Dow jumps to session peak after report U.S. and China map plan to end trade spat

The Dow Jones Industrial Average in late-afternoon Friday trade jumped to session highs amid reports that the U.S. and China are setting the stage to end a contentious multibillion-dollar tariff dispute by November, according to the Wall Street Journal. The Dow
DJIA, +0.50%
was trading 150 points, or 0.5%, at 25,685, the S&P 500 index
SPX, +0.39%
climbed 0.4% at 2,850, while the Nasdaq Composite Index
COMP, +0.18%
also drifted into positive territory, after lagging behind its peers earlier in the session. The Nasdaq was up 0.1% at 7,814. All three benchmarks were trading at their best levels for Friday, extending a powerful rally ignited on Thursday, sparked by news that Beijing and Washington had agreed to resume trade negotiations next week. The coming negotiations are intended to set the stage for multilateral summits between President Trump and Chinese leader Xi Jinping in November, according to WSJ.

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Dow, S&P 500 turn positive but tech stocks lag at midday

U.S. stock-index benchmarks early Friday struggled to extend the prior session’s powerful rally as a decline in technology and consumer-discretionary shares weighed on the broader market. Lingering worries about Turkey’s fiscal health and China’s wobbly economy also limited stock-buying enthusiasm.

What are the main benchmarks doing?

The Dow Jones Industrial Average
DJIA, +0.33%
turned higher in late-morning action, up 37 points, or 0.2%, at 25,596, while S&P 500 index
SPX, +0.14%
edged less than 1 point higher at 2,841. Nasdaq Composite Index
COMP, -0.17%
shed 28 points, or 0.4%, to 7,779. The technology-laden Nasdaq faced pressure as the tech sector retreated following a pair of weak results from chip makers late Thursday.

A popular fund, the iShares PHLX Semiconductor ETF
SOXX, -1.13%
which tracks semiconductor manufacturers, was down 1.3%, on weakness in quarterly results from chip makers Nvidia and Applied Materials.

On Thursday, the Dow, S&P 500 and Nasdaq Composite
COMP, -0.17%
closed higher by 1.6%, 0.8% and 0.4%, respectively.

The Dow and S&P 500 are on pace for weekly gains of 1.1% and 0.3%, respectively, while the tech-laden Nasdaq Composite is down 0.7% for the week, hamstrung by week-to-date declines for Microsoft Corp.
MSFT, -0.45%
Facebook Inc.
FB, -0.93%
 and Google-parent Alphabet Inc.
AAPL, +1.60%
 over the past five sessions.

What’s driving markets?

Investors continue to monitor the latest developments on trade policy. On Thursday, there was cause for optimism as the U.S. and China prepared to resume trade talks next week. However, the new U.S. special representative for Iran said that the Trump administration was prepared to impose sanctions on all countries that buy oil from Iran, a list that includes China.

While geopolitical issues surrounding trade and Turkey will likely remain short-term drivers of market activity, investors are also monitoring the final results from the second-quarter earnings season.

Most recently, the Turkish lira was down about 4.7% against the U.S. dollar
USDTRY, +4.1342%
with the buck buying 6.1082 lira, compared against 5.8246 lira late Thursday in New York.

Meanwhile, China’s Shanghai Composite Index
SHCOMP, -1.34%
 closed 1.3% lower on Friday, ending the week down 4.5% and marking the lowest close in nearly two years.

What are strategists saying?

Jack Ablin, chief investment officer at Cresset Wealth Advisors, described Friday’s slump as a “cooling off” in a seasonally choppy period for equity markets, with investors following disappointing results from chip makers and a revealing newspaper interview with Tesla Chief Executive Elon Musk.

“It’s a little cooling off period after yesterday and obviously everyone is watching Elon Musk and some of the chip makers too,” Ablin said.

“Stock markets had a strong finish yesterday over renewed hopes of a resolution to the trade spat between the U.S. and China,” said David Madden, an analyst at CMC Markets UK, in a note.

Which stocks are in focus?

