Church & Dwight Co Share News (CHD.US)

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U.S. STOCKS END SLIGHTLY LOWER AFTER VOLATILE SESSION (1600 EDT/2000 GMT)

The main U.S. indexes ended lower on Monday in choppy trading as investors weighed the risk that the economy is in a downturn and after stocks posted the biggest monthly gain in two years in July.

Data on Monday showed that U.S. manufacturing activity slowed in July, though it was less than expected and there were signs that supply constraints are easing, with a measure of prices paid for inputs by factories falling to a two-year low, suggesting inflation has probably peaked.

It came after surveys showed factories across Asia and Europe struggled for momentum in July as flagging global demand and China's strict COVID-19 curbs slowed production.

The S&P 500 was the worst performing index, dropping 0.28%, followed by the Nasdaq Composite, down 0.18%, after a volatile day that saw most indexes oscillate between gains and losses.

Consumer staples was the best performing sector, ending up 1.21%, with consumer discretionary, industrials and utilities also ending higher. Energy was the worst performer, falling 2.17%, followed by financials and real estate.

Here is Monday's closing market snapshot:

(Karen Brettell)

INVESTORS SWIM CONFUSING CROSS-CURRENTS (1330 EDT/1730 GMT)

Financial markets have shifted from worrying about higher inflation and interest rates to fearing recession.

In his latest "Deliberations," Bob Doll, chief investment officer at Crossmark Global Investments, says that the recent pullback in government bond yields and inversion of the U.S. 2/10 yield curve, combined with weaker economic data and the equity-market collapse in the first half of this year, have led investors to dive into positioning for the next recession.

While not likely in the coming months, Doll anticipates that ultimately "another wave or two of higher bond yields will occur before the cycle ends."

For the near-term, however, Treasuries are "likely to stay well bid" until skies clear on economic softness and uncertainty. Although, Crossmark remains cyclically bearish on bonds, they believe that the current pause in the government bond yield uptrend, is likely to persist until recession fears recede.

As for equity markets, Doll believes they are trying to bottom, but a durable and sustained rally likely will require less hawkish rhetoric from central banks and an easing in recession fears.

"Such conditions should develop in the coming months. An easing in inflation pressures is needed to boost current depressed economic sentiment and, thus, help to sustain a better equity market backdrop."

(Terence Gabriel)

ASSETS HAVE BEST MONTH SINCE 2020, BUT STILL DOWN ON YEAR (1230 EDT/1630 GMT)

Most assets posted gains in July, with Deutsche Bank noting that 29 of the 38 non-currency assets that it tracks were up during the month, the highest percentage since November 2020.

That said, only five assets in its sample are currently up year-to-date.

Markets were boosted by hopes that the Federal Reserve will pare back its hawkishness as it hikes rates in a bid to stem inflation that is rising at its fastest pace in four decades.

"Concerns about growth slowing and some signs that inflation might be peaking meant that investors began to price in a less aggressive pace of monetary tightening from the Fed over the coming months," Deutsche Bank analysts Karthik Nagalingam and Jim Reid said in a report.

The Nasdaq Composite index posted the best return in the month, gaining 12.4%, followed by the S&P 500 and Stoxx 600, which rose 9.2% and 7.8%, respectively, Deutsche Bank said.

Bonds also gained in the month, with U.S. high-yield credit posting its best month since July 2009, with a gain of 6.8%. European investment grade, European high-yield and U.S. investment grade, excluding financials, also rose by 5.0%, 5.1% and 3.5%, respectively.

Chinese equities bucked the bullish trend in July, posting losses as Shanghai dealt with flareups of COVID-19 and as China fined tech companies, including Alibaba (9988.HK) and Tencent (0700.HK), for failing to comply with anti-monopoly rules on the disclosure of transactions.

The Hang Seng fell 7.3% during the month, while the Shanghai Composite dropped 3.1%.

Oil also dipped during July, with WTI down 6.8% while Brent fell 4.2%. Other commodities also struggled, with copper falling 3.8% and gold down 2.3%.

(Karen Brettell)

EARTH TO POWELL: PMI, CONSTRUCTION SPENDING (1150 EDT/1550 GMT)

Data released on the first day of August painted a picture of economic slowdown and weakening demand, and also suggested that decades-hot inflation is on the verge of returning from orbit, raising hopes that the Federal Reserve could soften its hawkish attitude after Labor Day.

The bad news is that U.S. factory activity decelerated last month to its most sluggish rate of expansion in two years.

The good news is it's still expanding.

The Institute for Supply Management's (ISM) purchasing managers' index (PMI) shed 0.2 points in July to 52.8, the lowest it's been since August 2020.

