Last Updated 4:05 PM EST
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Stock indices finished today’s trading session in the red. The Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 lost 1.45%, 1.54%, and 1.43%, respectively.
The real estate sector was the session’s laggard, as it lost 2.78%. Conversely, the consumer staples sector was the session’s leader, with a loss of 0.35%.
Furthermore, the U.S. 10-Year Treasury yield decreased to 3.68%, a decrease of less than one basis point. Similarly, the Two-Year Treasury yield also decreased, as it hovers around 4.45%. This brings the spread between them to -77 basis points.
Compared to Friday, the market is pricing in a higher chance of a lower Fed Funds rate for June 2023. In fact, the market’s expectations for a rate in the range of 5% to 5.25% decreased to 38.3% compared to Friday’s expectations of 40.1%.
In addition, the market is now also assigning a 17.9% probability to a range of 5.25% to 5.5%. For reference, investors had assigned an 18.8% chance on Friday.
Stocks Fall; Fed President Expects Higher Unemployment
Last Updated 2:30 PM EST
Stocks are in the red heading into the final 90 minutes of today’s trading session. As of 2:30 p.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are down 1.3%, 1.5%, and 1.4%, respectively.
A speech was given today by New York Federal Reserve President, John Williams. He stated that rising interest rates are starting to lower demand in the economy. Despite this, he sees the labor market as incredibly tight, as the current unemployment rate sits at 3.7%.
Nevertheless, Williams expects the unemployment rate to increase to a range of 4.5% and 5% by the end of 2023. This is likely because central bank policies usually take at least 6 months to impact the economy.
Furthermore, Williams also believes that inflation is showing signs of slowing down, as supply chain bottlenecks are starting to ease. Indeed, he sees inflation falling between 3% to 3.5% by the end of 2023.
However, this implies that inflation will remain above the 2% target for quite some time. He attributes this to wages, services, and inflation expectations.
Stocks Fall; Gasoline Prices Continue Downtrend
Last Updated at 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 0.8%, 0.8%, and 0.6%, respectively.
In addition, WTI crude oil is relatively flat today, as it hovers around the mid-$76 per barrel range. The commodity’s overall downtrend has caused prices at the pump to decline when compared to last week.
Indeed, the national average for regular gas was last $3.546 per gallon, down from last week’s reading of $3.662. This is significantly lower than the all-time high of $5.016 per gallon on June 14.
The highest prices can be found in Hawaii, where prices are substantially higher than the national average, at $5.198 per gallon. On the other hand, Texas is the state with the lowest gas prices, at $2.885 per gallon.
It’ll be interesting to see if this 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 and Treasury Yields Fall
Last Updated 10:00AM EST
Stock indices are in the red to start 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 0.5%, 0.6%, and 0.2%, respectively.
The energy sector (XLE) is the laggard so far, as it is down 2.5%. Conversely, the consumer discretionary sector (XLY) is the session’s leader, with a gain of 0.3%.
WTI crude oil remains below $80 per barrel as investors weigh the impact of protests in China, production increases from oil-producing countries, and a softer demand outlook caused by recession fears.
Meanwhile, bond yields are lower to start the day, as the U.S. 10-Year Treasury yield is now hovering around 3.68%. This represents a decrease of more than one basis point from the previous close.
Similar movements can be seen with the Two-Year yield, which is now at 4.45%. As a result, the spread between the 10-Year and Two-Year U.S. Treasury yields is still negative, as it currently sits at -77 basis points.
Futures Dip as China Unrest Intensifies
First Published 6:58AM EST
Stock futures fell on Monday as the resurgence of another COVID-19 wave and social unrest in China hit the news. Dow Jones Industrial Average (DJIA) futures lost 0.54%, while those on the S&P 500 (SPX) lost 0.75% as of 6:58 a.m. EST, Monday. Meanwhile, the Nasdaq 100 (NDX) futures retreated 0.76%.
Last week was a calm week for markets, as investor sentiments were uplifted thanks to the Federal Reserve’s meeting minutes. The document revealed that the central bank’s representatives were considering slowing down the pace of rate hikes, which is what investors wanted to hear.
As a result, the markets saw gains last week, with the Dow gaining 1.78%. In addition, the S&P 500 increased 1.53%, whereas the Nasdaq was up 0.72% during the holiday-shortened week.
China Unrest Sparks Concerns Again
Unrest in China has been brewing since last week after the country found itself in the middle of a bad COVID-19 wave once again. This is despite President Xi Jinping’s strict zero-COVID policy. The fresh wave prompted the government to tighten its grip and reimpose COVID controls just weeks after it gave hope of easing the restrictions.
By the time the Thanksgiving weekend arrived, various parts of China saw civil disobedience and protests against the prolonged lockdowns, which are disrupting life in China to the point of frustration. The unrest impacted Asian trade, and oil prices retreated as demand concerns arose.
However, this is also a time when investors should not indulge in panic. It should be kept in mind that China has been suffering from lockdowns and restrictions for quite some time now, and another round of lockdowns should not make much difference to U.S. investors.
Granted, Chinese stocks are expected to remain volatile in the near future. Nevertheless, when looking at past trends, Chinese stocks have overcompensated for panicked sell-offs with impressive gains once investor sentiments settled. Thus, keeping a long-term perspective of well-capitalized and fundamentally strong stocks can be beneficial, as fear gives rise to new buying opportunities.
