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Markets Lower, but Macau Is a Bright Spot

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Markets went into the red and stayed there nearly all session today, save the tech-heavy Nasdaq, which pushed into the green both in the morning and afternoon but eventually fell short of gains by the closing bell. The Dow, which had been -429 points at its intraday low, closed -329 points or -1.11%. The S&P 500, hovering around its lows for the year, was -1.03% on the day. The Nasdaq was -0.60% while the small-cap Russell 2000 wound up -1.41%.

Bond yields continue to climb, with the 2-year at 4.32% — a fresh 15-year high — and the 10-year now at 3.90%, which is its highest since April 10th. Aside from its design to sop up excess inflation in the economy, these yields are starting to offer a legitimate alternative to equities as valuations keep coming down among stock industries. As early as last week, the 2-year looked reluctant to cross over to a 4-handle; now it looks as if the 10-year might join it soon.

One sector performing well is the Gaming space today, especially international casino names with exposure to Macau, like Wynn Resorts (WYNN - Free Report) and Las Vegas Sands (LVS - Free Report) — both up +12% today — with the autonomous government of “Chinese Vegas” resuming issuing visas, and clearing the way for group tours to Macau. This is a region whose tourism industry has been depressed -89% from 2019 comps; bringing Macau back online ought to be a boon for China in particular and Macau in specific.

Tomorrow brings us a slew of new data — perhaps not as important to the Fed as this late week’s Personal Consumer Expenditures (PCE) — including Durable Goods Orders, the Case-Shiller Home Price Index, Consumer Confidence and New Home Sales. Durables are expected to fall deeper into negative territory for August, while Confidence may tick up a tad month over month. We look for New Home Sales to come down over the same time period, even as Existing Home Sales, reported last week, showed pretty even from July to August.

Calendar Q3 ends this week (good riddance!), which, of course, brings us a new deluge of earnings season in a couple weeks. As much as any single economic data point, how Q3 earnings season fares will also clarify the inflation picture — and help keep the Fed abreast of when it may be risking too much tightening on interest rates. In this excellent feature by Zacks Director of Research Sheraz Mian from last Friday, there is plenty of perspective to be had even ahead of the main thrust of Q3 earnings results. Click here.

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