Dow sheds nearly 200 points as fears of further Fed rate hikes roil stocks: Live updates

Bernstein isn’t expecting the resumption of student loan payments to make a big dent in consumer spending, with the low-income consumers impacted the least thanks to their lower levels of student debt and potential debt relief, the firm said in a note Wednesday.

Discretionary spending on things like apparel will be hit harder than others, said analyst Aneesha Sherman. In this environment, she likes off-price retailers. The sector is already set up amid modest guidance and improving macro circumstances for low-income shoppers, Sherman said.

“Adding in student loans, the core low-income shopper is protected by debt relief … while the middle-income shopper may trade into off-price to get more value for Back-to-school, Halloween, Black Friday and Christmas shopping occasions, so we think the impact will be negligible or possibly even positive,” she said.

— Michelle Fox

Further upside could be in sight for defense contractor AeroVironment amid a rise in demand, according to Baird. 

Analyst Peter Arment upgraded the stock to outperform in a Wednesday note.

Shares jumped more than 21% on the back of the company’s strong fiscal first quarter results. Late Tuesday, AeroVironment posted an earnings and revenue beat, as well as a surge in order activity. 

To read the full story, click here.

— Hakyung Kim

Argus analyst Kristina Ruggeri upgraded pet food and supplies e-retailer Chewy to buy from hold. She issued a $30 price target, implying shares could jump 22.9% from where they closed on Tuesday. 

Shares were little changed Wednesday, but the stock has lost more than 30% so far this year. 

“While Chewy may face weak economic conditions and substantial investment spending in the near-term, we expect its expansion into higher-margin products and services, where the company has been gaining market share, to help offset pressure on earnings,” Ruggeri said in a Wednesday note. “We believe that the recent pull-back in the shares presents a buying opportunity.”

Since its IPO in 2019, Ruggeri noted that Chewy’s revenue has nearly tripled to $10 billion and its gross margin has expanded by 800 basis points to 28%. The company is now expanding into high-margin businesses like pet medications, pet insurance and sponsored ads, she noted.

The firm has a positive view of Chewy’s focus on non-discretionary pet products and services, which make up over 80% of the company’s revenue. Argus also likes Chewy’s autoship delivery service, which comprises 75% of company revenue through its sales and “provides predictable income,” Ruggeri said.

— Pia Singh

Amgen has a promising growth outlook despite facing a “substantial patent cliff,” according to HSBC.

The firm initiated coverage on the drug treatment developer with a buy rating.

Amgen is set to lose exclusivity on patents for drugs that make up about three-quarters of the company’s sales. The analyst noted that this exposes Amgen to heavy patent losses in the medium term, but he thinks the company’s pipeline of new medications is “fuller than it has ever been.” 

To read more about the call, click here.

— Hakyung Kim

The U.S. economy saw “modest” growth in July and August, while price growth slowed and hiring was “subdued,” the Federal Reserve’s latest “Beige Book” report showed Wednesday.

In the latest installment of the central bank’s progress report on the national economy, businesses reported that consumers spent more on tourism and travel while other areas saw slowness in the summer months.

On employment, businesses said they still struggled to fill open positions, but expect that the trend of sharply higher wages will abate as the year progresses.

Regarding inflation, manufacturing and consumer goods showed a slowing, through “several” regions saw “sharp increases” in property insurance.

—Jeff Cox

Here are some of the names making moves during midday trading:

• Roku — The stock added 2.3% after Roku said it plans to lay off 10% of its staff, consolidate office space and trim other expenses. The streaming company also increased its third-quarter revenue guidance.
• NextGen Healthcare — Shares soared 14.6% after private equity firm Thoma Bravo said it would acquire the health-care software provider for $23.95 per share, 17% higher than where the stock closed Tuesday.
• AMC Entertainment — The stock tumbled 30.5% after AMC announced plans to sell up to 40 million new shares to raise cash. The news wasn’t unexpected after AMC converted preferred APE shares into AMC common stock last month.

— Michelle Fox

A turbulent macroeconomic environment might spell near-term challenges for Tesla, but the company’s long-term prospects continue to look rosy, according to Deutsche Bank. In a Wednesday note, analyst Emmanuel Rosner said he’s sticking with his buy rating and continues to remain bullish.

