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Main U.S. stock indexes down slightly
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Indexes hold slight losses following release of Fed minutes
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Materials weakest S&P 500 sector; utilities lead gainers
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Dollar up slightly; gold dips; crude up ~3%; bitcoin down
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U.S. 10-Year Treasury yield rises to ~3.94%
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S&P 500 ENDS RECORD DIVIDEND PAYMENT STREAK WITH Q2 DECLINE (1415 EDT/1815 GMT)
The S&P 500's dividend payments declined 2.3% in the second quarter from the first quarter of this year, and the index ended seven-straight quarters of record dividend payments, Howard Silverblatt, senior index analyst at S&P Dow Jones Indices writes in a note Wednesday.
S&P 500 second-quarter dividend payments decreased 2.3% to $17.13 per share from the prior record first quarter 2023's $17.54 per share payment, and were up 3.0% from the year-ago second quarter's $16.63 per share payment, according to S&P Dow Jones.
On an aggregate basis, index constituents paid $143.2 billion in dividends for the second quarter, down from the $146.8 billion record paid in first quarter of 2023 and up from $140.6 billion in the second quarter of 2022.
"Uncertainty over a potential recession, earnings, and both government and corporate debt cost increased to limit the Q2 2023 increases," Silverblatt notes.
He adds that financial company dividends are expected to be limited because of likely new regulatory requirements while energy company payouts could also face problems.
"At this point, Q3 and Q4 dividend payments are expected to increase with the potential of Q4 setting a new record, but it will be close," Silverblatt writes.
(Caroline Valetkevitch)
A HOT FIRST HALF FOR STOCKS MAY LEAD TO A SUNNY SECOND HALF TOO (1225 EDT/1625 GMT)
Stocks were hot in the first half of 2023. The S&P 500 index rose about 16%, and the Nasdaq had its best first-six start to a year since 1983.
So far, in July's early going, the start of H2 has been a bit tentative.
Nevertheless, Ryan Detrick, chief market strategist at The Carson Group, believes investor will ultimately see a sunny second half to the year as well.
Detrick looked at all the years that were up more than 10% at the midpoint of the year, but were also negative the year before, or what he refers to as a "potential slingshot move."
According to Detrick's findings, stocks did even better when this took place, with the S&P 500 higher those final six months eight out of nine times and up a median of 12.4% – well above the median final six month return of 7.7% when those first six months gain more than 10%.
So, can this surprise summer rally continue?
"As Honest Abe would say, might as well be an optimist and we think it can, as July historically is a strong month. Of course, it isn’t just about seasonals, as the realization the economy may not be going into a recession and a Fed that is likely done hiking are both also positives, which should keep things moving higher in July," Detrick writes in a note.
He adds that July is usually a good month in the middle of the weak summer months.
Since 1950, Detrick says stocks gain 1.3% on average in July, but this goes up to 2.2% in the past 20 years and 3.3% in the past decade. He cautions, however, that pre-election years are a little weaker, up 0.9%.
"We want to be clear, at some point stocks will take a well-deserved break. August, September, and October usually can see this volatility and it very well could happen again this year. But we remain overweight equities and we’d use any seasonal weakness as an opportunity to add to core equity exposure."
(Terence Gabriel)
GLOBAL MINERS: TROUBLES ARE NOT OVER, SAYS JEFFERIES (1118 EDT/1518 GMT)
Jefferies foresees another tough earnings season for metals and miners as growing fears of a weaker economic recovery in China and the "perpetual threat" of Federal Reserve rate hikes still take a toll.
With global growth concerns hurting metals prices, the broker paints a challenging second-quarter scenario for the sector, with production misses, margin compression and smaller-than-expected capital returns. Consensus estimates continue to be too high in its view.
Possible mergers and acquisitions can bring a sigh of relief, but cyclical risks still overshadow the potential positives.
The directionless volatility with mining equities acts as a deterrent to investments in the sector, as it keeps traders away even if they believe there is value in these shares, according to Jefferies.
A greater-than-expected stimulus from Chinese government that leads to stability in the housing market would be a short-term positive factor for mining shares, as investors still have not priced it in.
Also, as mining equities are discounting a weakening U.S. economy, another key factor is how much further the Fed will push up interest rates.
A soft landing with inflation trending to below 3% would be ideal, but this "Goldilocks" scenario does not reflect Jefferies' view.
First Quantum and Antofagasta stand out among its preferred copper miners, while on the iron ore front, its picks are Rio and Vale.
(Matteo Allievi)
ARE FED MEETING MINUTES A TRADING EVENT, OR A SNOOZE? (1030 EDT/1430 GMT)
The Federal Reserve is due this afternoon to release minutes from its June 13-14 meeting, but according to Deutsche Bank that may not be that exciting for markets.
Analysts at the bank looked at the volatility in various asset prices on Fed meeting and minutes days since 2020, compared to other trading days. They found that the days when the Fed released its meeting minutes had slightly lower daily volatility, though the differences aren’t significant.
This compares to the meeting days, which for the past three years “have been associated with significantly higher volatility in rates, risk assets, and the dollar.”
The bank thus concludes that “the overall message is that one shouldn’t pay a minutes volatility premium.”
The Fed left interest rates unchanged in June but signaled in new projections that borrowing costs may still need to rise by as much as half of a percentage point by the end of this year.
WALL STREET DIPS BEFORE FED MINUTES (1000 EDT/1400 GMT)
Major U.S. stock indexes were down slightly in early trading Wednesday as investors await minutes from the last Federal Reserve policy meeting.
Investors are hoping to get some insights on the outlook for interest rates from the minutes. Traders are pricing in an 85.2% chance that the Fed will raise rates by another quarter-point in July.
The minutes are due at 1400 EDT (1800 GMT).
The materials sector is down the most of any major S&P 500 sector, followed by financials.
The FANG index is slightly green.
Here is the early market snapshot:
(Caroline Valetkevitch)
NASDAQ COMPOSITE: X MARKS THE SPOT? (0900 EDT/1300 GMT)
The Nasdaq Composite just saw its biggest first-six month start to a year since 1983. However, things may be about to turn a bit dicey given that the tech=laden index is now up against a formidable resistance zone:
The IXIC hit a high on Monday at 13,839.092 before closing at 13,816.773.
Inn terms of resistance, through this Friday, there is a weekly Gann Line intersection around 13,835. Gann Lines are trend lines running at certain angles off significant highs and lows. Intersections of these lines can be especially important in signaling the potential for trend change.
The June 16 high at 13,864.061 presents an additional hurdle as do several Fibonacci retracement levels: the 61.8% retracement of the November 2021-October 2022 decline is at 13,873.09 and the 23.6% retracement of the March 2020-November 2021 advance is at 13,951.158.
The Composite will need to clear these levels to continue its strong advance.
Meanwhile, with e-mini Nasdaq 100 futures dipping about 0.6% in premarket trade, the IXIC is likely to step back at the open.
The June 30 gap requires a dip to 13,618.529 for a fill. The June 26 low was at 13,334.
On a deeper setback, the Aug. 16, 2022 high was at 13,181 and the 50% retracement of the November 2021-October 2022 decline is at 13,150.
The rising 50-day moving average ended Monday around 12,850.
(Terence Gabriel)
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(Terence Gabriel is a Reuters market analyst. The views expressed are his own)
