Last Updated 4:05 PM EST
Stock indices finished today’s trading session in the green. The Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 gained 1.31%, 0.97%, and 1.11%, respectively.
The utilities sector was the session’s laggard, as it fell 1.92%. Conversely, the communications sector was the session’s leader, with a gain of 1.8%.
Furthermore, the U.S. 10-Year Treasury yield increased to 4.22%, an increase of more than five basis points. Similarly, the Two-Year Treasury yield also increased, as it hovers around 4.73%. This brings the spread between them to -51 basis points.
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 52%, compared to Friday’s expectations of 61.5%.
In addition, the market is now also assigning a 48% probability to a range of 4.5% to 4.75%. For reference, investors had assigned a 38.5% chance Friday.
Stocks Rise; Real Estate Consumer Confidence Falls
Last Updated 2:00PM EST
Stocks are in the green heading into the final two hours of today’s trading session. As of 2:00 p.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are up 1%, 0.5%, and 0.4%, respectively.
On Monday, Fannie Mae released its monthly National Housing Survey. This includes its Home Purchasing Sentiment Index (HPSI), which decreased from a reading of 60.8 to 56.7. The HPSI indicator has been on an eight-month downtrend and now sits at an all-time low.
Indeed, only 16% of respondents believe that it is currently a good time to buy a house. In addition, just over half of the respondents believe that it is a good time to sell a house at 51%. This is an eight-point decline from the previous month.
This decline in sentiment can be attributed to rising mortgage rates that currently sit above 7%. This is more than double the approximate 3% consumers saw at the beginning of the year. With inflation still running hot, the Federal Reserve will continue to raise interest rates, which will push mortgage rates even higher.
As a result, it’s no surprise that 37% of respondents believe that housing prices will continue to decline in the next 12 months, an increase of 2% compared to the previous month.
Indices are Mixed; Gasoline Prices Rise
Last Updated at 12:07PM EST
Stock indices are mixed halfway into today’s trading session. As of 12:07 p.m. EST, the S&P 500 and the Dow Jones Industrial Average are up 0.1% and 0.6%, respectively. Meanwhile, the Nasdaq 100 is down 0.1%
In addition, WTI crude oil is also up today as it hovers above $93 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.
Indeed, the national average for regular gas was last $3.804 per gallon, up from last week’s reading of $3.762. 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 $5.458 per gallon. On the other hand, Georgia is the state with the lowest gas prices, at $3.121 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 Rise Along with Treasury Yields
Last Updated 10:03AM EST
Stock indices are in the green after the first half-hour of today’s trading session. As of 10:03 a.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are up 0.4%, 0.2%, and 0.3%, respectively.
The utilities sector (XLU) is the laggard so far, as it is down 1.1%. Conversely, the communications sector (XLC) is the session’s leader with a gain of 1%.
WTI crude oil is currently above $90 per barrel as investors hope to see a rebound in Chinese demand. In addition, they are also trying to weigh the impact of production cuts from oil-producing countries, along with a softening outlook that’s being caused by recession fears.
Meanwhile, bond yields are higher to start the day, as the U.S. 10-Year Treasury yield is now hovering around 4.19%. This represents an increase of more than two basis points from the previous close.
Similar movements can be seen with the Two-Year yield, which is now at 4.71%. However, the spread between the 10-Year and Two-Year U.S. Treasury yields is still negative, as it currently sits at -52 basis points.
Futures Up as Investors Prepare for Midterms, CPI Report
First Published 5:49AM EST
U.S. stock futures rose early Monday morning ahead of an action-packed week for the eco-political scene.
Futures on the Dow Jones Industrial Average (DJIA) gained 0.44%, while those on the S&P 500 (SPX) climbed 0.44%, as of 5.32 a.m. EST, Monday. Meanwhile, the Nasdaq 100 (NDX) futures advanced 0.40%.
Midterms are Almost Here
The Congressional midterm elections are due on Tuesday, and the results will decide which party takes over Congress — Democrats or Republicans. Currently, the Democrats are in the majority and preside over Congress. However, a Republican win might be positive for oil and gas companies as their policies are likely to support this sector.
A lot of discussions about the semiconductor industry and the trade restrictions with China are also likely to take place in the campaigns.
Inflation Report Due Thursday
The nail-biting around October’s inflation will end on Thursday with the release of the month’s consumer price index data. Inflation is still expected to be hot, as anything above the 3% target rate of inflation is being treated as too much.
However, if the rate shows a slowdown on a year-over-year and month-over-month basis, the stock market may see a rally. Cooler inflation will indicate a possible step-down in aggressiveness by the Fed in its forthcoming meetings.
Markets are expected to be volatile till Thursday in response to the anticipation.
Global Demand Shows Strong Signs of Slowing
Meanwhile, a global recession is appearing to be gaining ground as economies across the world face various economic concerns.
China’s trade figures were dull in October, as evident from the exports and import figures, both of which fell more than expected. The export surplus of $85.15 billion decreased considerably as a result of a sharp decline in global demand. Moreover, domestic issues such as the stringent zero-Covid controls the and housing market crash are slowing down domestic demand as well.
October was a spooky month for many nations. South Korea’s exports posted the worst fall in more than two years as global demand for electronics fell. Exports to the US, Europe, Taiwan, and Hong Kong also fell significantly in October.
This apart, manufacturing output shrank in most nations of the euro-zone during the month. Business activity in the U.S. also dipped for the fourth consecutive month.
M&A Activities Take a Backseat
The cash crunch in the U.S. made its presence felt strongly in October. New debt and equity raises as well as corporate mergers slowed meaningfully in October.
It is important to mention here that a Wall Street Journal analysis of Fitch ratings data found that at least $200 billion is required over 2022 and 2023 by North American companies to operate through rising interest rates. The high interest rates are yet to have meaningful effects on consumer spending but are adding to the pressure on debt-ridden companies that have a combined debt of more than $10 trillion.
This certainly puts the valuation of numerous companies at risk.
What Awaits on Monday?
After Friday’s rally where the S&P 500, the Dow, and the Nasdaq 100 clocked gains of 1.36%, 1.26%, and 1.56%, respectively, the indexes are looking at a positive start to the week despite some concerns.
Apple (NASDAQ:AAPL) warned of lower iPhone shipments in the forthcoming months as the company was forced to temporarily shrink its production capacity due to Covid restrictions in China. This might affect the share prices of the company as the day continues.
On the earnings front, Palantir Technologies (NYSE:PLTR), Activision Blizzard (NASDAQ:ATVI), Lyft (NASDAQ:LYFT), and Take-Two Interactive (NASDAQ:TTWO) are slated to release earnings later on Monday.