Chip company Nvidia Corp.
NVDA, -4.26%
and chip manufacturer Applied Materials Inc.
AMAT, -7.11%
both reported earnings late yesterday. A decline in cryptocurrency-mining sales appeared to weigh on Nvidia, sending shares down 4.6%, while a weaker-than-expected guidance pushed Applied Materials shares down by nearly 6%.

Nordstrom Inc.
JWN, +11.38%
is on track for an up day after the retailer posted better-than-expected earnings and raised its outlook. The stock surged 12%.

The stock of farm-equipment maker Deere & Co.
DE, +2.47%
fell by about 2.3% after giving a downbeat growth outlook.

BMY, -0.01%
 said the Food and Drug Administration had approved a treatment for small-cell lung cancer. Shares were down 0.2%.

Tesla Inc.
TSLA, -7.25%
 shares were down 7.4% after Musk told the New York Times the past year had been “excruciating” and “the most difficult and painful” of his career.

DSW Inc.
DSW, -5.55%
shares sank 6.7% in Friday trading after it was downgraded to negative from neutral at Susquehanna Financial Group due to higher costs and margin pressure.

Which economic reports in focus?

The University of Michigan said its consumer-sentiment index in August fell to 95.3, down from 97.9 in July, the lowest level in 11 months. Economists polled by MarketWatch expected a reading of 98.5.

Meanwhile, U.S. leading economic indicators jumped 0.6% in July.

Check out: MarketWatch’s Economic Calendar

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U.S. economy still surging at midsummer, leading index shows


The U.S. economy built up lots of momentum since the spring.

The numbers: The ebullient U.S. economy flexed its muscles at midsummer and is likely to expand steadily in the months ahead, according to an index that measures the nation’s economic health.

The leading economic index rose 0.6% in July after a 0.5% gain in June, the Conference Board said Friday.

What happened: Measures of economic health that look ahead, such as business orders, were particularly strong in July.

A measure of current conditions — or how the economy is doing right now — rose 0.2%.

The LEI is a weighted gauge of 10 indicators designed to signal business-cycle peaks and valleys.

What they are saying?: “The U.S. LEI increased in July, suggesting the U.S. economy will continue expanding at a solid pace for the remainder of this year,” said Ataman Ozyildirim, economist at the board.

Big picture: A range of indicators point to the U.S. economy expanding around 3% in the second half of 2018. Growth is so robust that the Federal Reserve might even raise interest rates more rapidly than Wall Street had been expecting in order to prevent inflation from rising and the economy from overheating.

Market reaction: The Dow Jones Industrial Average
DJIA, +0.09%
and the S&P 500
SPX, -0.07%
fell slightly in Friday trades, taking a breather after a sharp rally. The stock market had surged earlier this week on news of China returning to the bargaining table with the U.S. over trade. Reports of a revamped trade deal with Mexico also added to the momentum

The 10-year Treasury yield
TMUBMUSD10Y, -0.13%
slipped to 2.86%.

U.S. consumer sentiment falls to 11-month low in August

Getty Images

People walk through the Oculus transportation hub and shopping mall in lower Manhattan on July 27, 2018 in New York City.

The numbers: The University of Michigan said its consumer sentiment index in August fell to 95.3, down from 97.9 in July, the lowest level in 11 months.

Economists polled by MarketWatch expected a reading of 98.5.

What happened: The decline was concentrated among households in the bottom third of the income distribution, the University of Michigan said. And the concern was rising prices.

Buying conditions for large household durables, which include items such as furniture, cars and appliances, sank to the lowest level in nearly four years, the University of Michigan said, and for vehicles in particular the worst in the last four years.

Home prices meanwhile were judged less favorably than anytime since 2006.

The big picture: This is the first time in a while where perceptions of inflation really impacted the report. That said, the one-year anticipated inflation rate stayed at 2.9%.

Interestingly, while current conditions dropped sharply, the index of consumer expectations stayed at 87.3, perhaps as the unemployment rate was just 3.9% in July.

