Last Updated 4:15 PM EST
Stock indices finished today’s trading session firmly in the green after a poor performance on Friday. The Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 increased by 1.86%, 2.65%, and 3.47%, respectively.
All sectors rallied today after each one finished Friday in negative territory. Nonetheless, the consumer staples sector was the laggard, as it closed 1.08% higher. Conversely, the consumer discretionary sector (XLY) was the session’s leader with a gain of 4.06%.
Furthermore, the U.S. 10-Year Treasury yield fell to 4.017%, a decrease of less than one basis point. Similarly, the Two-Year Treasury yield also decreased, as it hovers around 4.45%. The negative spread indicates that investors still have fears of a recession.
Compared to Friday, the market is pricing in a higher chance of a lower 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% increased to 32.1%, which is up from Friday’s expectations of 29.4%.
In addition, the market is now also assigning a 66.7% probability to a range of 4.5% to 4.75%. For reference, investors had assigned a 69.8% chance Friday.
Stock Market Gains Accelerate Heading into the Close
Last Updated at 3:15PM EST
Stocks are in the green heading into the final 45 minutes of today’s trading session. As of 3:15 p.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are up 1.8%, 2.6%, and 3.4%, respectively.
In addition, WTI crude oil continues to pull back from its previous rally, as it now hovers around the mid-$85 per barrel range. This has caused prices at the pump to decline when compared to last week.
Indeed, the national average for regular gas was last $3.888 per gallon, down from last week’s reading of $3.919. 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 $6.059 per gallon. On the other hand, Georgia is the state with the lowest gas prices, at $3.253 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 Positive Halfway into the Day
Last Updated at 12:20PM EST
Equity markets are positive halfway into the trading session. As of 12:20 p.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are up 1.7%, 2.5%, and 3.2%, respectively.
On Monday, the Bank of Canada released its Business Outlook Survey, which measures the sentiment of 100 different businesses by asking them to rate current conditions. Unfortunately, sentiment saw the largest decline since the second quarter of 2020, when the world shut down for the first time.
More specifically, the indicator fell from 4.87 in the second quarter to 1.69 in the third quarter. The decline in sentiment can be attributed to higher interest rates while demand growth for products normalizes to pre-pandemic levels. In addition, most businesses expect inflation to remain higher than 3% going forward.
Not surprisingly, most businesses and consumers expect a recession within the next 12 months. As the United States’ largest trading partner, what happens in Canada will have a ripple effect on the American economy. With sentiment falling, spending will inevitably fall, which will lead to an economic slowdown.
Stocks Rally to Start the Day
Last Updated at 10:08AM EST
Stock indices are in the green to start today’s trading session. As of 10:08 a.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are up 1.8%, 2.6%, and 3.3%, respectively.
All sectors are rallying today after each one finished Friday in negative territory. Nonetheless, the consumer staples sector (XLP) is the laggard so far, as it is up 1.1%. Conversely, the real estate sector (XLRE) is the session’s leader with a gain of 3.4%.
WTI crude oil remains below $90 per barrel as investors 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 down, as the U.S. 10-Year Treasury yield is now hovering around 3.96%. This represents a decrease of more than six basis points from the previous close.
Similar movements can be seen with the Two-Year yield, which is now at 4.43%. However, the spread between the 10-Year and Two-Year U.S. Treasury yields is still negative, as it currently sits at -47 basis points.
Futures Climb Ahead of Another Week of Major Earnings
First Published at 7:06AM EST
U.S. stock futures climbed early on Monday as investors looked for chances for the market to go up as the earnings season rolled in.
Futures on the Dow Jones Industrial Average (DJIA) climbed 0.97%, while those on the S&P 500 (SPX) gained 1.16%, as of 6.55 a.m. EST, Monday. Meanwhile, the Nasdaq 100 (NDX) futures advanced 1.36%.
Satisfactory earnings were reported by most of the banks that posted their quarterly results on Friday, which kept investor sentiments buoyed in the pre-market session. JPMorgan (NYSE:JPM) and Wells Fargo (NYSE:WFC) reported solid results while Morgan Stanley (NYSE:MS) recorded disappointing equity trading revenues.
Friday’s earnings releases paved the way for more positivity around the upcoming bank earnings this week. Bank of America (NYSE:BAC) will report before the market opens on Monday. Meanwhile, the quarterly report of Goldman Sachs (NYSE:GS) is scheduled for a Tuesday morning release.
Moreover, tech names including Netflix (NASDAQ:NFLX), Tesla (NASDAQ:TSLA), and IBM (NASDAQ:IBM) are set to release earnings this week.
Hotter-than-expected inflation in August revealed last week led to a paradoxical trend among investors, with the market swinging from a sell-off to a massive rally in a single trading session on Thursday. However, experts speculated that rather than being a sign of the market bottoming out of the bear market of 2022, the climb was most possibly just a bear market rally driven by investors who just wanted to pull the market out of a suspense rut.
Unsurprisingly, most of the gains were given back on Friday, and the major indexes closed in the red. The S&P 500 closed 2.37% lower whereas the Dow lost 1.34%. Meanwhile, the Nasdaq 100 dove 3.1% at Friday’s market close.
Although most investors are slowly settling for the fact that the U.S. cannot circumvent a recession next year as a result of the aggressive policy tightening by the Federal Reserve, the hope for a dovish Fed pivot will always be present.
Moreover, the Wall Street Journal’s latest survey found out that economists believe that there is a 63% chance on average for the U.S. tipping into a recession in 2023. This brings a level of certainty to the speculation.
Nonetheless, many experts are of the opinion that a Volcker-style interest rate hike or a very deep and damaging recession is not likely this time. The Fed has learned from its past and is approaching the situation very strategically, weakening a few parts of the economy at a time, so as to not induce an economic shock.
