Wall Street opened lower Thursday as Walmart delivered a rare sales disappointment, Treasury yields moved back toward uncomfortable levels and another jump in oil prices reminded investors that the Iran confrontation is still capable of changing the inflation outlook almost overnight.
At the opening bell on Thursday, August 20, the Dow Jones Industrial Average fell 81.8 points to 53,381.22, the S&P 500 dropped 17.5 points to 7,690.49, and the Nasdaq Composite lost 119.6 points to 26,211.52.
The numbers themselves are not dramatic. The pressure underneath them is.
Long-term Treasury yields are climbing again after Wednesday’s extraordinary intervention by the Treasury Department, which announced it would at least double purchases of certain longer-dated government bonds. The move temporarily relieved a bond market that had been demanding increasingly high interest rates to finance Washington’s growing debt load, but Thursday morning the 10-year yield was again hovering near 4.7%.
Oil is adding to that pressure. Brent crude climbed to roughly $94 a barrel, while U.S. crude approached $87, after President Trump threatened a much tougher economic campaign against Iran. Higher oil prices matter far beyond energy stocks: they raise transportation and production costs and can make it harder for inflation to continue cooling.
Thursday’s economic data gave investors an unusual combination of low layoffs and very strong manufacturing activity.
New applications for unemployment benefits fell by 6,000 to 206,000 for the week ended August 15, below economists’ expectations of about 210,000. Continuing claims rose by 18,000 to 1.799 million. The message is that companies still are not laying workers off aggressively, even as hiring has softened.
At the same time, the Philadelphia Federal Reserve’s manufacturing index unexpectedly climbed to 47.4 in August from 41.4 in July, crushing expectations near 25 and reaching its strongest level in years. Employment inside the survey jumped sharply as well, while the prices-paid index dropped to 40.9 from 53.9.
The arithmetic for the Federal Reserve is complicated. A resilient labor market and stronger factory activity argue against rushing to lower rates, while easing price pressures argue that inflation may still be moving in the right direction. Investors already knew from Wednesday’s Fed minutes that a September rate increase has not completely disappeared from the discussion.
The biggest corporate story is Walmart.
Shares fell about 6% around the opening after Walmart’s U.S. comparable sales increased only 2.6%, versus expectations for roughly 3.8%. That was Walmart’s first comparable-sales miss in at least five years and a notable warning because the retailer has been one of the biggest beneficiaries of consumers trading down in search of lower prices.
Walmart itself is hardly collapsing. Quarterly revenue rose nearly 6% to $187.9 billion, U.S. e-commerce sales jumped 24%, its advertising business grew 43%, and the company actually raised its full-year sales forecast.
The concern is underneath those numbers: store traffic growth slowed and the average amount spent per transaction increased only 1.1%. Walmart also expects third-quarter adjusted earnings of 62 to 64 cents a share, below Wall Street expectations around 68 cents.
For investors trying to understand the consumer, that distinction matters. Americans are still shopping. They are simply becoming more selective about where the money goes.
Elsewhere, Alibaba’s U.S.-listed shares fell after adjusted profit missed expectations as the Chinese technology giant increased spending on artificial-intelligence infrastructure by 75%. Its cloud business is growing quickly — AI cloud and computing revenue jumped 45% — but investors are being reminded again that the global AI race requires enormous amounts of capital before those investments translate into profits.
Crypto is moving in the opposite direction. Bitcoin pushed above $70,000 after Trump urged Congress to pass the stalled Clarity Act following his White House meeting with cryptocurrency executives. Coinbase, Strategy, Circle, Robinhood and several crypto miners moved sharply higher.
Moderna, meanwhile, pulled back after Wednesday’s extraordinary 177% surge following successful late-stage results for its personalized mRNA melanoma treatment with Merck. The retreat is less a reversal of the medical news than investors recalibrating after one of the largest single-day moves ever for a major pharmaceutical company.
For the rest of Thursday, three markets deserve as much attention as the Dow itself: Treasury yields, crude oil and Walmart.
If the 10-year yield pushes materially above 4.7%, expensive technology and AI shares could again come under pressure. If oil continues climbing toward $90 in the U.S., the market will begin recalculating inflation expectations. And if Walmart’s decline spreads into other retailers, investors may start treating its sales miss as evidence of a broader consumer slowdown rather than a Walmart-specific quarter.
The Conference Board’s July Leading Economic Index is also scheduled for release at 10 a.m. ET and could provide another read on where the economy is headed.
JBizNews Desk | Wall Street
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