What they’re saying: “The data suggest that consumers have become much more sensitive to even relatively low inflation rates than in past decades. As is usual at this stage in the business cycle, some price resistance has been neutralized by rising wages, although the falloff in favorable price perceptions has been much larger than ever before recorded,” said Richard Curtin, the survey of consumers chief economist. He said that’s good news for the Fed, since interest rates now play a more decisive role in purchase decisions.

Market reaction: The Dow Jones Industrial Average
DJIA, +0.08%
 wasn’t moving much on Friday. The threat and imposition of tariffs has limited stock market gains this year, as the Dow has climbed 3.4% through Thursday.

Trade-war tracker: Here are the new levies, imposed and threatened

Trump asks SEC to study allowing 6-month corporate earnings reports

President Donald Trump on Friday said he has asked the Securities and Exchange Commission to study allowing companies to report on a six-month rather than quarterly system. Trump said on Twitter he asked the SEC to study the issue after talking with business leaders about what would “make business (jobs) even better in the U.S.” He said one leader told him “stop quarterly reporting & go to a six month system.” Trump didn’t name the executive.

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Trump officially cancels postponed military parade, citing cost

President Donald Trump said Friday he has canceled plans for a military parade. Trump’s statement comes just hours after the Pentagon said the event would be postponed until at least 2019, and follows a report that the price tag would be $92 million, or $80 million over the original estimate. In a tweet Trump blamed local politicians in Washington for a “ridiculously high” price for the parade and said he would instead attend a previously scheduled parade at Andrews Air Force Base. “Now we can buy some more jet fighters!” Trump added.

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Zoe’s Kitchen to be acquired by Cava Group for $12.75/share, a 33% premium

Zoe’s Kitchen Inc.
ZOES, +34.31%
said Friday it has agreed to be bought out by privately held Cava Group Inc. in a deal with an enterprise value of about $300 million. The fast-casual restaurant chain with 261 outlets in the U.S., said shareholders will receive $12.75 in cash for each share owned, equal to a 33% premium over the company’s 30-day volume weighted average price ending Aug. 16. Cava Group is a Mediterranean culinary brand with 66 restaurants. The combined group will own 327 restaurants in 24 states. The deal is expected to close in the fourth quarter and will be financed through a significant equity investment in Cava led by Act III Holdings, an investment vehicle created by Ron Shaich, founder and former CEO of Panera Bread, as well as existing investors Swan and Legend Venture Partners and Revolution Growth. Cava CEO Brett Schulman will be CEO of the combined company with Shaich acting as chairman. Cava has agreed to pay a $17 million breakup fee if the deal does not occur. Zoe’s Kitchen shares jumped 33.6% premarket after resuming trade following a halt. But they have fallen 43% in 2018, while the S&P 500
SPX, -0.05%
has gained 6%.

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Bristol-Myers wins FDA okay for Opdivo as treatment for small-cell lung cancer

Bristol-Myers Squibb Co.
BMY, +1.41%
said Friday the U.S. Food and Drug Administration has approved Opdivo as a treatment for certain patients with previously treated small cell lung cancer. The company said the approval makes Opdivo the first and only Immuno-Oncology treatment option for patients with metastatic small cell lung cancer whose cancer has progressed after platinum-based chemotherapy and at least one other line of therapy. The decision was based on overall response rate and duration of response and continued approval may be contingent on verification of clinical benefit in further confirmatory trials. Small cell lung cancer is one of two main types of lung cancer and accounts for 10% to 15% of all lung cancers. It is an aggressive form of the disease and is often only detected when it is at an advanced stage. Bristol-Myers shares rose 0.6% in premarket trade Friday, but are down 0.3% in 2018, while the S&P 500
SPX, +0.79%
has gained 6%.

