Last Updated 4:00 PM EST
Stock indices finished today’s trading session in the green as yesterday’s positive momentum continues. The Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 increased by 1.13%, 1.16%, and 0.77%, respectively.
The healthcare sector was the session’s laggard, as it gained 0.56%. Conversely, the industrial sector was the session’s leader, with a gain of 2.44%.
Furthermore, the U.S. 10-Year Treasury yield fell to 3.996%, a decrease of 1.9 basis points. Similarly, the Two-Year Treasury yield also decreased, as it hovers around 4.43%. This brings the spread between them to -43.4 basis points. The negative spread indicates that investors still have fears of a recession.
Compared to yesterday, 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 34.5%, which is up from yesterday’s expectations of 33.6%.
In addition, the market is now also assigning a 64% probability to a range of 4.5% to 4.75%. For reference, investors had assigned a 65.7% chance yesterday.
Last Updated 3:00PM EST
Stock indices are in the green 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 up 0.6%, 0.7%, and 0.1%, respectively.
The Federal Reserve released its U.S. Industrial Production report, which measures the change in the total value of output produced by manufacturers, utilities, and mines. These figures are adjusted for inflation.
For September, industrial production increased by 0.4% on a month-over-month basis. This was better than the 0.1% that was expected and an improvement from the previous month’s report of -0.1%.
When looking at the year-over-year number, it increased by 5.33%. This was also higher than last month’s reading of 3.91%. Over the past 12 months, this indicator has remained positive, ranging from a low of 3.64% to a high of 7.51%.
It’s good to see that industrial production is still strong and growing. However, investors should definitely keep an eye on this indicator to see how rising interest rates will ultimately impact the industrial sector.
Stocks Rise as Home Builder Sentiment Collapses
Last Updated 12:00PM EST
Equity markets are in the green halfway into today’s trading session. As of 12:00 p.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are up 0.7%, 0.7%, and 0.4%, respectively.
On Tuesday, the National Association of Home Builders released its U.S. NAHB Housing Market Index for August. The report measures home builder sentiment by surveying around 900 companies. A reading above 50 indicates that more home builders have a positive view of market conditions than a negative one.
The bad news is that this indicator continues to plunge, as today’s number came in at 38. This means that most have a negative view of the market. In addition, today’s print is much lower than the 43 that was expected.
Indeed, it was an eight-point drop from the past month’s reading, which was 46. This is the lowest level since May 2020, when the reading was 37. To highlight just how quickly sentiment has fallen in 2022, the NAHB Housing Index came in at 83 for January. By June, it fell to 67 only to see it collapse over the next four months to where it is today.
The main driver behind this drop in sentiment is higher construction costs related to rising inflation and financing costs. In addition, buyer demand is softening as rising mortgage rates make buying a house even more difficult than it already was.
This downward trend is likely to continue as the Federal Reserve continues to raise interest rates to combat high inflation.
Stocks Rally to Start Today’s Trading Session
Last Updated at 10:03AM EST
Stock indices are in the green to start 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 1.8%, 1.9%, and 1.9%, respectively.
All sectors are rallying today after each one finished Friday in negative territory. Nonetheless, the energy sector (XLE) is the laggard so far, as it is up 1.1%. Conversely, the materials sector (XLB) is the session’s leader with a gain of 2.5%.
WTI crude oil continues to slide as it hovers around the mid-$83 per barrel range. Investors are 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 down, as the U.S. 10-Year Treasury yield is now hovering around 3.97%. 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 4.41%. However, the spread between the 10-Year and Two-Year U.S. Treasury yields is still negative, as it currently sits at -44 basis points.
Futures Climb as Strong Earnings Keep Sentiments Up
First Published at 5:12AM EST
Stock futures rose early on Tuesday as a relatively quiet week on the economic front rolls in and investors look for signs that the great bear market of 2022 has bottomed out. Moreover, solid earnings results from most of the companies that reported in the first leg of the earnings season also kept investor sentiments up.
Futures on the Dow Jones Industrial Average (DJIA) climbed 1.16%, while those on the S&P 500 (SPX) gained 1.41%, as of 4.53 a.m. EST, Tuesday. Meanwhile, the Nasdaq 100 (NDX) futures advanced 1.65%.
It was a positive day on Wall Street on Monday, with the Nasdaq Composite clocking the best daily performance since July. The S&P 500, the Dow, and the Nasdaq 100 popped 2.65%, 1.86%, and 3.46%, respectively. Technology names like Amazon (NASDAQ:AMZN), Meta Platforms (NASDAQ:META), and Microsoft (NASDAQ:MSFT) led what appears to be an emotional rally.
That apart, solid earnings reports from the Bank of America (NYSE:BAC) and Bank of New York Mellon (NYSE:BK) also boosted stock prices.
Key earnings reports including those from Goldman Sachs (NYSE:GS), Johnson & Johnson (NYSE:JNJ), Netflix (NASDAQ:NFLX), and United Airlines (NYSE:UAL) are slated for Tuesday. Also, Tesla (NASDAQ:TSLA), IBM (NASDAQ:IBM), and American Airlines (NYSE:AAL) are scheduled to release their earnings later this week.
Additionally, another pivot from the U.K. stoked fresh hopes in the U.S. (despite the Federal Reserve reiterating time and again that there won’t be one anytime soon). On Monday, U.K. finance minister Jeremy Hunt announced the reversal of all announced tax cuts and the retraction of an energy subsidy.
No major economic updates apart from the weekly initial jobless claims on Thursday are slated for this week, meaning that investors are pinning their emotions on the earnings. However, the initial jobless claims report is not likely to cause any major market movement, as investors are currently focused on earnings.
Looking ahead, November 2 is likely to see the market break out from this short-sighted trading trend, as another possible 75 basis point interest rate hike by the Fed is likely to put investors into perspective that the macroeconomic backdrop hasn’t really changed enough to celebrate.
Moreover, the latest recession probability models by Bloomberg revealed that the probability of the U.S. economy entering a recession in the next 12 months (by October 2023) is now 100%, up from the 65% that was estimated last week.