“In the very near term, we came away with the sense there could be downside risk to investors’ expectations for volume and margin in,” Rosner wrote, pointing towards limited positive costs offsets, inventory discounts, and upcoming summer production shutdowns in global factories.

But going forward, strong demand and margins for Tesla’s refreshed Model 3 could improve the company’s profitability. Rosner also cited the automaker’s upcoming Cybertruck release, which is part of its planned next-gen vehicle offerings, as an additional catalyst that could help the company grow its global market share.

Tesla shares have doubled year to date.

— Lisa Kailai Han

UBS upgraded shares of restaurant point-of-sales provider Toast to buy from neutral.

Analyst Rayna Kumar cited improved potential for quarterly net new location additions, in addition to margin expansion. 

“While the competitive environment remains intense and macro uncertainty looms, Toast continues to prove itself as a top provider, evidenced by the recent acceleration of location net Adds,” Kumar said.

Read more about the upgrade here.

— Hakyung Kim

Amid a losing day for the market, 23 stocks on the S&P 500 reached new 52-week lows.

Walgreens Boots Alliance, which is also a Dow Component, lost 0.8%, trading at its lowest level since March 2009.

Other notable losers in the broad market index include Paramount and Conagra Brands, which are both trading at lows not seen since April 2020.

Several major pharmaceutical names were also on the list. Pfizer, Bristol-Myers Squibb shed 2.3% and 1.6%, respectively.

Meanwhile, three stocks hit new 52-week highs. Semiconductor company Applied Materials touched its highest point since January 2022.

KLA Corporation shares also gained to its highest level back to KLA Instruments’ IPO in 1980.

Synopsys also rose 0.3%, help shares trade at an all-time high back to its IPO in February 1992.

— Hakyung Kim

The Japanese yen also strengthened ticked down slightly to 147.44 per U.S. dollar after ticking up 0.4% earlier on Wednesday.

— Brian Evans

Meme stocks once beloved by retail traders slid on Wednesday.

The Roundhill MEME ETF (MEME) shed about 1.7%, getting on track for a second straight day of losses.

Big decliners in the ETF include Snap, down 5.8%, and Tilray Brands, off 6.1%. Tesla was another notable loser in the fund, as was Peloton. Both stocks were off by about more than 3%.

— Darla Mercado, Gina Francolla

More increases may be ahead for the Federal Reserve depending on the data, but the central bank can take a more patient approach to policymaking, according to Boston Federal Reserve President Susan Collins.

“Overall, we are well positioned to proceed cautiously in this uncertain economic environment, recognizing the risks while remaining resolute and data-dependent, with the flexibility to adjust as conditions warrant,” she said in prepared remarks for a speech in Boston.

Despite some promising signs on the inflation front, she said “further tightening could be warranted.”

— Jeff Cox

Amer Sports, the maker of Wilson tennis rackets and Salomon ski boots, has filed confidentially for a U.S. initial public offering, according to Bloomberg News. The deal could value the company at as much as $10 billion, and Amer plans to list by early next year, according to the Wednesday report.

The IPO market has suffered a big lull over the past year as an aggressive Federal Reserve and recession fears diminished appetite. Now with interest rates stabilizing and the stock market rising double digits this year, demand for new issuance could be higher.

The filing for Amer Sports comes a day after chip design firm Arm is seeking a valuation as much as $52 billion in a blockbuster IPO on the Nasdaq stock exchange, setting a price range between $47 and $51. The Softbank-backed Arm’s listing is set to be the biggest technology IPO of the year, which could be a major test for sentiment after the doldrums.

— Yun Li, Tanaya Macheel

The Nasdaq Composite is leading the major indexes lower in early Wednesday trading, a sign that technology stocks are feeling pressure.

The tech-heavy index lost 0.9% in Wednesday’s session. Meanwhile, the Dow and S&P 500 slid 0.3% and 0.6%, respectively.

Overstock and Digital Brands were among the biggest laggards in the index, with both down more than 15%. Major tech stocks including Apple, Tesla, Microsoft, Netflix and Meta Platforms also all traded lower in the session.

— Alex Harring

The services sector of the U.S. economy expanded at a faster-than-expected pace in August, according to an Institute for Supply Management gauge released Wednesday.