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Deere’s stock drops premarket on downbeat growth outlook

Shares of Deere & Co.
DE, +1.22%
fell 1% in premarket trade Friday, after the agriculture and construction equipment maker reported fiscal third-quarter revenue that topped expectations but provided a downbeat net sales growth outlook. Net income rose to $910.3 million, or $2.78 a share, from $641.8 million, or $1.97 a share, in the same period a year ago. Excluding a favorable net adjustment to provisional income taxes, earnings per share came to $2.59. The FactSet EPS consensus was $2.73. Total revenue grew 32% to $10.31 billion, above the FactSet consensus of $10.22 billion, as agriculture and turf growth of 18% to $6.29 billion beat the FactSet consensus of $6.15 billion and a doubling in construction and forestry to $2.99 billion topped expectations of $2.88 billion. For fiscal 2018, the company expects net sales to rise 26% from a year ago, while the FactSet consensus of $33.68 implies 30% growth. Deere affirmed its 2018 outlook for adjusted net income of $3.1 billion. The stock has declined 12% year to date through Thursday, while the S&P 500
SPX, +0.79%
has gained 6.3%.

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Nvidia shares fall 5% after sales outlook falls short

Nvidia Corp.
NVDA, -0.63%
shares fell in the extended session Thursday after the graphics-chip maker’s results topped Wall Street views but their revenue outlook did not as cryptocurrency mining sales weakened. Nvidia shares fell 5.6% after hours, following a 0.6% decline to close the regular session at $257.44. For the third quarter, Nvidia estimates revenue of $3.19 billion to $3.32 billion, but analysts surveyed by FactSet expect revenue of $3.34 billion. “Our revenue outlook had anticipated cryptocurrency-specific products declining to approximately $100 million, while actual crypto-specific product revenue was $18 million,” said Chief Financial Officer Colette Kress in a statement. “Whereas we had previously anticipated cryptocurrency to be meaningful for the year, we are now projecting no contributions going forward.” The company reported second-quarter net income of $1.1 billion, or $1.76 a share, compared with $583 million, or 92 cents a share, in the year-ago period. Adjusted earnings were $1.94 a share. Revenue rose to $3.12 billion from $2.23 billion in the year-ago period. Analysts polled by FactSet had estimated $1.85 a share on revenue of $3.1 billion.

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Dow industrials close up over 390 points on U.S.-China trade hopes

The Dow Jones Industrial Average enjoyed its best day in about four months as a rally in shares of retailing giant Walmart Inc.
WMT, +9.33%
and an apparent easing of China-U.S. trade tensions helped to support a broad rally on Wall Street. The Dow
DJIA, +1.58%
gained about 400 points, or 1.6%, at 25,559, registering its best one-session rise since April 10, the S&P 500 index
SPX, +0.79%
rose about 22 points, or 0.8%, at 2,840. All 11 sectors of the broad-market index finished in positive territory, led by a 1.5% gain in consumer-staples
XLP, +1.43%
and financials
XLF, +1.33%
up 1.3%. The S&P 500 posted its best one-day climb since July 25. The technology-laden Nasdaq Composite Index
COMP, +0.42%
meanwhile, gained 0.4% at 7,807. Walmart’s surge was the big story of the day, with retailing giant and Dow component rising 9.3% and contributing nearly 60 points to the price-weighted Dow, after it reported better-than-expected quarterly results, underscoring the health of the consumer. The enthusiasm around corporate results and an agreement by China and U.S. officials to meet later in the month to discuss easing their animosities on trade helped to overshadow concerns about the Turkish lira
TRYUSD, +2.7318%
which had underpinned recent fretting about a currency crisis and a possible contagion effect from the country. Those fears had dragged stocks solidly lower on Wednesday.

