Piling Up: Wall Street's Skid Persists Amid Firm Yields and Dollar as China Worries Sink Tech

The holiday-shortened week probably couldn't end soon enough for many investors. Firm yields, a climbing dollar and strength in the oil patch have every sector lower so far this week except for energy. Next week brings key U.S. inflation data and an ECB meeting.

5 min read
Photo by Adobe

Key Takeaways

  • Stocks on pace for losing week as firm dollar, rates, and Apple worries cause investor headaches

  • Kroger shares fall despite beating analysts’ EPS forecast as revenue appears to disappoint

  • Next week features key U.S. inflation data, ECB meeting, earnings from Oracle and Adobe

(Friday market open) This short week is starting to feel long, and for many investors it probably can’t end soon enough. Stocks around the world remained in the red early Friday and major U.S. indexes are on pace for more losses, hurt by the troika of rising yields, a firm dollar, and spiking crude oil prices.

While Treasury yields neared recent 15-year peaks this week, dollar strength is another bearish story. A firm dollar can make U.S. products more expensive abroad. It’s one factor weighing on tech stocks this week, and it’s also tied up with the sluggish Chinese economy.

So far, China’s struggles and the dollar’s rally haven’t done much to dent crude oil, which rose again this morning after the U.S. government reported a weekly drop in stockpiles of more than 6 million barrels—the fourth straight week of falling supplies. That’s a more supply-and-demand driven event, as production cuts collide with surprisingly resilient U.S. demand even as U.S. supplies remain below average seasonally.

China dealt the U.S. market another blow this week when Beijing targeted Apple’s (AAPL) iPhone, banning its use by government workers. Apple shares fell 6% over the last two days, and when Apple sneezes, the market often catches a cold. That reflects Apple’s vast market capitalization near $3 trillion, forming about 7% of the total S&P 500 market capitalization. Apple shares are lower again in premarket trading, and Apple’s struggles this week also weighed on chipmaker stocks.

Morning rush

  • The 10-year Treasury note yield (TNX) is close to unchanged at 4.26%.
  • The U.S. Dollar Index ($DXY) is flat at 105.02.
  • Cboe Volatility Index® (VIX) futures inched up to 14.63.
  • WTI Crude Oil (/CL) futures rose 0.5% to $87.47 per barrel, near its high for the year.

What to watch

Next week brings crucial data including the August Consumer Price Index (CPI), the August Producer Price Index (PPI), and August Retail Sales. Together, those could do a lot to shape the Federal Reserve’s thinking ahead of its meeting the week after next.

Analysts expect July Wholesale Inventories, due at 10 a.m. ET today, to drop 0.1% for the month after a 0.5% decline in June, Briefing.com says. Certain products saw large inventory drops in June, including farm products, metals, lumber, and petroleum. However, inventories rose 1.3% year-over-year in June and have generally climbed since early last year. Rising inventories could suggest falling consumer demand, and also indicate supply chains continue to recover from shortages seen during the pandemic.

Weather report: Investors should also consider keeping an eye Friday and over the weekend on Hurricane Lee as it tracks across the Atlantic toward Florida. It’s expected to become a Category 4 storm by the weekend. Its path should be watched for any possible impact on the oil-producing Gulf of Mexico.

ECB Sighting: The European Central Bank (ECB) holds its policy meeting next week, with a decision and press conference scheduled Thursday morning, U.S. time. The ECB has raised rates at nine straight meetings, but economists expect a pause at this one, Reuters reports.

Stocks in Spotlight

Kroger (KR) shares sank in premarket trading despite the company surpassing Wall Street’s average earnings per share estimate. The company slightly missed analysts’ expectations on the top line, however, and reaffirmed prior guidance. Kroger was the only S&P 500 company to report this week.

Kroger’s earnings call could provide color on its proposed $25 billion purchase of Albertsons (ACI) supermarkets. The two companies are in talks to sell hundreds of stores as part of their merger agreement, Bloomberg reported this week, and a deal could be announced shortly.

The earnings plot thickens next week with expected results from Oracle (ORCL), Adobe (ADBE), and Lennar (LEN). Along with that, U.S. auto companies and their workers approach a Thursday, September 14 deadline to settle their differences.

Lot Count: Ford (F), General Motors (GM), and Stellantis (STLA), the parent company of Jeep, all face expiration of their contracts with the United Auto Workers (UAW) next Thursday. The last time the UAW went on strike (against GM in late 2019), the work stoppage lasted more than a month. It was the longest in 50 years and shut down 33 plants across nine states, along with nearly two dozen distribution warehouses.

GM said in its Q4 2019 earnings report the strike cost it $2.6 billion in earnings before interest and taxes, and dealers selling GM cars bought 191,000 fewer vehicles due to lack of production, according to CNN. The potential pain this time is even greater since all three major U.S. auto companies are targeted. An extended strike wouldn’t just hurt the companies involved. It also would cost thousands of auto workers a good chunk of pay and potentially raise car prices, hurting consumers. All of this could work its way into Q3 and Q4 economic growth, though it should be noted that other recent major strike threats by both railroad and shipping workers were settled before they began.

Eye on the Fed

As of this morning, the probability that the Federal Open Market Committee (FOMC) will maintain current rates after its September 19–20 meeting is 93%, according to the CME FedWatch Tool.

