Stocks Finish Thursday’s Session in the Green
Last Updated 4:15 PM EST
Stock indices finished Thursday’s trading session in positive territory. The Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 increased 0.51%, 0.99%, and 1.44%, respectively.
The energy sector was the session’s laggard, as it decreased by 1.7%. Conversely, the consumer discretionary sector was the session’s leader, with a gain of 2.3%. In addition, WTI crude oil lost 3.4%, reaching $96.40 per barrel.
Furthermore, the U.S. 10-Year Treasury yield fell substantially today to 2.9%, a decline of 12.7 basis points. Similarly, the Two-Year Treasury yield also fell, as it hovers around 3.1%. This brings the spread between them to -20 basis points. The negative spread indicates that investors still have fears of a recession.
Today’s rally could potentially be explained by the fact that the market is pricing in a higher chance of a lower Fed Funds rate for the end of the year when compared to yesterday.
In fact, the market’s expectations for a rate in the range of 3.75% to 4% decreased to 15.3%, which is down from yesterday’s expectations of 25.9%. In addition, the market is now also assigning a 34.7% probability to a range of 3.25% to 3.5%. For reference, investors had assigned a 24.1% chance yesterday.
However, the market’s current expectations appear to be too optimistic, as inflation has only been accelerating around the world. Indeed, the macroeconomic picture has only worsened recently.
Gas Prices Continue to Decline as Oil Prices Fall
Last Updated 3:30PM EST
Stocks are positive, heading into the final 30 minutes of today’s trading session. As of 3:30 p.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are up 0.2%, 0.7%, and 1.2%, respectively.
The energy sector 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 2.1%.
WTI crude oil is currently hovering around $96 per barrel, as it trades not too far away from its session low of $94.61 per barrel. The price has pulled back considerably from this week’s high of $104.44 per barrel.
Consumers will be happy to see that the commodity’s recent pullback has led to lower gas prices across the country. The national average for regular gas was last $4.44 per gallon, down from yesterday’s reading of $4.467. This is significantly lower than the all-time high of $5.016 per gallon on June 14.
The highest price can be found in California, where prices are substantially higher than the national average, at $5.818 per gallon. On the other hand, Texas is the state with the lowest gas price, at $3.952 per gallon.
It’s likely that this downward trend will continue going forward as the Federal Reserve looks to raise interest rates to fight inflation. However, higher rates will destroy demand throughout the whole economy. As a result, lower gas prices might have to come at the cost of a recession.
Initial Jobless Claims Come in Higher than Expected
Last Updated 12:10 PM EST
Stock indices are mixed halfway into today’s trading session. As of 12:10 p.m. EST, the S&P 500 and the Nasdaq 100 were up 0.4% and 0.9%, respectively. Meanwhile, the Dow Jones Industrial Average is down 0.1%
On Thursday, the Department of Labor released its Initial Jobless Claims report, which came in worse than expected. In the past week, 251,000 people filed for unemployment insurance for the first time. Expectations were for 240,000 individuals.
When using the four-week average, initial jobless claims were 240,500, up from last week’s reading of 236,000. It’s worth noting that this figure has been steadily trending upwards each week since the start of April 2022.
Also important, Continuing Jobless Claims, which measures the number of unemployed people who qualify for unemployment insurance, came in at 1.384 million, worse than the forecast of 1.340 million and higher than last week’s 1.333 million.
Continuing Jobless Claims are in an overall downtrend and are currently sitting near their lowest levels since 1970. This suggests that more individuals are finding work than those who are filing for the first time.
However, this figure has been trending slightly upwards since the beginning of June. It will be interesting to see if this trend continues as interest rates rise while economic growth continues to slow down.
Stocks are Mixed to Start Thursday’s Trading Session; ECB Raises Rates Higher than Expected
Last Updated 10:00AM EST
Stocks are relatively flat 30 minutes into Thursday’s trading session. The energy sector (XLE) is the laggard so far, as it is down 2.8%. Conversely, the healthcare sector (XLV) is the session’s leader, with a gain of 0.9%.
WTI crude oil remains below $100 per barrel as its downward momentum resumes after a brief bounce that saw it top out at $104.44 on Tuesday. Currently, the price is hovering around the mid-$96 range, equating to a decline of more than 3% from yesterday’s close.
Meanwhile, bond yields are lower, as the U.S. 10-Year Treasury yield is now hovering around 2.98%. This represents a decrease of more than four basis points from the previous close.
Similar movements can be seen with the Two-Year yield, which is now at 3.18%. However, the spread between the 10-Year and Two-Year U.S. Treasury yields is still negative, as it currently sits at -20 basis points.
On Thursday, the European Central Bank announced that it will raise its interest rate by 50 basis points, which was higher than expectations of 25 basis points. This is the ECB’s first rate hike since 2011 and comes as inflation continues to accelerate. As a result, the Euro to U.S. Dollar exchange rate increased to 1.0216 after briefly falling below parity last week.
Pre-Market Update
Stock futures were mixed early on Thursday morning as investors awaited some more major earnings releases scheduled for the week.
Futures on the Dow Jones Industrial Average (DJIA) faltered, losing 0.19%, while those on the S&P 500 (SPX) moved 0.08% lower, as of 6.04 a.m. EST. Meanwhile, the Nasdaq 100 (NDX) futures slightly advanced by 0.07%.
On Thursday, AT&T (T) and American Airlines (AAL) are two of several major companies set to report results before the opening bell. Investors will also be watching initial jobless claims data, which has been trending upward in recent weeks.
Sentiments around Wednesday’s earnings releases were mixed, particularly for Tesla (TSLA), whose strong earnings performance was partly overshadowed by contracting automotive gross margins. Also, United Airlines (UAL) failed to impress due to the high operating costs leading to lower-than-expected profits.
However, the earnings season brought in a new rush of optimism among investors, after weeks and months of worry. The Dow, S&P 500, and Nasdaq 100 rallied 0.15%, 0.59%, and 1.55% respectively. Significant rebounds in tech, crypto, and other risk-class assets were notable, especially in a high-inflation, high-interest rate environment.
That said, the concerns of a recession following another aggressive rate hike still loom large. Meanwhile, signs of a slowdown have already started to show up in different parts of the economy.
On Wednesday, the National Association of Realtors revealed that the median price of existing homes shot up 13.4% over the past 12 months, reaching a staggering $416,000 in June. Simultaneously, the number of resold homes dropped for the fifth consecutive month. Also amid a fading housing boom and rising mortgage rates, new residential construction in the U.S. fell 2% in June.
Elsewhere, as the Russia-Ukraine war rages on, Russian natural gas resumed its flow through the Nord Stream pipeline to Germany at a lower rate. This calmed oil prices in Europe by as much as 6.5%.