The ISM Services index registered a 54.5% reading, representing the share of companies reporting growth during the period. That was up 1.8 percentage points from the July reading and better than the 52.5% forecast from the Dow Jones consensus.

Services have expanded eight straight months, contrasting to the manufacturing side, which has seen 10 consecutive months of contraction.

At an industry level, inventories rose 7.3 points and the employment index increased 4 points. Order backlogs slide 10.3 points, which was the only sub-index to show contraction.

—Jeff Cox

A final reading of the Purchasing Managers Index, a measure of health within the services sector, came in lower than expected in August.

August’s reading came in at 50.5, according to data released Wednesday. That’s below the consensus estimate of 51 from economists polled by Dow Jones. It also marks a decrease from the prior reading, which also came in at 51.

— Alex Harring

Southwest shares moved slightly lower after the airline narrowed its third-quarter revenue outlook and said it anticipates higher-than-expected fuel costs.

The company said it expects a 5% to 7% decline in unit revenue from last year in the current period. Southwest had previously forecasted that revenue could drop as little as 3% year over year.

Southwest also said that it anticipated fuel costs will average $2.70 to $2.80 a gallon this quarter, up from a previous estimate of a $2.55 to $2.65 increase.

— Leslie Josephs, Samantha Subin

Shares of AMC Entertainment fell more than 14% in premarket trading after the theater chain said in a filing that it plans to sell up to 40 million shares new shares to raise cash.

AMC was expected to issue additional shares after the successful conversion of the preferred APE shares into AMC common stock in August. The company originally issued those preferred shares as part of a strategy to get shareholder approval to sell additional common stock.

AMC said in the filing that it will sell the new shares through “at-the-market” offerings. Citigroup, Barclays, B. Riley Securities and Goldman Sachs are listed as sales agents.

— Jesse Pound

Here are Wednesday’s biggest premarket movers:

• Enbridge, Dominion Energy — Enbridge shares lost 7.2% premarket after Dominion, which is down 2.2%, said Tuesday it would sell its three natural gas distribution companies to the pipeline operator for $9.4 billion.
• Gitlab — Shares of the technology platform jumped 6% in premarket trading following a strong second-quarter report postmarket Tuesday. The company’s current-quarter revenue outlook beat analyst expectations.
• Toast — Shares of the restaurant tech stock added 4.1% after UBS upgraded shares to buy from neutral in a Wednesday note, citing improved potential for quarterly net new additions as well as margin expansion.

Read here for the full list of stocks on the move.

— Pia Singh

The U.S. trade deficit with its global partners rose less than expected in July, the Commerce Department reported Wednesday.

The goods and services shortfall totaled $65 billion for the month, up $1.3 billion from June’s downwardly revised total but less than the $68 billion Dow Jones estimate. On an annual basis, the trade deficit is down $128.3 billion, or 21.4% from the same period a year ago.

Imports jumped by $5.2 billion, outweighing the $3.9 billion increase in imports. Regarding U.S. trading partners, the shortfall with China was largest at $24 billion, an increase of $1.2 billion from June.

—Jeff Cox

The price of oil slipped on Wednesday, reversing some of Tuesday’s upward move that came on the heels of Saudi Arabia extending its production cuts.

Front-month futures for U.S. benchmark West Texas Intermediate crude fell 0.2% to $86.53 per barrel.

Brent crude futures fell 0.4% to $89.67 per barrel, breaking back below the $90 mark. The Brent futures price briefly traded above $91 per barrel on Tuesday.

— Jesse Pound

There’s limited upside potential ahead for Block as a softening consumer discretionary spending outlook will likely slow down gross profit growth for the Square and Cash App parent, according to UBS. 

Analyst Rayna Kumar downgraded shares to neutral from buy.

“With a lack of catalysts in sight, and re-acceleration of gross profit growth unlikely, we see limited upside potential,” Kumar said in a Wednesday note. According to the analyst, Cash App is seeing a slowdown in monthly active user growth and moderation in monetization rates.

The stock fell 2.7% Wednesday before the bell.

CNBC Pro subscribers can read the full story here.

— Hakyung Kim

Roku shares jumped more than 10% after the company announced plans to lay off 10% of its workforce as it looks to temper expenses.

