Last Updated 4:05 PM EST
Stock indices finished Friday’s trading session in the red near the lows. The Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 fell 1.32%, 2.34%, and 3.1%, respectively. This comes after yesterday’s impressive rally and another week of volatility.
All sectors saw losses today. The consumer discretionary sector (XLY) was the session’s laggard, as it fell 3.71%. Conversely, the healthcare sector was the session’s leader, with a loss of 0.77%.
Furthermore, the U.S. 10-Year Treasury yield increased to 4.02%, an increase of 7.4 basis points. Similarly, the Two-Year Treasury yield also increased, as it hovers around 4.5%.
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 2.8% in the third quarter.
This is slightly lower than its previous estimate of 2.9%, which can be attributed to economic data that was recently released from the U.S. Bureau of Labor Statistics, along with the U.S. Census Bureau. This includes today’s sales retail sales data.
The last few updates represent a significant reversal from September when the estimate was around 0.3% growth for the quarter. At this point, it appears that the U.S. economy had a strong third quarter following two consecutive quarters of decline.
Stock Losses Accelerate Heading into the Close
Last Updated 3:00 PM EST
Stock market losses accelerate 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 1.1%, 2%, and 2.5%, respectively.
In addition, WTI crude oil is also lower today as it hovers around $85.70 per barrel. 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 compared to last week.
Indeed, the national average for regular gas was last $3.903 per gallon, up from last week’s reading of $3.891. Still, this remains significantly lower than the all-time high of $5.016 per gallon on June 14. In addition, it is lower than yesterday’s reading of $3.913 per gallon.
The highest prices can be found in California, where prices are substantially higher than the national average, at $6.152 per gallon. On the other hand, Georgia is the state with the lowest gas prices, at $3.265 per gallon.
It’ll be interesting to see what will happen to the price of gasoline 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.
Consumer Inflation Expectations Rise Compared to the Previous Month
Last Updated 12:05 PM EST
Equity markets are in the red halfway into the trading session. As of 12:05 p.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are down 0.7%, 1.5%, and 2.1%, respectively.
The materials sector (XLB) is the session laggard so far, as it is down 2.9%. Conversely, the Healthcare sector (XLV) is the session’s leader, with a loss of 0.9%.
Furthermore, WTI crude oil is down today, as prices are currently hovering around 86% per barrel. Meanwhile, bond yields are higher, as the U.S. 10-Year Treasury yield is now at 4.01%. This represents an increase of more than six basis points from the previous close.
On Friday, the University of Michigan released its preliminary results on consumer inflation expectations over the next five years. Consumers now expect inflation to be 2.9%. This number has pulled back from its June high of 3.3%.
However, it’s ticked up slightly from the previous reading of 2.7%. It’ll be interesting to see how these results will change going forward given the hotter-than-expected CPI report from Thursday.
Stocks Turn Negative as Retail Sales Remain Flat
Last Updated 10:00AM EST
Equity markets 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%, 0.5%, and 1%, respectively. On Friday, the Census Bureau released its month-over-month U.S. Retail Sales report, which measures the change in the total value of retail sales. In September, retail sales remained flat at 0%, below the expected 0.2%.
However, Core Retail Sales, which excludes automobiles, increased 0.1% month-over-month, which is above the -0.1% that was forecast.
It appears that lower gasoline prices had the most significant impact on retail sales during September. Indeed, when also excluding gasoline, core retail spending grew by 0.3%. A category that saw a spending increase was restaurants and bars, which grew by 0.5%.
This highlights how inflation has broadened out to many different areas of the economy. This further feeds the narrative that the Federal Reserve will need to be more aggressive with its rate hikes.
Futures Up after Rally in Response to Hot Inflation Data
First Published 6:56AM EST
Stock futures were mixed after September’s inflation data revealed persistently hot prices.
Futures on the Dow Jones Industrial Average (DJIA) climbed 0.27%, while those on the S&P 500 (SPX) gained 0.17%, as of 6.42 a.m. EST, Friday. Meanwhile, the Nasdaq 100 (NDX) futures remained unchanged.
The market movements were spectacular on Thursday, with an initial rush to sell stocks quickly turning into a massive rally which left the major indexes in the green at the end of the regular trading session. The S&P 500 ended 2.6% higher, breaking a six-day spell of losses. The Dow Jones Industrial Average surged 2.83% after being down by almost 500 points earlier in the day. The Nasdaq 100 also gained 2.3%.
Inflation Rages On
The consumer price index (CPI) for September came at 8.2% compared to 8.3% in August. Although at the first glance it shows a mild cooling, the figure was actually up 0.4% on a monthly basis, as compared to 0.1% in August. Moreover, it came above the consensus expectation of a 0.3% monthly increase.
Not only that, but the core CPI, which excludes food and energy prices, rose 6.6% annually, which is the highest annual price increase since 1982. Policymakers follow the core inflation data more closely because it leaves out the most volatile sectors, enabling them to see a steady inflation trend.
The latest inflation data sets the stage for another 75 basis point interest rate hike by the Federal Reserve, and another few months of aggressiveness, at the least.
The rebound was led by a rally in the energy and banking stocks. Significant gains accrued by tech players like Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Nvidia (NASDAQ:NVDA), and Qualcomm (NASDAQ:QCOM) also contributed to the upward movement.
The CPI data underscored the fact that the macroeconomic environment has not changed much, and it should be noted that investors are reacting emotionally to every news before settling down. With the unusual optimism after a hot inflation reading, investors may be betting that the price increases might peak soon. However, considering that such optimism was seen multiple times this year, it is still too soon to say anything about inflation coming down. Therefore, the rally experienced by the market yesterday might not be a sustainable one.
The markets are expected to keep swinging throughout the earnings season and until the next FOMC meeting scheduled for November 1-2. Therefore, it can be tough to predict the next swing of the pendulum. In such a scenario, keeping a long-term view on well-capitalized and fundamentally strong companies can be a good idea.
More Economic Updates to Keep an Eye on
Deep-diving within the economy, the U.S. mortgage rates may be on the verge of surpassing the 7% threshold rate, according to the National Association of Realtors. The association believes that if the mortgage rates do move higher, then the next threshold of housing shock will be 8.5%. This highlights the crisis of the U.S. housing market.
Moreover, Labor Department data revealed Thursday that the weekly filing for unemployment benefits grew more than expected last week. Notably, 9,000 jobless claims were added on a month-over-month basis for the week ending October 8, taking the total number to 228,000, which was higher than consensus expectations of 225,000. Although alarming at first glance, this data may have a positive side to it, in the form of a weakening labor market, which is exactly what the Fed needs to see to determine its next course of action. A weakening labor market fits into the Fed’s agenda of gradually stabilizing prices.
