Last Updated at 4:26 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 climbed 2.47%, 2.37%, and 2.39%, respectively.
The communications sector was the session’s laggard, as it gained 0.66%. Conversely, the materials sector was the session’s leader, with a gain of 3.46%.
Furthermore, the U.S. 10-Year Treasury yield fell to 4.22%, a decrease of more than one basis point. Similarly, the Two-Year Treasury yield also decreased, as it hovers around 4.48%. This brings the spread between them to -26 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 47.7%, which is up from yesterday’s expectations of 24.2%.
In addition, the market is now also assigning a 48.4% probability to a range of 4.5% to 4.75%. For reference, investors had assigned a 75.4% chance yesterday.
Stocks Rally into the Close
Last Updated at 3:00PM EST
Stocks are near their session highs 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 2.1%, 2%, and 1.9%, respectively.
On Friday, Statistics Canada released its month-over-month Retail Sales report, which measures the change in inflation-adjusted sales for retailers. In August, sales increased by 0.7%, compared to the 0.2% that was forecast by economists. This comes after a 2.2% drop in July.
When removing the impact of automobiles, we get Core Retail Sales, which also came in at 0.7% on a month-over-month basis. The expectations were for a 0.4% increase.
This suggests that the Canadian consumer is still strong, which is important for the American economy since Canada is its largest trading partner. However, it’s worth mentioning that the data is from August, meaning that there is quite a considerable lag.
As a result, it is possible that spending has slowed down since then, especially since inflation is making it increasingly difficult to afford the necessities.
Stocks are Positive; Gasoline Prices Fall
Last Updated at 12:25PM EST
Stocks are in the green halfway into today’s trading session. As of 12:25 p.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are up 1.4%, 1.3%, and 1.1%, respectively.
In addition, WTI crude oil continues to slide, as it now hovers around the mid-$84 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 $3.82 per gallon, down from last week’s reading of $3.903. 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 $5.832 per gallon. On the other hand, Georgia is the state with the lowest gas prices, at $3.227 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 Rise as Short-Term Treasury Yields Fall
Last Updated at 10:00AM EST
Stock indices are in the green 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 up 1.2%, 1%, and 0.7%, respectively.
The communications sector (XLC) is the laggard so far, as it is down 0.3%. Conversely, the energy sector (XLE) is the session’s leader with a gain of 1.5%.
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 mixed to start the day. Long-term treasury yields are higher while short-term yields are lower. The U.S. 10-Year Treasury yield is now hovering around 4.25%. This represents an increase of more than one basis point from the previous close.
Alternatively, opposite movements can be seen with the Two-Year yield, which is now at 4.54%. However, the spread between the 10-Year and Two-Year U.S. Treasury yields is still negative, as it currently sits at -29 basis points.
Futures Down as Investors Face Several Market Movers
First Published at 6:48AM EST
U.S. stock futures were squeezed in the early hours of Friday as investors digested a mixed bag of earnings as well as a surge in bond yields.
Futures on the Dow Jones Industrial Average (DJIA) decreased 0.38%, while those on the S&P 500 (SPX) tumbled 0.56%, as of 6.13 a.m. EST, Friday. Meanwhile, the Nasdaq 100 (NDX) futures retracted 0.90%.
What Happened on Thursday?
At market close Thursday, the indexes clocked the second consecutive day in the red, with the S&P 500, the Dow, and the Nasdaq 100 losing 0.8%, 0.3%, and 0.51%, respectively. The healthy gains garnered by the Dow earlier in the day were given back by the end of the day, and then some more. The decline was spurred by rising bond yields, which pushed stock prices down (as bond yields and stock prices move inversely). The yield on the 10-year Treasury note climbed to a 14-year high of 4.239%.
Additionally, earnings releases were mixed, which further confused investors. AT&T (NYSE:T) and IBM (NYSE:IBM) posted earnings beats whereas Snap (NYSE:SNAP) and Robert Half (NYSE:RHI) disappointed investors with their prints.
Earlier, we mentioned in this column that the rally at the beginning of the week was not sustainable, as the macroeconomic backdrop has not yet changed enough for investors to celebrate. The markets are still jittery and the Federal Reserve is not expected to pivot soon. In a report released on Wednesday, the central bank noted that U.S. businesses are expressing growing concerns about weakening economic conditions.
Labor Market Still Strong
Meanwhile, on the economic front, last week’s initial jobless claims dropped to 214,000 from 226,000 in the preceding week, as reported by the Labor Department on Thursday. This indicates that layoffs were low last week, compared to the prior week.
This data gave mixed signals to investors, because, on one hand, a strong labor market reflects a strong economy; on the other hand, a strong labor market may induce tighter monetary policy from the Fed. It should be noted that one of the goals of the Federal Reserve is to weaken the economy, especially the labor market, in order to stabilize prices.
All things said, even with the losses, the indexes of the stock market are still up more than 2% for the week, and are on track to end the week with overall gains.