Market expectations for the Fed’s next moves and for the “peak” in interest rates “haven’t changed much lately,” says Collin Martin, director of fixed income strategy at the Schwab Center for Financial Research. “No more rate hikes seems like the most likely outcome, but the expected duration that we’ll be at peak rates keeps lengthening. And the longer the Fed holds at its peak, the longer the 10-year Treasury may remain elevated.”

Talking Technicals: Is the dollar ready to bust out? The Dollar Index ($DXY) has traded in a very narrow range all year between roughly 100 and 105. This week found it near the very top of that range, peeking above 105 at times and not far from the 2023 high of 105.88, posted back in March. Technically, things are looking up, as the Dollar Index recently pushed above its 200-day moving average and through a downward trendline going back to last fall’s peak near 115. It remains in an uptrend. Every recent rally, however, has run into heavy selling above 105.

CHART OF THE DAY: BACK IN THE GREEN. The U.S. Dollar Index ($DXY-candlesticks) entered an uptrend in mid-July and recently pushed above both its 200-day moving average (blue line) and a diagonal downtrend line (red line) dating back to last fall’s high. This puts the dollar in solid technical shape, but the 2023 high of 105.88 looms just above and may mark a resistance point. Data source: ICE. Chart source: thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results.

Thinking cap

Ideas to mull as you trade or invest

Beyond the iPhone: One analyst told CNBC Thursday that in a worst-case scenario, Beijing’s iPhone crackdown might have an impact of around 10 cents a share on Apple’s earnings. That’s not a huge chunk of the $6.07 Wall Street consensus estimate for Apple earnings per share in 2023, but the worries go well beyond the balance sheet and even beyond Apple itself. The question is whether this marks the start of a wave of anti-U.S. restrictions by the Chinese government. Worries over that might help explain why shares of firms with Chinese market exposure including Tesla (TSLA), Caterpillar (CAT), Nvidia (NVDA) and Deere (DE) lost ground yesterday. But despite all the hand wringing over China’s targeting of Apple, it’s worth pointing out that Beijing doesn’t necessarily have carte blanche to do whatever it wants. Apple and its suppliers in China are major employers in the country. One factory making iPhones employs more than 300,000 people.

Valuation consideration: The current FactSet estimate for 0.5% S&P 500 earnings growth in Q3 would mean a quarterly rise for the first time in a year, ending the “earnings recession” and perhaps allowing the “E” side of the price-earnings (P/E) equation to play some catch-up. Until now, almost all the market’s 2023 gains were driven by multiple expansion rather than profit growth, and the rather high forward P/E for the S&P 500 Index (SPX) of nearly 19 likely helps explain the lack of market traction over the last six weeks. As an aside, info tech and consumer discretionary own the highest P/E ratios, according to FactSet.

Moving the chains: Wall Street’s projected 0.5% S&P 500 Q3 earnings growth (and 1.2% growth for the full year of 2023) likely won’t be enough to really move the chains all that much from a valuation perspective, however. For that, bullish investors will have to hope analysts are right with their 2024 calendar year earnings growth estimate of 12%, as reported by FactSet. Double-digit earnings growth sounds positive but be aware that the recent trend has been for estimates to fall over time. A year ago, analysts expected 2023 earnings growth of 7.6%, and now it’s down to the 1.2% mentioned above. Rising rates likely played into that. A year ago, the Fed estimated that interest rates would top out at 4.6% in 2023. The current Fed target rate is between 5.25% and 5.5%.


Sept. 11: Expected earnings from Oracle (ORCL).

Sep. 12: No major earnings or economic data.

Sept. 13: August Consumer Price Index (CPI).

Sept. 14: August Producer Price Index (PPI), August Retail Sales, and expected earnings from Adobe (ADBE) and Lennar (LEN).

Sept. 15: August Import and Export Prices, September Empire State Manufacturing, August Industrial Production, and Preliminary September University of Michigan Consumer Sentiment.


Key Takeaways

  • Stocks on pace for losing week as firm dollar, rates, and Apple worries cause investor headaches

  • Kroger shares fall despite beating analysts’ EPS forecast as revenue appears to disappoint

  • Next week features key U.S. inflation data, ECB meeting, earnings from Oracle and Adobe

Related Videos

Call Us

Do Not Sell or Share My Personal Information

Content intended for educational/informational purposes only. Not investment advice, or a recommendation of any security, strategy, or account type.

Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. Clients must consider all relevant risk factors, including their own personal financial situations, before trading.

TD Ameritrade and all third parties mentioned are separate and unaffiliated companies, and are not responsible for each other’s policies or services. Inclusion of specific security names in this commentary does not constitute a recommendation from TD Ameritrade to buy, sell, or hold.  unaffiliated companies, and are not responsible for each other’s policies or services.  

Inclusion of specific security names in this commentary does not constitute a recommendation from TD Ameritrade to buy, sell, or hold.


Market volatility, volume, and system availability may delay account access and trade executions.

Past performance of a security or strategy does not guarantee future results or success.

Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options.

Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon request.

This is not an offer or solicitation in any jurisdiction where we are not authorized to do business or where such offer or solicitation would be contrary to the local laws and regulations of that jurisdiction, including, but not limited to persons residing in Australia, Canada, Hong Kong, Japan, Saudi Arabia, Singapore, UK, and the countries of the European Union.

TD Ameritrade, Inc., member FINRA/SIPC, a subsidiary of The Charles Schwab Corporation. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2023 Charles Schwab & Co. Inc. All rights reserved.

Scroll to Top