Last Updated 4:15 PM EST
Stock indices finished today’s trading session in the red. The Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 decreased by 0.32%, 0.75%, and 1.02%, respectively. Furthermore, the U.S. 10-Year Treasury yield jumped to 3.961%, an increase of 7.6 basis points.
Similarly, the Two-Year Treasury yield also increased, hovering around 4.325%. This brings the spread between them to -36.4 basis points. The negative spread indicates that investors still have fears of a recession.
The energy sector (XLE) was the session’s laggard, as it lost 2.09%. Conversely, the consumer staples sector (XLP) was the session’s leader, with a gain of 0.35%.
Compared to Friday, the market is pricing in a higher chance of a higher Fed Funds rate for the end of the year. In fact, the market’s expectations for a rate in the range of 4.25% to 4.5% decreased to 57.9%, which is down from Friday’s expectations of 63.1%.
In addition, the market is now also assigning a 28.3% probability to a range of 4.5% to 4.75%. For reference, investors had assigned a 23.5% chance Friday.
Stocks Remain Negative; Gas Prices Continue to Climb
Last Updated 3:00 PM EST
Stocks are red 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 down 0.2%, 0.6%, and 0.8%, respectively.
In addition, WTI crude oil is also down by 2.5% as it takes a break from its rally over the past couple of weeks.
Although the commodity is well off its yearly highs, its recent uptrend has led to prices at the pump gaining upward momentum across the country.
Indeed, the national average for regular gas was last $3.919 per gallon, up from yesterday’s reading of $3.91. Still, this remains significantly lower than the all-time high of $5.016 per gallon on June 14.
The highest prices can be found in California, where prices are substantially higher than the national average, at $6.33 per gallon. On the other hand, Georgia is the state with the lowest gas prices, at $3.23 per gallon.
It’ll be interesting to see if this upward 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 Continue Falling; BoE Increases Bond Buying Program
Last Updated 12:00PM EST
Stocks are in the red halfway into today’s trading session. As of 12:00 p.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are down 0.2%, 0.6%, and 0.9%, respectively.
On Monday, the Bank of England announced that it would increase its support for pension funds. This comes after the debt-market crisis that recently hit the United Kingdom caused many pension funds to receive margin calls on their investments.
The support will be in the form of more long-dated bond buying by the Bank of England on a daily basis. Although this bond-buying program is temporary and scheduled to end Friday, today’s news doesn’t exactly instill much confidence in the UK market.
In fact, it suggests that financial conditions may be worsening. As a result, it could be possible that the Bank of England won’t be able to end its support when it expects to.
Investors need to pay close attention to any new development regarding this debt crisis as it could have ripple effects across global economies, including North America.
Stocks Begin the Week in the Red
Last Updated 10:00 AM 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 0.01%, 0.4%, and 0.8%, respectively.
The technology sector (XLK) is the laggard so far, as it is down 1.3%. Conversely, the industrial sector (XLY) is the session’s leader, with a gain of 0.6%.
WTI crude oil remains above $90 per barrel as investors weigh the impact of production cuts from oil-producing countries.
Meanwhile, bond yields are flat to start the day, as the U.S. 10-Year Treasury yield is now hovering around 3.885%.
Similar movements can be seen with the Two-Year yield, which is now at 4.308%. However, the spread between the 10-Year and Two-Year U.S. Treasury yields is still negative, as it currently sits at -42.3 basis points.
Stock Futures are Down as Earnings Season Arrives
First Published 7:03 AM EST
Stock futures retreated early on Monday morning as banks prepare for a possibly murky earnings season.
Futures on the Dow Jones Industrial Average (DJIA) fell 0.17%, while those on the S&P 500 (SPX) lost 0.29%, as of 6.48 a.m. EST, Monday. Meanwhile, Nasdaq 100 (NDX) futures dipped 0.43%.
Monday is Columbus day, and the holiday is likely to keep trading volumes in the equity market low and volatility high.
What Made Investors Cautious Last Week?
On Friday, major averages headed south after the U.S. Labor Department’s latest jobs report revealed a remarkably strong labor market. Notably, 263,000 jobs were added to the economy in September, only marginally higher than expected. Most importantly, the unemployment rate dropped to a multi-decade low of 3.5%, from 3.7%.
Despite being good news for the workforce, investors failed to be positive about it. A sell-off ensued on the speculation that the Fed will draw encouragement from the strong labor market and will keep pushing interest rates high enough to topple the economy over to a recession.
The S&P 500, the Dow, and the Nasdaq 100 closed Friday’s regular trading session with losses of 2.8%, 2.11%, and 3.88%, respectively.
Also, the World Trade Organization cut its world trade forecast from 3.5% year-over-year growth in total exports and imports to just 1% growth. The organization said that elevated energy prices, rising interest rates, and geopolitical unrest is likely to keep trade under pressure in 2023.
What the Week Holds
This week will be a busy one, with JPMorgan (JPM), Morgan Stanley (MS), Wells Fargo (WFC), and Citigroup (C) reporting earnings later this week. Among other key earnings releases this week are PepsiCo (PEP), Delta Air Lines (DAL), and Domino’s (DPZ).
Earnings reports from these behemoths will give investors key insights into economic health, including consumer behavior.
However, September’s consumer price index (CPI), which is due to be released on Thursday, is going to be the undisputed highlight of the week. The CPI is the most favored inflation data, influencing the Federal Reserve’s policy decisions to a large extent.
Strong Dollar Threatens to Slow Exports
Another worrisome update is tied to the strength of the dollar. The dollar has been growing in value relative to currencies like the Euro, the Japanese Yen, and the British pound. Although this is making imports from foreign countries cheaper for the U.S., exports from the U.S. are getting more expensive.
This is also bad news for U.S. manufacturers running overseas factories, as the value of their manufactured goods is worth much less locally in comparison to dollars. This is a threat to American industrial manufacturing revenues, which is likely to be reflected in the quarterly reports during this earnings season.
