Last Updated 4:05 PM EST
Stock indices finished today’s trading session in the red. The Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 fell by 0.3%, 0.8%, and 0.51%, respectively. The utilities sector was the session’s laggard, as it lost 2.52%. Conversely, the communications sector was the session’s leader, with a gain of 0.22%.
Furthermore, the U.S. 10-Year Treasury yield jumped to 4.23%, an increase of 9.2 basis points. Similarly, the Two-Year Treasury yield also increased, as it hovers around 4.61%. This brings the spread between them to -38 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 23.5%, which is up from yesterday’s expectations of 22%.
In addition, the market is now also assigning a 76.5% probability to a range of 4.5% to 4.75%. For reference, investors had assigned a 77% chance yesterday.
Stocks Turn Negative after Hawkish Fedspeak
Last Updated 2:07PM EST
Stock indices turn negative during the afternoon portion of today’s trading session. As of 2:07 p.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are down 0.3%, 0.8%, and 0.6%, respectively.
This can be attributed to Hawkish Fedspeak from FOMC Member Patrick Harker, who is the President of the Federal Reserve Bank of Philadelphia. He believes that interest rates will rise well above 4% with the possibility of going higher if necessary.
Fed Governor Lisa Cook echoed a similar sentiment when she spoke, as she also believes rates need to go higher in order to bring inflation under control.
The Federal Reserve’s quest to bring down inflation is causing the spread between U.S. Treasury yields to widen relative to foreign equivalents. This has made U.S. bonds more desirable to foreign investors, thus, increasing the demand for U.S. dollars.
As a result, the greenback has strengthened relative to other currencies, particularly the Japanese Yen, which has hit a 32-year low relative to the dollar.
Stocks Rise as Home Sales Continue to Fall
Last Updated 12:05PM EST
Stock indices are positive halfway into today’s trading session. As of 12:05 p.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are up 0.6%, 0.3%, and 0.9%, respectively.
On Thursday, the National Association of Realtors released its U.S. Existing Home Sales report, which measures the change in sales of existing residential buildings during the previous month on an annualized basis. Existing home sales came in at 4.71 million for the month of September, above the expected 4.7 million.
Nevertheless, this figure was the lowest reading since June 2020, as existing home sales declined month-over-month by 1.5%, accelerating from the 0.8% decline in August. Indeed, this represents the eighth straight month of declines, as higher interest rates continue to make homeownership difficult. On a year-over-year basis, sales fell 25.1%.
It is likely that this downward trend will continue as the Federal Reserve continues to hike interest rates to combat inflation.
Stocks Rise as Initial Jobless Claims Beat Expectations
Last Updated 10:00AM EST
Stocks are in the green to start 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 0.5%, 0.2%, and 0.5%, respectively.
On Thursday, the Department of Labor released its Initial Jobless Claims report, which came in better than expected. In the past week, 214,000 people filed for unemployment insurance for the first time. Expectations were for 230,000 individuals.
When using the four-week average, initial jobless claims were 212,250, up from last week’s reading of 211,000. It’s worth noting that this figure has been on an uptrend since the end of September.
In addition, Continuing Jobless Claims, which measures the number of unemployed people who qualify for unemployment insurance, came in at 1.385 million. This was above the forecast of 1.375 million and higher than last week’s print of 1.364 million.
Continuing Jobless Claims are currently sitting near their lowest levels since 1970. Relatively speaking, this suggests that individuals aren’t struggling to find other jobs after being laid off.
However, it’ll be interesting to see what will happen going forward as the Federal Reserve’s tightening policy slowly begins taking effect.
Stock Futures Edge Down as Rising Yields Spook Markets
First Published 5:34AM EST
U.S. stock futures declined in the early hours of Thursday morning after markets closed in the red yesterday, ending a two-day rally triggered by upbeat corporate earnings.
Futures on the Dow Jones Industrial Average (DJIA) and the S&P 500 (SPX) declined 0.08% and 0.45%, respectively, as of 5.23 a.m. EST, Thursday. Meanwhile, futures tied to the tech-heavy Nasdaq 100 (NDX) fell 0.81%.
On Wednesday, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 declined 0.33%, 0.67%, and 0.40%, respectively. Soaring treasury yields pulled away the focus from corporate earnings and dragged down the three indices.
The U.S. 10-Year Treasury yield increased to 4.14% on Wednesday, reaching the highest level since 2008. Likewise, the Two-Year Treasury yield spiked to 4.55%, reaching near the peak levels seen in 2007. An inverted yield curve (arises when yields on short-term maturities rise above the yields on long-term bonds) is often considered a warning sign of an impending recession.
Several companies across various sectors are cautioning investors about the significant impact of currency headwinds due to the strengthening of the U.S. dollar and the stubbornly high inflation on their profitability.
Shares of tech giant IBM (IBM) were trending higher in Thursday’s pre-market as the company announced better-than-anticipated Q3 results and an improved revenue outlook despite significant forex headwinds. In contrast, Tesla (TSLA) stock was down as the company missed Q3 revenue estimates.
Meanwhile, the U.S. West Texas Intermediate crude was moving higher by 1.59%, as of writing, after rising more than 3% yesterday to close at $85.55. WTI crude was trending higher on reports that China might ease its COVID restrictions, which could favorably impact oil demand.
Coming to economic releases, the weekly jobless claims, the Philadelphia Fed Manufacturing Index data, and the September existing home sales data are key numbers to look out for. These macro numbers will give insights on whether Fed’s aggressive interest rate hikes to tame inflation are fetching the desired results or the hawkish stance needs to continue for some time.