ISM PMI has now logged 26 consecutive months above 50, a level which signifies monthly expansion.

The crucial 'new orders' component descended further into contraction territory and 'employment' hovered just a hair below the dividing line.

But the most upbeat element of the report by far, was 18.5-point plunge in the 'prices paid' element, which dropped from 78.5 to an even 60, also its lowest level since August 2020.

Falling input prices should convince goods makers to stop passing price increases along to the consumer, which in turn could convince Powell & Co to relent on its aggressive interest rate hikes.

"The U.S. manufacturing sector continues expanding — though slightly less so in July — as new order rates continue to contract, supplier deliveries improve and prices soften to acceptable levels," says Timothy Fiore, chair of ISM's Manufacturing Business Survey's Committee. "Panelists are now expressing concern about a softening in the economy, as new order rates contracted for the second month amid developing anxiety about excess inventory in the supply chain."

Whispers and murmurs about the looming specter of recession were common among survey participants' remarks:

Comments such as "I believe a slowdown is coming," "all markets ... face headwinds that will eventually take a toll," and "there have been signs of a slowdown beginning in the fourth quarter" were peppered throughout.

The report follows a swath of data from Europe and Asia that showed factory activity decelerating or contracting in the face of dampened global demand and persistent inflation.

Below is a breakdown of ISM PMI and its major components:

S&P Global (née Markit) also had its say with its final manufacturing PMI for July, which came in at 52.2, just a hair lower than initially reported in its advance "flash" take released a few weeks ago.

The dueling indexes differ in the weight they allot to their components (new orders, employment, etc.).

"With the exception of pandemic lockdown periods, July saw US manufacturers report the toughest business conditions since 2009," writes Chris Williamson, chief business economist at S&P Global. "The rising cost of living is the most commonly cited cause of lower sales, as well as the worsening economic outlook."

The graphic below shows the extent to which the two PMIs agree (or differ):

Finally, expenditures on U.S. construction projects unexpectedly dropped by 1.1% in June, defying expectations for a modest 0.1% increase.

The report from the Commerce Department showed total private construction spending dropping 1.3%, with a 1.6% decrease in expenditures on residential projects hitting hardest.

Residential projects, which have been tentpole for headline construction spending throughout the pandemic-driven housing boom, have now become a liability as commodities prices and rising mortgage rates continue to stifle demand.

"A rebound in residential construction spending is unlikely any time soon, given the loss of momentum in housing construction, which effects construction with a lag," says Nancy Vanden Houten, lead U.S. economist at Oxford Economics. "Private nonresidential spending also likely to remain depressed given the slowing economy, which is likely to continue to weigh on business investment."

Wall Street wavered for a bit before deciding to accentuate the positive.

All three major U.S. stock indexes were modestly green, with the tech-laden Nasdaq taking the lead.

(Stephen Culp)

AN ELECTRIC TOOTHBRUSH IN THIS ECONOMY?! (1122 EDT/1522 GMT)

Some of the world's biggest names in consumer goods are finally starting to feel the heat of inflation.

In a flurry of Friday earnings calls, executives from Procter & Gamble, Newell Brands and Church & Dwight all had one thing in common to say: customers are starting to buy cheaper.

The comments dulled Wall Street's outlook on consumer staples stocks, a traditional safe haven during recessionary times, with shares of Dow component P&G falling over 6% on Friday.

To be sure, consumers trading down is limited to only some product categories for now and isn't the end of the world for companies that compete at multiple price-points.

But sales of cheaper alternatives aren't as lucrative in terms of profit margins - a sore spot for most companies in recent months as transportation and raw material costs continue to rise.

So where are shoppers buying cheaper? Depends on who you ask.

Church & Dwight said sales of its battery-operated toothbrushes and electric water flossers are down because people are going back to buying old-fashioned "manual toothbrushes."

Sharpie maker Newell Brands said people are looking to buy cheaper car seats for their kids, while P&G is seeing store-brand versions of toilet paper gaining traction over the category's more premium options.

P&G, which makes everything from Tide detergent to Charmin toilet paper and is considered a bellwether for consumer products, also suggested that retailers are starting to show some reluctance to accepting more price increases.

"Consumers maybe scrimp for a period of time, use up inventory, and that's what we're seeing," P&G Chief Financial Officer Andre Schulten warned in a call with media.

Toothpaste giant Colgate-Palmolive said it hasn't seen any trade down yet, but expects to do so in the coming months.

The increasingly downbeat company outlooks come as the U.S. economy braces for a recession. The U.S. GDP report last week showed inflation-adjusted consumer spending increased at its slowest pace in two years amid declines in purchases of goods, particularly food, because of higher prices.

