Last Updated 4:15 PM EST
Stock indices finished Monday’s trading session in the green. The Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 increased 2.66%, 2.59%, and 2.36%, respectively. The increase in equities was the result of a fall in bond yields.
Indeed, the U.S. 10-Year Treasury yield fell significantly to 3.645%, a decrease of 18.8 basis points. Similarly, the Two-Year Treasury yield also decreased, as it hovers around 4.115%. The inverse relationship between the two asset classes remains very strong and has been one of the major driving forces behind this year’s market decline.
The consumer discretionary sector was the session’s laggard, as it gained 0.08%. Conversely, the energy sector remained the leader throughout the trading day, with a gain of 5.65%. In addition, WTI crude oil remained above $80 per barrel.
Furthermore, the Atlanta Federal Reserve updated its latest GDPNow reading, which allows it to estimate GDP growth in real-time. The “nowcast” becomes more accurate as more economic data is released throughout the quarter. Currently, it estimates that the economy will expand by about 2.3% in the third quarter. This is slightly down from last week’s estimate of 2.4%, which can be attributed to today’s Manufacturing ISM report (see 12 p.m. update).
Prices at the Pump Increase
Last Updated 3:00PM EST
Stocks are continuing to rally heading into the final hour of today’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 3.13%, 3.04%, and 2.72%, respectively.
In addition, WTI crude oil is also up by 5.06% despite crude oil inventories coming in higher than expected. This comes after some selling pressure in the past two trading sessions.
Nevertheless, the commodity’s overall downtrend over the past few months has led to lower gas prices across the country. However, prices might start to reverse following the announcement from OPEC+, which may cut oil production, moving forward.
Indeed, the national average for regular gas was last $3.799 per gallon, up from yesterday’s reading of $3.796. This is significantly lower than the all-time high of $5.016 per gallon on June 14.
The highest price can be found in California, where prices are substantially higher than the national average, at $6.382 per gallon. On the other hand, Texas is the state with the lowest gas price, at $3.093 per gallon.
It’ll be interesting to see if the overall downward trend will continue going forward as the Federal Reserve looks to raise interest rates to fight inflation while oil producers lower production in order to maintain the price.
Stocks Rise Despite Manufacturing Data Miss
Last Updated 12:00PM EST
Stocks continue to rally halfway into Monday’s trading session. As of 12:00 p.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are up 2.1%, 1.9%, and 1.4%, respectively.
On Monday, The Institute for Supply Management released its monthly report for the ISM Manufacturing Purchasing Managers’ Index, which measures the month-over-month change in production levels. A number over 50 represents an expansion, whereas anything below 50 means a contraction. The report came in at 50.9, worse than the expected 52.2.
It’s worth noting that this indicator has been slowly downtrending ever since its peak in April 2021, when it hit a high of 64.7. This steady downtrend has led to today’s reading, which indicates minimal expansion. This suggests that a contraction in production levels is right around the corner.
Furthermore, the ISM Manufacturing Employment report posted a reading of 48.7, meaning that manufacturing employment went into contraction again after a brief expansion in the previous report. Therefore, this could mean that manufacturing companies expect production levels to continue waning.
Stocks are in the Green to Start Monday’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 1.4%, 1.3%, and 1%, respectively.
The consumer discretionary sector (XLY) is the laggard so far, as it is down 0.8%. Conversely, the energy sector (XLE) is the session’s leader with a gain of 4.1%.
Meanwhile, bonds yields are lower, as the U.S. 10-Year Treasury yield is now hovering around 3.71%. This represents a decrease of more than 12 basis points from the previous close.
Similar movements can be seen with the Two-Year yield, which is now at 4.14%. However, the spread between the 10-Year and Two-Year U.S. Treasury yields is still negative, as it currently sits at -43 basis points.
Stocks Looking to Rebound after Q3 Misery
Last updated: 9:04 AM EST
Futures on the Dow Jones Industrial Average (DJIA) increased by 1.1%, while those on the S&P 500 (SPX) were on an uptick by 1.1% as of 9:04 a.m. EST, Monday. Meanwhile, Nasdaq 100 (NDX) futures were up 0.7%.
Last updated: 5:54 AM EST
Stock futures were mixed in the early hours of Monday morning following a terrible end to September.
Futures on the Dow Jones Industrial Average (DJIA) moved up by 0.20%, while those on the S&P 500 (SPX) were down marginally as of 5.31 a.m. EST, Monday. Meanwhile, futures tied to the tech-heavy Nasdaq 100 (NDX) were down 0.57%.
The Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 declined 1.71%, 1.51%, and 1.73%, respectively on Friday, ending the week and quarter on a negative note.
Coming to oil prices this morning, the U.S. West Texas Intermediate crude jumped 4.1% to $82.74 a barrel at the time of writing, after witnessing a loss of 2.1% on Friday. The uptick in oil prices was driven by the news that at the meeting scheduled this week, OPEC+ is considering cutting output by over 1 million barrels a day in an attempt to support prices. Concerns about energy demand in China amid lockdowns and a strengthening U.S. dollar have weighed on oil prices over recent weeks.
Meanwhile, the yield on the benchmark 10-year Treasury note moved down to 3.78% after closing at 3.80% on Friday.
Volatility Might Persist Following an Ugly September
Following the turmoil in September, the S&P 500 and the Nasdaq 100 have now declined for three consecutive quarters. Such a losing streak was last seen in 2009. Furthermore, the Dow Jones has also fallen for three straight quarters, marking the first such trend since 2015.
Investors might not see any respite soon, as the Federal Reserve’s hawkish stance to tame inflation is expected to persist over the short-term. The statement by Fed’s Vice Chair Lael Brainard on Friday reinforced its aggressive moves to control inflation. Brainard stated, “Monetary policy will need to be restrictive for some time to have confidence that inflation is moving back to target.”
The Fed might look for consistent improvement in inflation data for three to four months before it eases its stance. Meanwhile, stock market volatility might continue as investors fear that rising interest rates could push the economy into a recession.
Key Company Updates Continue to Raise Concerns
Recently reported results and guidance updates by several companies have clearly reflected the impact of inflation, currency headwinds, and supply chain issues. Last week, Nike delivered better-than-anticipated fiscal first quarter results but reported a 44% rise in inventory due to supply chain issues, which weighed on profitability.
On Sunday, Tesla (TSLA) reported Q3 deliveries of 343,830 vehicles, which lagged analysts’ expectation of 364,660 vehicles and reflected the impact of supply chain snarls. The company produced 365,923 vehicles in the quarter.
While the tech sector might continue to experience severe pressure due to macro challenges, several companies in the consumer staples and healthcare sectors might show some resilience. Names like Procter & Gamble (PG) and Johnson & Johnson (JNJ) are expected to fare better as their products generally see stable demand trends, even during an economic downturn.
Meanwhile, investors will be keenly watching the September payrolls report and the August job-openings data this week. These reports will give further insights into how the labor market is faring amid the ongoing uncertainty.
