August 18, 2023 – The Dow Jones Industrial Average closed lower on Thursday, losing 0.8%, or 290 points, as pressure mounted from a slide in Walmart shares and an ongoing surge in Treasury yields. Investors are increasingly concerned that rate hikes may be in the cards later this year, leading to a sell-off in equities. The Nasdaq also fell 1.2%, while the S&P 500 declined by 0.8%.
The surge in Treasury yields was primarily attributed to growing fears among investors about the potential for rate hikes by the Federal Reserve. The 10-year Treasury yield, in particular, is nearing 16-year highs, as investors continue to digest the possibility of the Fed raising rates again in the coming months.
The Federal Reserve’s minutes from its July meeting, released on Wednesday, revealed that members of the central bank are leaning towards a more hawkish stance, further stoking market fears. Many are now anticipating that Fed Chair Jerome Powell will echo these sentiments at the upcoming Jackson Hole symposium next week.
Analysts at UBS noted that while there may be some hopeful signs in recent CPI data, the FOMC is not out of the inflation woods yet. The central bank still has concerns about restoring price stability.
Despite delivering better-than-expected results for the second quarter and raising its annual guidance, Walmart Inc (NYSE:WMT) saw its shares fall nearly 2%. The company’s strong grocery and e-commerce performance drove its positive results, with the grocery business up by high single digits in the quarter. Walmart also reported market share gains and growth in its private label.
Walmart CEO Doug McMillon noted that while there are concerns about the strength of the consumer, further pain for consumers could drive demand for lower-priced items, boosting top-line growth.
In contrast, Cisco Systems (NASDAQ:CSCO) saw its shares rise more than 3%, following better-than-expected fiscal fourth-quarter results. Goldman Sachs attributed Cisco’s strong results to previous pricing actions and maintained cost discipline, which should remain strong with a shift towards more software revenue.
Wolfspeed (NYSE:WOLF), on the other hand, faced a 17% decline in its shares after reporting a wider-than-expected quarterly loss and downbeat annual guidance.
CVS Health (NYSE:CVS) experienced a significant slump, falling more than 8% after Blue Shield of California announced that it would no longer use the company’s Caremark unit as its pharmacy benefit manager. Instead, Blue Shield plans to partner with several companies, including Amazon (NASDAQ:AMZN). CVS’s losses now exceed 20% year to date, as it faces increasing competition from low-cost pharmaceutical companies, including Amazon Pharmacy.
As investors continue to navigate through the effects of rising Treasury yields and the potential for rate hikes, the market remains cautious. Attention will now turn to the upcoming Jackson Hole symposium, where market participants eagerly await comments from Federal Reserve Chair Jerome Powell regarding the Fed’s stance on monetary policy and the potential path forward for interest rates.