"Recession or not, consumer behavior is shifting," Jefferies analysts wrote, highlighting the heightened risk health & personal care companies are facing from people trading-down and a more limited ability to raise prices to cover cost increases.

The brokerage cut its price targets on P&G, Newell and Church & Dwight over the weekend.

(Uday Sampath)

UPSHOTS FROM THIS EARNINGS SUMMER (1042 EDT/1442 GMT)

With the bulk of earnings season behind us, Goldman Sachs strategists analyze key macro takeaways from second quarter reports across three dimensions: growth, the labor market, and inflation.

Growth: Even after two negative quarters of GDP growth and a collapse in the CEO confidence survey, Corporate America is consistent with continued revenue growth in Q3, and full-year capex expectations have actually edged slightly higher since the start of earnings season, Goldman economists said in a note.

Labor market: Companies commentary overall indicates easing labor shortages and tentative signs of peaking wage growth. Across the 88 Dow Jones and mid- or large-cap consumer companies that discussed the labor market, 35 companies signaled improved labor availability, compared to only one that saw labor shortages worsening, Goldman noted.

Inflation: The earnings season suggests progress towards normalizing inflation but no sea change, consistent with GS view that core inflation will lag the labor and commodity markets lower, economists say.

Overall, resilient corporate fundamentals and continued but peaking core inflation pressures make the case for additional hikes, albeit at a slower pace, to account for the slowdown in economic growth, GS economists said.

About 279 S&P 500 companies have reported so far, of which 77.8% have topped analysts' estimates for profit, according to IBES Refinitiv data. That's higher than the long-term average beat rate of 66.1%.

Value is delivering stronger revenue and EPS growth, noted Credit Suisse in a note, adding that more globally-oriented S&P 500 companies are delivering faster EPS growth of 18.9% than their more domestically-oriented peers, at 13.7%.

The market response to earnings is quite subdued, said Credit Suisse's senior equity strategist Manish Bangard.

Companies beating on both revenues and EPS are outperforming the market by 1.0% versus an average of 1.7%, Bangard added.

(Medha Singh)

STOCKS BOUNCE FROM LOWS IN CHOPPY TRADE (0957 EDT/1357 GMT)

Stocks bounced at the open in choppy trade on Monday as traders parsed data that fueled concerns about global growth.

Surveys showed factories across Asia and Europe struggled for momentum in July as flagging global demand and China's strict COVID-19 curbs slowed production.

U.S. data also showed that U.S. manufacturing activity slowed less than expected in July.

Stocks also weakened earlier on Monday on concerns about conflict with China after it was reported that U.S. House of Representatives Speaker Nancy Pelosi plans to visit Taiwan.

Small caps led index losses, with the Russell 2000 down than 0.64% on the day. The Nasdaq Composite gained 0.18%.

Energy led sector losses, with a 2.19% decline. Consumer discretionary led gainers, with a 1.38% increase.

Here is where markets stand early in the session:

(Karen Brettell)

NASDAQ COMPOSITE: CHIPPING AWAY (0903 EDT/1303 GMT)

The Nasdaq Composite ended Friday back over a key technical hurdle, adding to the significance of its recent rally.

With this, the tech-laden index has now recovered 16.4% from its early-June low, which in percentage terms just slightly exceeds the 16.2% mid-to-late March bounce. The Composite remains down about 23% from its record close on November 19.

In any event, the IXIC still has its work cut out for it as it chips away at its bear-market losses:

The IXIC ended Friday at 12,391. With this, it closed above its June 2 high (12,320) and its 100-day moving average (DMA). It was the first close above the 100-DMA since January 4. Of note, this longer-term moving average had capped strength in mid-January and again in late March and early April. It should now attempt to act as support at around 12,345 on Monday.

In terms of its next hurdles, the Composite faces its late-February and mid-March lows in the 12,555/12,587 area. At those times, the IXIC bottomed just above the 38.2% Fibonacci retracement of the entire March 2020-November 2021 advance at 12,552. The 38.2% Fibonacci retracement of the November-June bear market is at 12,722.

Meanwhile, the 14-day RSI has now hit 64.3, or its highest level since November 19, which was the day of the Composite's record close. If the momentum oscillator can muster enough strength to reclaim the 70.00 overbought threshold, traders can see it as another positive development.

If the RSI stalls shy of 70.00 and the IXIC now reverses back below its 50-DMA, now around 11,535, and its July 26 low at 11,533, it can suggest the recent rally may have been just another bear-market bounce.

(Terence Gabriel)

FOR MONDAY'S LIVE MARKETS' POSTS PRIOR TO 0900 EDT/1300 GMT - CLICK HERE:

(Terence Gabriel is a Reuters market analyst. The views expressed are his own)