18.08.2023: Wall Street affected by headwinds (S&P500, USD, CAD, Bitcoin)

August has the reputation of a dismal month for Wall Street. The benchmark stock indices have been printing lower lows, getting on investors’ nerves. This week is going to be the worst one in 2023. Sadly, there are no fundamentals to revive the risk-on mood in the New York pre-market.
The major stock indices were hit by another sell-off on Thursday. The S&P 500 slumped by 2.7% in the last three sessions, the sharpest fall in three days since mid-March. The Nasdaq plunged by 3.4% in three days, the steepest drop since February. The Dow Jones tumbled by 290 points yesterday. The Nasdaq lost 1.07%. The S&P 500 declined by 33 points or 0.77% to close at 4,370.
The benchmark indices traded on a pessimistic note in the New York pre-market. Futures on the stock indices shed from 0.5 to 0.8%. The S&P is expected to trade in the intraday corridor between 4,280 and 4,370.
All three indices closed in the red yesterday after a turbulent session. Losses in healthcare stocks outweighed the growth of Cisco shares and energy stocks.
Pressing hard on the S&P 500, CVS Health shares sank by 8% on news that Blue Shield of California plans to reduce its reliance on the company as a pharmacy benefits manager and work with others, including Amazon.com.
Shares of major health insurers UnitedHealth and Cigna tumbled by 1.9% and 6.4% respectively, pushing the broad S&P 500 healthcare index down 0.8%.
Higher oil prices pushed Exxon Mobil and Chevron stocks up 1.9% and 1.7% respectively as commodities were propped up by hopes that China’s central bank is looking to support the housing market and the broader economy.
Rising Treasury yields are still putting pressure on stocks. 10-year Treasury yields hit their highest level since October as a series of strong economic data this week fuels fears that the Fed may hold interest rates at current levels longer.
The Labor Department report showed a decline in jobless claims last week, indicating that the labor market remains tight.
The weakness in the stock market in recent days is linked to robust economic growth in the US, suggesting that the Fed is likely to keep rates high for longer.
Holding back losses in the major indices, Cisco Systems added 3.3% after the network equipment maker beat estimates in the fourth quarter and its CEO spoke about the possibilities of artificial intelligence.
Pfizer shares rose by 2.9% as the company said its updated vaccine has been successfully tested in mice. Shares of vaccine makers Moderna and Novavax also went up as US data showed pandemic-related hospitalizations rose more than 40% from recent lows hit in June.
Biggest retailer Walmart raised its guidance for the full year after outperforming sales estimates in the second quarter, but its shares fell by 2.2%.
Futures for US stock indices continued their decline on Friday no less rapidly. A batch of strong economic data, including a decline in weekly jobless claims, forced investors to abandon expectations of rate cuts and boosted government bond yields.
The revision of the forecast of long-term interest rates has troubled financial markets as they try to figure out the reasons. Ten-year US Treasury yields this week topped 4.3% for the first time since October, within a 15-year high, pushing the inflation-adjusted real equivalent closer to 2% for the first time since the 2009 global banking crash.
30-year Treasury yield hit its highest level in 12 years.
Moreover, the exceptional performance of the US economy, even after the Fed raised interest rates by more than five percentage points, has led markets to wonder if the post-pandemic restructuring of the economy is leading to a return to long-term stable interest rates.
This week, the upbeat data on retail sales, industrial production, and housing starts in July forced analysts to raise their forecasts for US gross domestic product.