Along with the layoffs, the streaming company said Wednesday it plans to consolidate office space and perform a strategic review of its content slate. These restructuring costs should range between $45 million and $65 million, Roku said.

The company also lifted guidance for the third quarter, saying it now expects revenue to range between $835 million and $875 million, ahead of its prior forecast of $815 million.

— Samantha Subin

Mortgage applications fell 2.9% last week to the lowest level since December 1996, according to the Mortgage Banker Association’s seasonally adjusted index.

Then average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances dipped to 7.21% from 7.31%. Applications to refinance a home loan fell 5% from the previous week and 30% from a year ago.

— Diana Olick, Samantha Subin

Tech giants Amazon, Apple, Alphabet, Meta and Microsoft were designated as “gatekeepers” under the European Commission’s new Digital Markets Act. The term refers to big internet platforms which the EU sees as restricting access to services such as search and messaging.

Shares of all five companies were down slightly in the premarket.

— Fred Imbert, Ryan Browne

Despite a late-summer rebound in AI as the summer unofficially came to a close, RBC warned of some problems facing the growth trade going forward.

“Growth valuations have only corrected slightly vs. Value and remain extremely elevated,” Lori Calvasina, head of U.S. strategy, wrote in a note dated Tuesday. “The weekly CFTC data for asset manager positioning in Nasdaq 100 futures has suggested that the Large Cap Growth trade has been over owned, and that positioning is starting to stall. Earnings sentiment (the rate of upward EPS revisions) continues to favor Growth relative to Value, but the gap has started to narrow suggesting that Growth is seeing its dominance on the earnings front fade.”

— Fred Imbert, Michael Bloom

Shares of Chinese property developer Evergrande jumped as much as 54.29% on Wednesday, leading gains on the Hang Seng Index.

The real estate sector was the top gainer on the HSI, but the overall index was still in negative territory, dragged by health-care and industrial stocks.

The move come after Country Garden, another real estate giant in China, paid $22.5 million in bond coupon payments and avoided a default.

Shares of Country Garden Holdings and Logan Group also surged, gaining 21.78% and 24.1% respectively, while the Hang Seng Mainland Property Index was up about 4%.

— Lim Hui Jie

Japan’s vice minister of finance for international affairs Masato Kanda warned that the country will not “rule out any options if speculative moves persist” against the yen, Reuters reported.

Kanda was speaking to reporters after the yen slid to a 10-month low against the dollar, breaking past 147 to reach as much as 147.78 on Wednesday.

“We won’t rule out any options if speculative moves persist,” Kanda said, according to Reuters’ report. “Needless to say, it’s important for currency moves to reflect fundamentals.”

— Lim Hui Jie, Reuters

Australia’s gross domestic product expanded 2.1% in the second quarter from a year ago, higher than the 1.8% expected by economists polled by Reuters.

However the figure was lower than the 2.3% year-on-year growth recorded in the first quarter.

On a quarter-on-quarter basis, GDP rose 0.4%, marking the seventh consecutive quarterly rise.

Australia’s statistics bureau said that exports and investment were the primary contributors to GDP growth this quarter, partly offset by changes in inventories.

— Lim Hui Jie

The Russell 2000 index of smallcap stoocks slid 2.1% Tuesday after the Labor Day break, its worst one-day decline April 25 (when it dropped 2.4%) and its second decline in three sessions. The Russell is more than 6% below its 52-week high, and is below its 50-day moving average.

The Dow Jones Transportation Average dropped 2.19% Tuesday, its worst day since April 26 (when it fell 3.56%), and also its second down day in three. The transports closed below their 50-DMA for the first time since June 5.

— Scott Schnipper, Christopher Hayes

These are some of the stocks making the biggest moves after the bell:

• Zscaler — The cloud security stock slipped 1% even after a better-than-expected report for its fiscal fourth quarter and strong current-quarter guidance.
• GitLab — The technology platform jumped 4% following a strong second-quarter report and current-quarter guidance.
• Gogo — The broadband stock advanced 3.5% after the company announced the approval of a share repurchase program of up to $50 million.

See the full list here.

— Alex Harring

Futures tied to the S&P 500 and Dow were little changed shortly after 6 p.m. ET. Meanwhile, Nasdaq 100 futures slipped 0.1%.

— Alex Harring