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FDA approves first rival generic EpiPen, sending Teva shares up 6%

Shares of the U.S.-listed Teva Pharmaceutical Industries Ltd.
TEVA, +6.54%
surged 6.2% in extremely heavy Thursday afternoon trade after the company’s generic version of the EpiPen allergic reaction treatment was approved by the Food and Drug Administration, making it the product’s first true generic rival. Teva secured approval for both adult and child-appropriate dose levels of its generic epinephrine autoinjector. Shares of Mylan
MYL, -0.10%
, which sells the EpiPen and a cheaper authorized generic version, slumped 0.5% in heavy trade, while rivals Amneal Pharmaceuticals Inc.
AMRX, -1.76%
and Adamis Pharmaceuticals Corp.
ADMP, -15.21%
had shares drop 3% and 7.5% respectively. The approval comes at a time of monthslong spot shortages of the EpiPen, the authorized generic and Amneal’s generic Adrenaclick product, causing parents to worry about securing the products in time for back-to-school season. The new alternative should help protect against shortages as well as offer patients a lower-cost option, Food and Drug Administration Commissioner Scott Gottlieb said in a statement. The regulator also noted that generic versions of products like the EpiPen, called “combination products” because that are made up of both a drug and a device, can be more difficult to make. For Teva, which has sought a turnaround amid difficult competitive pressures in the U.S. generics market, the news comes as a reprieve. The FDA previously failed to approved its generic EpiPen in 2016. The entrant could also stymie the launch of another rival product, a pre-filled syringe from Adamis Pharmaceuticals; the company said last week that the commercial launch of the product would be at the discretion of its partner, Novartis’ Sandoz unit
NVS, +0.45%
Teva shares have risen nearly 14% over the last three months, compared with a 4.4% decline in Mylan shares, a 4.5% rise in the S&P 500
SPX, +0.95%
and a 3.2% rise in the Dow Jones Industrial Average
DJIA, +1.73%

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Mortgage rates tumble as housing begins to drag down the economy

Getty Images

Street of brightly painted colonial style homes in Richmond, Va.

Rates for home loans tumbled in line with the broader bond market, even as the housing market’s woes threatened to become a headwind for the entire U.S. economy.

The 30-year fixed-rate mortgage averaged 4.53% during the Aug. 16 week, down six basis points, according to the weekly data from mortgage provider Freddie Mac. The 15-year fixed-rate mortgage averaged 4.01%, down from 4.05%. The 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.87%, down three basis points.

Those rates don’t include fees associated with obtaining mortgage loans.

Mortgage rates follow the path of the 10-year U.S. Treasury note
TMUBMUSD10Y, +0.48%
 , which has tumbled over the past week as investors flocked to safe-haven assets in the wake of the Turkey currency crisis. Bond yields decline as prices rise.

Also see: Home prices rise at the fastest pace in more than four years, defying expectations of a pullback

Lower rates are a boon for borrowers and should help jump-start housing activity. But there’s been so little to buy for so long that many would-be buyers are simply giving up. And that means the sluggish housing market is no longer just a story unto itself. Analysts now believe housing will drag down overall economic growth in the near term.

In a research note out Thursday, Doug Duncan, chief economist for Fannie Mae, Freddie’s counterpart, explained: “Housing continues to drag on growth due to lackluster home-building activity, home sales, and brokers’ commissions.”

The stagnant housing market may also be impacting the labor market. The percentage of job seekers relocating for new employment was at longtime lows earlier this year, said outplacement consultancy Challenger, Gray & Christmas on Thursday. Just over 10% of job seekers relocated for work in the first six months of 2018, compared with an average of 19% over the previous decade.

The more Americans are on the move, the more local economies get a “halo effect” from home sales, according to Daren Blomquist, senior vice president at Attom Data Solutions. As Blomquist puts it, higher home sales activity “bodes well for local real-estate agents, home improvement stores, moving companies and others.”

Read: Americans can’t buy new homes, so they’re fixing up the ones they’ve got

The Dow is up more than 300 points early Thursday, led by Walmart and Boeing

The Dow Jones Industrial Average on Thursday was up more than 300 points, with the blue-chip benchmark buoyed by a surge in shares of Walmart Inc.
WMT, +9.49%
and Boeing Co.
BA, +3.52%
Walmart and Boeing were combining to produce a 130-point tailwind for the Dow
DJIA, +1.37%
The jolt in their shares, underscores the bullish theme that has helped the overall U.S. market shake off worries about Turkey’s economy and lira
TRYUSD, +3.6352%
Giant retailer Walmart delivered quarterly results that were better than expected and Boeing scored a bounce from reports that trade talks between China and the U.S. would resume soon. Boeing had been among the main large-capitalization, multinational stocks perceived to be among the most vulnerable to trade disputes between the two largest global economies. A $1 move in any one of the price-weighted Dow’s components equates to a swing of 6.8 points.

