Last updated at 4:15 PM EST
Stock indices ended Monday’s trading session in the green. The Dow Jones Industrial Average, S&P 500 and Nasdaq 100 rose 2.66%, 2.59% and 2.36% respectively. The rise in equities resulted from lower bond yields.
Indeed, the 10-year US Treasury yield fell significantly to 3.645%, down 18.8 basis points. Similarly, the two-year Treasury yield also declined, hovering around 4.115%. The inverse relationship between the two asset classes remains very strong and has been one of the main drivers of the market decline this year.
The Consumer Discretionary sector lagged the session, gaining 0.08%. Conversely, the energy sector remained the leader throughout the session, with a gain of 5.65%. Additionally, WTI Crude Oil remained above $80 a barrel.
Additionally, the Atlanta Federal Reserve has updated its latest GDPNow reading, allowing it to estimate real-time GDP growth. The “nowcast” becomes more accurate as more economic data is released throughout the quarter. Currently, it estimates that the economy will grow about 2.3% in the third quarter. This is down slightly from last week’s estimate of 2.4%, which can be attributed to today’s ISM manufacturing report (see 12:00 PM update).
Prices at the pump are rising
Last Updated 3:00 PM EST
Stocks continue to rally ahead of the final hour of today’s trading session. As of 3:00 p.m. EST, the Dow Jones Industrial Average, S&P 500 and Nasdaq 100 are up 3.13%, 3.04% and 2.72%, respectively.
Additionally, WTI crude oil is also up 5.06% despite higher than expected crude oil inventories. This comes after some selling pressure over the past two trading sessions.
Nevertheless, the general downward trend in the commodity over the past few months has led to lower gasoline prices across the country. However, prices could start to reverse after the announcement of OPEC+, which could reduce oil production, in the future.
Indeed, the national average for regular gasoline was $3.799 per gallon, up from yesterday’s reading of $3.796. This is significantly lower than the all-time high of $5.016 per gallon on June 14.
The highest price is in California, where prices are significantly higher than the national average, at $6.382 per gallon. On the other hand, Texas is the state with the lowest gasoline price at $3.093 per gallon.
It will be interesting to see if the general downward trend continues as the Federal Reserve looks to raise interest rates to fight inflation while oil producers cut production to keep the price down.
Inventories rise despite lack of manufacturing data
Last Updated 12:00 PM EST
Shares continue to rally midway through Monday’s trading session. As of 12:00 p.m. EST, the Dow Jones Industrial Average, S&P 500 and Nasdaq 100 are up 2.1%, 1.9% and 1.4%, respectively.
On Monday, the Institute for Supply Management released its monthly report for the ISM Manufacturing Purchasing Managers Index, which measures the month-to-month change in production levels. A number above 50 represents expansion, while anything below 50 signifies contraction. The report came in at 50.9, worse than the expected 52.2.
It should be noted that this indicator has been slowly declining since its peak in April 2021, when it reached a high of 64.7. This steady downtrend has led to today’s reading, which indicates minimal expansion. This suggests that a contraction in production levels is imminent.
Additionally, the ISM manufacturing employment report showed a reading of 48.7, meaning that manufacturing employment contracted again after a brief expansion in the previous report. Therefore, this could mean that manufacturing companies expect production levels to continue to decline.
Stocks are in the green to start Monday’s trading session
Last updated at 10:00 a.m. 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, S&P 500 and Nasdaq 100 are up 1.4%, 1.3% and 1%, respectively.
The consumer discretionary sector (XLY) is lagging so far, down 0.8%. Conversely, the energy sector (XLE) is the leader of the session with a gain of 4.1%.
Meanwhile, bond yields are lower, with the 10-year US Treasury yield now hovering around 3.71%. This represents a decline of more than 12 basis points from the previous close.
Similar moves can be seen with the two-year yield, which is now at 4.14%. However, the spread between 10-year and 2-year US Treasury yields is still negative, currently standing at -43 basis points.
Stocks look to rebound from third quarter misery
Last Updated: 9:04 a.m. EST
Futures contracts on the Dow Jones Industrial Average (DJIA) rose 1.1%, while those of the S&P 500 (SPX) were up 1.1% as of 9:04 a.m. EST Monday. Meanwhile, the Nasdaq 100 (NDX) futures contracts rose 0.7%.
Last updated: 5:54 a.m. EST
Equity futures were mixed in the early hours of Monday morning after a terrible end to September.
Futures contracts on the Dow Jones Industrial Average (DJIA) rose 0.20%, while those of the S&P 500 (SPX) were down slightly at 5:31 a.m. EST Monday. Meanwhile, futures tied to the tech-heavy Nasdaq 100 (NDX) fell by 0.57%.
The Dow Jones Industrial Average, S&P 500 and Nasdaq 100 fell 1.71%, 1.51% and 1.73% respectively on Friday, ending the week and quarter on a negative note.
Turning to oil prices this morning, US crude West Texas Intermediate jumped 4.1% to $82.74 a barrel at the time of writing, after posting a 2.1% loss. Friday. The rise in oil prices was driven by news that at its meeting scheduled for this week, OPEC+ plans to cut production by more than a million barrels a day in an attempt to support prices. Concerns about China’s energy demand amid lockdowns and a strengthening US dollar have weighed on oil prices in recent weeks.
Meanwhile, the yield on the benchmark 10-year Treasury fell to 3.78% after closing at 3.80% on Friday.
Volatility could persist after a lousy September
After September’s turmoil, the S&P 500 and Nasdaq 100 have now fallen for three straight quarters. Such a losing streak was last seen in 2009. Moreover, the Dow Jones also fell for three consecutive quarters, marking the first such trend since 2015.
Investors may not see respite any time soon, as the Federal Reserve’s hawkish stance on controlling inflation is likely to persist in the near term. Fed Vice Chairman Lael Brainard’s statement on Friday reinforced his aggressive measures to control inflation. Brainard said, “Monetary policy will have to be tight for a while to have confidence that inflation is back on target.”
The Fed could look for steady improvement in inflation data for three to four months before easing its stance. Meanwhile, stock market volatility could continue as investors worry that rising interest rates could push the economy into a recession.
Major company updates continue to cause concern
Recently released earnings and guidance updates from several companies clearly reflected the impact of inflation, currency headwinds and supply chain issues. Last week, Nike reported better-than-expected fiscal first quarter results, but reported a 44% increase in inventory due to supply chain issues, which weighed on profitability.
Sunday, Tesla (TSLA) reported third-quarter deliveries of 343,830 vehicles, lower than analysts’ expectations of 364,660 vehicles and reflecting the impact of supply chain issues. The company produced 365,923 vehicles during the quarter.
While the tech sector may continue to come under heavy pressure from macroeconomic challenges, several companies in the consumer staples and healthcare sectors may show some resilience. Names like Procter & Gamble (PG) and Johnson & Johnson (JNJ) should fare better, as their products generally experience stable demand trends, even during economic downturns.
Meanwhile, investors will be watching the September payrolls report and August job vacancies data closely this week. These reports will provide additional insight into how the labor market is faring amid continued uncertainty.