closing price. Chipotle shares have doubled since February, but have not paused to form a proper base.
Macy's sank more than 9% after its second-quarter results. A 23% earnings jump cleared analysts' targets. Management lifted full-year revenue and guidance, but a 1% revenue decline apparently topped views by too narrow a margin, spooking investors. Macy's stock broke out above a 41.04 buy point in a cup-with-handle base on Tuesday. Wednesday's action implies an open back below the buy point, but still above the stock's 10-week moving average.
Energen Surges On Diamondback Deal
Diamondback tumbled 9.8%, Energen spiked 4.3%, after Diamondback agreed late Tuesday agreed to pay $9.2 billion for the peer producer in the Permian Basin shale. Diamondback said the deal would produce $3 billion in annual cost savings, with $2 billion of that coming from reductions in general and administrative expenses. Diamondback's real estate unit Viper Energy Partners (VNOM), an IBD 50 stock, rose 1.4%.
Among China-based stocks, Tencent Holding crumbled 8.8% after reporting a profit decline and revenue growth below consensus expectations. Regulations hemmed in the release during the quarter of online games, Tencent's largest source of revenue.
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