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Aretha Franklin, the ‘Queen of Soul,’ has died at age 76

Aretha Franklin, the Queen of Soul, has died, according to an Associated Press report, citing her publicist. The 76-year-old singer and songwriter was under hospice care for an undisclosed illness. Franklin began her career as a child singing gospel at the New Bethel Baptist Church in Detroit and is known for with an incredible four-octave vocal range, and iconic hits songs, including “Respect.”

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Stocks open higher with Cisco, Walmart gains leading the way

U.S. stock-index benchmarks rebounded early Thursday, as strong corporate earnings helped to overshadow Turkey’s currency crisis and as China and the U.S. appeared set to resume trade talks.

What are markets doing?

The Dow Jones Industrial Average 
DJIA, +1.26%
rose 284 points, or 1.1%, to 25,441, while the S&P 500 index
SPX, +0.64%
was up 19 points to 2,837, a rise of 0.7%. The Nasdaq Composite Index
COMP, +0.50%
added 52 points, or 0.7%, to 7,825.

Better-than-expected results from Walmart and Cisco, two Dow components, could support the blue-chip average, while Cisco could lift technology stocks, boosting the Nasdaq.

Major indexes fell sharply on Wednesday, though they ended off their lows of the session. The Dow  closed at its lowest level since July 23, and both the Dow and the S&P 500  have dropped in five of the past six sessions. The Nasdaq  has dropped in three of the past four trading days.

Read: The Dow just registered its longest stint in correction territory in nearly 60 years

What is driving the market?

In a potentially positive development, it was reported that China’s commerce ministry would send a delegation to the U.S. later this month to resume trade talks, the first such meeting since July. The development comes at a period of elevated tensions between the two countries, which are major trading partners and which have been imposing tariffs on billions of dollars on each other’s goods over the past several months. The prospect of a trade war has intermittently pressured equities in recent months.

Opinion: Trump is right: America was ‘built on tariffs’

Also on the geopolitical front, recent trading has been driven by the economic crisis in Turkey, which many investors fear could spread to other regions or hurt European banks, many of which have exposure to the region.

The issue will likely continue to dictate market action in the short term, but there are signs that the situation has stabilized. On Wednesday, it was reported that Qatar would invest $15 billion in Turkey, which could provide something of a lifeline.

The Turkish lira
TRYUSD, +4.4926%
 was on track for its third straight session with a pronounced gain against the dollar, fueling hopes that the recent all-time low represented a bottom. The lira gained about 3% on the dollar Thursday, bringing its week-to-date rise against the greenback to more than 10%. However, it is still down more than 15% thus far in August.

Don’t miss: Turkey’s woes won’t trigger a full-blown crisis across emerging markets, economist says

See also: How the lira selloff compares to Turkey’s previous crises

In the latest economic data, initial jobless claims fell more than expected in the latest week, nearing postrecession lows.

Meanwhile, the Philadelphia Fed manufacturing index sank to a 21-month low of 11.9 in August, a reading that was below analyst expectations.

Construction on new houses increased by less than 1% in July, reflecting a recent slowdown in building that is likely tied to higher mortgage rates and growing shortages of skilled craftsmen.

What are market analysts saying?

Speaking about the trade meeting, Andrew Adams, senior research associate at Raymond James, wrote that the gathering “is unlikely to be THE resolution to the trade war, but it could be the start of progress on that front [emphasis in original]. And if President Trump feels enough progress is being made with China he could declare victory even if all the trade terms aren’t worked out, which would likely be a tweet the market would welcome.”

What stocks are in focus?

