Last Updated 4:15PM EST
Stock indices finished Wednesday’s trading session in the red after staging a brief comeback in the final hour of trading. The Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 fell 0.14%, 0.2%, and 0.08%, respectively. As a result, the recent two-day winning streak came to an end.
The utility sector was the session’s laggard, as it fell 2.22%. Conversely, the energy sector was the session’s leader, with a gain of 2.13%. In addition, WTI crude oil remained above $80 per barrel as it continued its approach toward the $90 per barrel level.
Furthermore, the U.S. 10-Year Treasury yield increased significantly to 3.75%, an increase of 12.3 basis points. Similarly, the Two-Year Treasury yield also increased, as it hovers around 4.15%.
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 2.7% in the third quarter.
This is higher than its previous estimate of 2.3%, which can be attributed to recent data released from the U.S. Bureau of Economic Analysis, the Institute for Supply Management, and the U.S. Census Bureau.
The last few updates represent a significant reversal from September when the estimate was around 0.3% growth for the quarter. Investors should keep an eye out for potentially-sharp reversals to the downside as more economic data is released, all while the Federal Reserve continues to raise interest rates.
Stocks Erase Losses Heading into the Close
Last Updated 3:00PM EST
Stock indices have erased most of their losses 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 roughly flat compared to yesterday’s close.
On Wednesday, the Mortgage Bankers Association released its weekly report for the U.S. 30-Year mortgage rate. The mortgage rate increased to 6.75% compared to last week’s reading of 6.52%.
Due to the higher rates, the number of mortgage applications decreased week-over-week by a whopping -14.2%, following last week’s decrease of -3.7%. This indicates that sentiment in the real estate market is falling, which is consistent with other data that has been released so far.
In addition, mortgage application volume is down substantially on a year-over-year basis, with the Mortgage Market Index at 218.7 compared to 684.5 on October 6, 2021.
Stocks Fall despite Positive Employment Data
Last Updated 12:00PM EST
Equity markets are in the red 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 down 1.1%, 1.3%, and 1.6%, respectively.
On Wednesday, Automatic Data Processing (NASDAQ: ADP) released its Nonfarm Employment Change report, which is the change in non-farm, private employment on a month-over-month basis.
The number came in at 208,000 for September, which was above the expected 200,000. The figures reported by ADP have been on an overall downtrend since the start of 2022, although the recent print came in higher than last month’s report. The overall trend suggests that hiring is slowing down in the U.S. economy as companies continue to face macroeconomic uncertainties.
Furthermore, 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 56 but lower than last month’s reading of 56.9.
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.
Furthermore, the ISM Non-Manufacturing Employment report came in at 53, indicating that the number of jobs is expanding. This comes after last month’s reading of 50.3, which equates to an accelerating expansion. It’ll be interesting to see if this is the beginning of an uptrend or just a temporary boost.
Stocks Fall as Bond Yields Rise
Last Updated at 10:00AM EST
Stock indices are in the red 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 down 1%, 1.3%, and 1.6%, respectively.
The utilities sector (XLU) is the laggard so far, as it is down 2.6%. Conversely, the energy sector (XLE) is the session’s leader, with a gain of 0.4%.
WTI crude oil remains above $80 per barrel after OPEC+ announced it’s considering a large production cut, going forward.
Meanwhile, bond yields are higher, as the U.S. 10-Year Treasury yield is now hovering around 3.77%. This represents an increase of more than 14 basis points from the previous close.
Similar movements can be seen with the Two-Year yield, which is now at 4.19%. However, the spread between the 10-Year and Two-Year U.S. Treasury yields is still negative, as it currently sits at -42 basis points.
Futures Fall after a Strong 2-Day Rally
Published at 6:00 AM EST
U.S. stock futures declined in the early hours of Wednesday morning following a sharp rally on the first two trading days of the month.
Futures on the Dow Jones Industrial Average (DJIA) and the S&P 500 (SPX) were down 0.95% each, while those tied to the tech-heavy Nasdaq 100 (NDX) declined 0.97%, as of 5.56 a.m. EST, Wednesday.
All three U.S. stock indexes continued to rally on Tuesday after witnessing a significant decline in September. The Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 were up 2.8%, 3.06%, and 3.14%, respectively, in Tuesday’s regular trading session.
The strong start to the fourth quarter was supported by a fall in the bond yields. The 10-year Treasury yield traded at about 3.637% on Tuesday, down seven basis points. Meanwhile, the Two-Year Treasury yield came in at 4.113%, reflecting a decline of two basis points.
Despite the two-day rally, investors continue to fear that aggressive interest rate hikes by the Federal Reserve to tame inflation might push the economy into a recession.
This morning, the U.S. West Texas Intermediate crude was trending lower by 0.40% at the time of writing. WTI crude oil prices surged over the past two days on the possibility of a major production cut by OPEC+, which will be decided at a meeting scheduled today. The potential production cut by OPEC+ could trigger a recovery in oil prices following a decline over the recent weeks due to fears of an impending recession and a strong U.S. dollar.
The economic releases lined up for today include September’s ADP Employment report, which is a monthly measure of private payrolls. The previous report revealed that private businesses employed 132,000 workers in August, down from 268,000 in July. The decline reflected a “more conservative pace of hiring”, as per Nela Richardson, ADP’s chief economist. The consensus for September month stands at 200,000.
Key Company Updates
Meanwhile, Energy giant Exxon Mobil (XOM) expects its third-quarter results to benefit from higher natural gas prices, which will help in mitigating the impact of lower oil prices compared to the second quarter. Exxon delivered impressive results in the first half of the year as elevated oil prices triggered by the Russia-Ukraine conflict helped in generating solid earnings and cash flows.
Also, shares of Amylyx Pharmaceuticals (AMLX) were trending lower in Wednesday’s pre-market trading after the company announced a public offering of 6 million shares. Amylyx recently won the FDA’s approval for its ALS drug.
