Stock Market Today: Stocks Fall as Bond Market Flashes Major Recession Indicator

Last Updated 4:00 PM EST

Stock indices finished Wednesday’s trading session mostly in the red. The Dow Jones Industrial Average remained flat while the S&P 500 and the Nasdaq 100 fell 0.74% and 2.26%, respectively.

Furthermore, the U.S. 10-Year Treasury yield decreased to 4.02%, a decrease of more than eight basis points. However, the bond market signaled a major red flag today. Indeed, the spread between the Three-Month Treasury yield and the 10-Year yield inverted.

This is a major recession indicator with a perfect track record of predicting recessions approximately a year in advance. Currently, the Three-Month yield sits at 4.035%.

Nonetheless, the U.S. economy is expected to see growth in the third quarter. 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 3.1% in the third quarter.

This is higher than its previous estimate of 2.9%, which can be attributed to recent data released this week.

Nevertheless, inflation continues to be a problem around the world. Therefore, it’ll be interesting to see what the actual GDP growth will be and how it’ll change going forward as higher rates start to impact the economy.

Stocks Turn Negative Heading into the Close

Last Updated at 3:00PM EST

Stocks are in the 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 0.1%, 0.8%, and 2.2%, respectively.

In addition, WTI crude oil is higher today, as it hovers around the high-$87 per barrel range. Nonetheless, 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 $3.764 per gallon, down from last week’s reading of $3.854. This is 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 $5.675 per gallon. On the other hand, Georgia is the state with the lowest gas prices, at $3.187 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 are Mixed; Mortgage Rates Continue to Increase

Last Updated at 12:22PM EST

Equity markets remain mixed halfway into today’s trading session. As of 12:22 p.m. EST, the S&P 500 and the Dow Jones Industrial Average were up 0.5% and 0.9%, respectively. Meanwhile, the Nasdaq 100 is down 0.5%

On Wednesday, the Mortgage Bankers Association released its weekly report for the U.S. 30-Year mortgage rate. The mortgage rate increased to 7.16% compared to last week’s reading of 6.94%.

Due to the higher rates, the number of mortgage applications decreased week-over-week by -1.7%, following last week’s decrease of -4.5%. 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 201.1 compared to 645.1 on October 27, 2021.

Indices are Mixed; New Home Sales Beat Expectations

Last Updated at 10:00AM EST

Stock indices are mixed 30 minutes into today’s trading session. As of 10:00 a.m. EST, the S&P 500 and the Nasdaq 100 were down 0.3% and 1.4%, respectively. Meanwhile, the Dow Jones Industrial Average gained 0.3%. As interest rates rise to combat inflation, many have become increasingly concerned about the real estate market.

On Wednesday, the Census Bureau released its United States New Home Sales data, which came in at 603,000. For reference, forecasters were expecting a print of 585,000. This was significantly lower than last year’s figure of 742,000. The New Home Sales metric measures the number of single-family homes sold in the prior month (on an annualized basis).

It’s worth noting that the overall trend in sales is in decline, which is occurring during a period of rising inventory. At the beginning of the year, the supply of houses was 5.6 months. However, in September 2022, the supply increased to 9.2 months. In contrast, the supply in September 2021 was only 6.1 months.

The reduced activity from buyers can be attributable to higher interest rates, which have made mortgage payments more expensive and more difficult to qualify for. The rising inventory may also be caused by higher interest rates, as those with variable mortgages are seeing their monthly payments increase as well. Thus, affordability may be an issue for the sellers as well.

Furthermore, homeowners may be selling in anticipation of further economic slowdown, which would also put pressure on home prices. Therefore, some may be trying to cash in while they still can. Nevertheless, the trend is clear: the real estate market is slowing down.

Futures Down as Uncertainty Looms Over Tech

First Published at 7:08AM EST

U.S. stock futures retracted on Wednesday morning after investors mull over possibilities in the upcoming tech earnings, after dismal quarterly results from Alphabet (NASDAQ:GOOGL)(NASDAQ:GOOG) on Tuesday.

Futures on the Dow Jones Industrial Average (DJIA) dipped 0.05%, while those on the S&P 500 (SPX) lost 0.61%, as of 6.49 a.m. EST, Wednesday. Meanwhile, the Nasdaq 100 (NDX) futures retracted 0.53%.

In the pre-market hours of Wednesday, Alphabet shares tumbled more than 6% after it reported top- and bottom-line misses, catalyzed by a significant drop in YouTube advertising revenues. This performance led investors to speculate on the performances and projections of the other tech players that are dependent on ad revenues. This uncertainty is keeping the market fragile and vulnerable to wide swings driven by emotional investing.

This uncertainty spurred a decline in other mega-cap tech stocks in after-hours trading. Shares of Meta Platforms (NASDAQ:META) which will report its earnings after the market closes Wednesday, as well as Amazon (NASDAQ:AMZN) both fell nearly 4% early Wednesday morning.

Having said that, this time around, investors seem to be looking more at the projections and expectations than the actual third-quarter results of companies. It is important to mention Coca-Cola (NYSE:KO) and General Motors (NYSE:GM) here as two safe stocks with solid projections and strong quarterly results.

However, looking at the bigger picture is what makes more sense. Around 30% of U.S. listed companies have already reported earnings, and most of them have done well.

Moreover, with the holiday season just around the corner and no money in consumers’ wallets, it will be interesting to see whether they will make transactions on credit in the ongoing quarter. In that case, companies like Visa (NYSE:V), which reported an earnings beat and a dividend hike on Tuesday, stand to benefit.

Disclosure