Cisco Systems Inc.
CSCO, +3.99%
 late Thursday reported earnings that topped expectations and gave an outlook that was above analyst forecasts.

Walmart Inc.
WMT, +8.93%
 surged after it reported adjusted second-quarter earnings that topped expectations, along with revenue that was above consensus expectations. The discount retailer also boosted its adjusted 2019 earnings forecast. The stock was poised to open at a six-month high.

On the downside, J.C. Penney Co. Inc.
JCP, -25.93%
 plummeted 21% after it reported an adjusted second-quarter loss that was much wider than expected. It also widened the loss it expects for the full year.

Federal regulators have subpoenaed Tesla Inc.
TSLA, -1.21%
according to a person familiar with the matter, ramping up an investigation into whether Chief Executive Elon Musk was truthful when he tweeted last week that he had secured funding to take the electric-car maker private. That tweet sparked a rally in Tesla, sending shares up nearly 14% in August.

Bloomberg reported that Inc.
AMZN, +0.70%
 was competing against other suitors to buy out Landmark Theatres. Other theater chains, including AMC Entertainment Holding Inc.
AMC, +1.84%
 and Cinemark Holdings Inc.
CNK, +1.23%
fell following the report.

Separately, a Reuters report said Amazon is considering offering a U.K. price comparison website for insurance products.

General Electric Co.
GE, +0.53%
 could remain in focus a day after the industrial conglomerate, whose share price has struggled for years, tumbled to its lowest level since 2009 as investors apparently remain unconvinced that the company’s turnaround plan will stem the bleeding.

Antivirus software company Symantec Corp.
SYMC, +6.68%
 confirmed it had received five director nominations from activist shareholder Starboard Value.

Two major chip makers, Nvidia Corp.
NVDA, -1.44%
 and Applied Materials Inc.
AMAT, +0.16%
will report after the close of trading. While Nvidia has jumped more than 30% thus far this year.

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Home construction slows when compared to year earlier

Bloomberg News/Landov

Home builders have applied for more permits, but the pace of construction isn’t keeping up lately.

The numbers: Construction on new houses increased by less than 1% in July, reflecting a recent slowdown in building that’s likely tied to higher mortgage rates and growing shortages of skilled craftsmen.

Housing starts edged up to an annual rate of 1.17 million last month from a revised 1.16 million in June, the government said Thursday.

Economists polled by MarketWatch has expected starts to total 1.27 million.

Permits to build new houses, meanwhile, rose 1.5% to a 1.31 million annual pace. While that’s still quite healthy, permits have also fallen off a recent post-recession peak.

What happened: Housing starts jumped 11.6% in the Midwest and 10.4% in the South, the fastest growing region in the U.S. New construction fell by 11% in the West and 4% in the Northeast.

Builders began work on new single-family homes at a 862,000 annual rate and structures with five or more units at a 303,000 clip.

The number of housing starts in July, however, was 1.4% lower compared to the same month in 2017.

Big picture: For the past few years, buyers have been clamoring for more houses and builders have suggested that they’re feeling fine. Yet none of that has translated into enough homes being built to keep prices down and satisfy the need of most buyers.

Also see: The new housing play: helping priced-out renters become long-distance landlords

What they’re saying: “As disappointing as June’s housing starts are, they do not suggest the housing recovery has shorted out,” wrote Wells Fargo analysts after the release of last month’s Commerce data. “Builders remain fairly optimistic and buyer traffic is reported to be fairly solid.”

But many other analysts believe the current housing cycle has run its course, as MarketWatch reported in June.

Read: We’re probably at peak housing. Here’s what that means.

Market reaction: Homebuilder stocks have been slammed in 2018 as investor concerns about the housing market take a bite. The iShares U.S. Home Construction ETF
ITB, -0.59%
  has lost 15% in the year to date.

The Dow Jones Industrial Average
DJIA, -0.54%
and the S&P 500
SPX, -0.76%
meanwhile, were set to open higher in Thursday trades. Stocks had been rallying over the past month until the threat of an economic crisis in Turkey halted the momentum this week.