Stocks Finish Wednesday’s Session in Positive Territory
Last Updated 4:15PM EST
Stock indices finished Wednesday’s trading session in the green. The Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 increased 1.29%, 1.56%, and 2.73%, respectively.
The energy sector was the session’s laggard, as it fell by 2.88%. Conversely, the technology sector (XLK) was the session’s leader, with a gain of 2.69%. In addition, WTI crude oil lost 3.22%, reaching $90.80 per barrel. This is near its session low of $90.41 per barrel.
Furthermore, the U.S. 10-Year Treasury yield decreased to 2.7%, a decline of 5.2 basis points. On the other hand, the Two-Year Treasury yield is higher than yesterday’s close, as it hovers around 3.075%. This brings the spread between them to -37.5 basis points. The negative spread indicates that investors still have fears of a recession.
On Wednesday, the U.S. Census Bureau released its monthly report for U.S. Factory Orders, which measures the month-over-month change in new orders placed with manufacturers. In June, new orders increased by 2%, much better than the expected 1.1%.
It’s worth noting that this indicator is based on data from June, making it a lagging indicator. Indeed, the Institute for Supply Management released its Manufacturing New Orders Index earlier this week for July, which showed a decline. Therefore, the U.S. Census Bureau’s Factory Orders report next month might also come in negative.
ISM Non-Manufacturing PMI Beats Expectations
Last Updated 3:00PM EST
Equity markets are in the green heading into the final hour of Wednesday’s trading session. As of 3:00 p.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are up 1.4%, 1.7%, and 2.8%, respectively.
On Wednesday, the Institute for Supply Management released its monthly report for the ISM Non-Manufacturing Purchasing Managers’ Index, which measures the overall economic condition of the non-manufacturing sector.
A number over 50 represents an expansion, whereas anything below 50 signals a contraction. The report came in at 56.7, better than the expected 53.5 and higher than last month’s reading of 55.3.
It’s worth noting that this indicator has been in an overall downtrend since peaking in December 2021, when it hit a high of 69.1. If this trend continues, it might not take long before the non-manufacturing sector enters into contraction.
Indeed, the ISM Non-Manufacturing Employment report came in at 49.1, indicating that the number of jobs is contracting. This is consistent with what was reported in the ISM Manufacturing Employment report earlier this week. It also provides clues for next month’s JOLTs report, suggesting that it will continue on its downward trend.
Mortgage Applications Increased from the Previous Week
Last Updated 12:00PM EST
Stocks are in the green halfway into the trading session. As of 12:00 p.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are up 1.1%, 1.3%, and 2.3%, respectively.
The energy sector (XLE) is the laggard so far, as it is down 2.5%, while the best performing sector, communications (XLC), is up 2.3%.
WTI crude oil remains under $100 per barrel, hovering around the mid-$91 per barrel range. Meanwhile, the U.S. 10-Year Treasury yield is hovering around 2.78%, which is up almost three basis points compared to yesterday’s close. The spread between the 10-Year and Two-Year U.S. Treasury yields remains negative, as it currently sits at -36 basis points.
On Wednesday, the Mortgage Bankers Association released its weekly report for the U.S. 30-Year mortgage rate. The mortgage rate decreased to 5.43% compared to last week’s reading of 5.74%.
Due to the lower rates, the number of mortgage applications increased week-over-week by 1.2%, following last week’s decline of 1.8%. This indicates that homebuyers are looking to lock in these lower rates before the Federal Reserve hikes again.
In addition, mortgage application volume is down substantially on a year-over-year basis, with the Mortgage Market Index at 279.2 compared to 734.3 on August 4, 2021.
Stocks are in the Green to Start Wednesday’s Trading Session
Last Updated 10:00AM EST
Stock indices are in the green 30 minutes into today’s trading session. As of 10:00 a.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are up 0.6%, 0.7%, and 1.3%, respectively.
The utilities sector (XLU) is the laggard so far, as it is down 1.5%. Conversely, the consumer discretionary (XLY) is the session’s leader, with a gain of 1.4%.
WTI crude oil remains below $100 per barrel amid a potential upcoming recession that would negatively impact demand for the commodity. However, it got a slight boost today after OPEC+ announced that it would only be increasing output by 100,000 barrels per day – much lower than the U.S. was hoping for.
As a result, the price is hovering around the mid-$94 per barrel range, up roughly 0.7% from the previous close.
Meanwhile, bond yields are higher, as the U.S. 10-Year Treasury yield is now hovering around 2.76%. This represents an increase of 0.8 basis points from the previous close.
Similar movements can be seen with the Two-Year yield, which is now at 3.09%. However, the spread between the 10-Year and Two-Year U.S. Treasury yields is still negative, as it currently sits at -33 basis points.
Pre-Market Update
U.S. stock market futures climbed early Wednesday morning as investors found respite in a drop in food and commodity prices, amid mounting economic and geopolitical concerns.
Futures on the Dow Jones Industrial Average (DJIA) gained 0.34%, while those on the S&P 500 (SPX) moved 0.32% higher, as of 6.55 a.m. EST, Wednesday. Meanwhile, the Nasdaq 100 (NDX) futures advanced by 0.27%.
Despite the moderation in food prices, experts still think that it might be too soon to celebrate. The ongoing Russia-Ukraine war, combined with an extremely hot and dry spell in Europe could disrupt food supply, which will weigh on food prices.
Moreover, sentiments during the regular trading hours Tuesday were tense, as House Speaker Nancy Pelosi made her controversial visit to Taiwan, defying several warnings from China. Investors believe that this step might hurt the already wounded relations between the U.S. and China, which may lead the stock prices of numerous companies to falter.
Importantly yet, the Federal Reserve updated us that their hawkishness is far from over, smashing the general hope of milder interest rate hikes in the forthcoming meetings. The Fed might make another aggressive rate increase in September, and continue the stance till about early next year.
This announcement led to some more investors fleeing from the stock market, and ultimately, the Dow, the S&P 500, and the Nasdaq 100 ended the day 1.23%, 0.67%, and 0.3% lower.
Additionally, on Tuesday, the Labor Department revealed that the U.S. job market had cooled significantly in June at 10.7 million vacancies, down from May’s reading of 11.3 million. Nonetheless, a recent survey by The Wall Street Journal found that most economists believe that unemployment will rise and then settle around the 4.3% mark at the end of 2023.
The unemployment rate reading for July is due out on Friday this week. The reading was 3.6% for the month of June.
