Last Updated at 4:10 PM EST
Stock indices finished today’s trading session in positive territory. The Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 climbed 1.34%, 1.19%, and 1.06%, respectively.
The materials sector (XLB) was the session’s laggard, as it fell 0.55%. Conversely, the healthcare sector (XLV) was the session’s leader, with a gain of 1.95%.
Furthermore, the U.S. 10-Year Treasury yield increased to 4.25%, a jump of more than two basis points. Similarly, the Two-Year Treasury yield also increased, as it hovers around 4.51%. This brings the spread between them to -26 basis points. 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 higher 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% decreased to 47.3%, which is down from Friday’s expectations of 51.8%.
In addition, the market is now also assigning a 52.6% probability to a range of 4.5% to 4.75%. For reference, investors had assigned a 45.6% chance Friday.
Stocks Rally into the Close
Last Updated at 3:00PM EST
Stocks 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 1.6%, 1.4%, 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 $3.793 per gallon, down from last week’s reading of $3.888. 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 $5.752 per gallon. On the other hand, Georgia is the state with the lowest gas prices, at $3.201 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 Green Despite Services PMI Miss
Last Updated at 12:08PM EST
Stock indices are in the green halfway into today’s trading session. As of 12:08 p.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are up 1.2%, 0.9%, and 0.4%, respectively
In addition to Manufacturing PMI, Markit also released its preliminary report for the U.S. Services Purchasing Managers Index, which measures the month-over-month change in service activity of 400 companies. A number over 50 represents an expansion, whereas anything below 50 represents a contraction. The report came in at 46.6, lower than the expected 49.2.
Similar to manufacturing, this indicator has also been down-trending ever since its peak in June 2021, when it hit a high of 70.4. The important difference between the two metrics is that services have already been in contraction since last July.
This is likely to continue as consumers begin to pull back on spending in order to deal with the rising cost of debt and essentials.
Major Indices are Mixed; Manufacturing PMI Misses Expectations
Last Updated at 10:00AM EST
Stock indices are mixed 30 minutes into today’s trading session. As of 10:00 a.m. EST, Nasdaq 100 is down 0.3%. Meanwhile, the S&P 500 and the Dow Jones Industrial Average are up 0.4%, and 0.8%, respectively.
On Monday, Markit released its preliminary report for the U.S. Manufacturing Purchasing Managers Index, which measures the month-over-month change in manufacturing activity. A number over 50 represents an expansion, whereas anything below 50 represents a contraction. The report came in at 49.9, lower than the expected 51.
It’s worth noting that this indicator has been down-trending ever since its peak in August 2021, when it hit a high of 63.4. As a result, it appears that the manufacturing sector is about to see a contraction in activity for the first time since July 2020.
Indeed, the Federal Reserve is trying to destroy demand in order to cool down inflation. With the central bank expected to continue hiking interest rates, it appears likely that this indicator will continue its downward momentum.
Futures are Up, but Fear Reigns
First Published at 4:14AM EST
Stock futures are up, ahead of major earnings releases this week. Futures on the Dow Jones Industrial Average (DJIA) increased 2.47%, while those on the S&P 500 (SPX) rose 2.37%. The Nasdaq 100 (NDX) futures similarly rose by 2.39%.
Additionally, Chinese stocks have slipped and Hong Kong stocks have plummeted on re-elected President Xi’s statements. Xi indicated that China will prioritize political ideology over economic growth and cooperation.
The Week Ahead
Some big players are reporting earnings this week, including Microsoft (MSFT), Alphabet (GOOGL), Meta (META), Boeing (BA), Amazon (AMZN), Apple (AAPL), Intel (INTC), and Exxon-Mobil (XOM). Investors are showing their excitement about the possibility of earnings beats, leading the indexes to rise accordingly.
However, this plays out against the backdrop of worries of the Fed’s November 2 announcement another interest hike. All indicators point to an interest rate rise of .75 percent, given the high inflation rate of 8.2%. Until we start to see deflation, the Fed is unlikely to pivot from its trajectory of interest rate increases.
Also causing concern among investors is the planned 3rd quarter GDP estimates announcement this Thursday. Given the slowing pace of retail sales, the outlook for the announcement is gloomy. Additionally, the jobless claims release this Thursday will doubtless influence the Fed’s decision.
Given the above, there is likely to be a flurry of investor activity before and after the major earnings releases. At the same time, worries about the macro economy will probably prevent a true surge in the markets.
Oil Stocks Rising, but Biden’s Plan Falling Flat
President Biden’s plan to increase U.S. oil production, in an effort to refill the oil reserves he has released, has left U.S. oil companies unenthused. That’s because the Energy Department wants to lock in a fixed price per barrel. The Wall Street Journal reports that oil companies, recognizing the unstable nature of commodity prices, are reluctant to commit to a fixed price for the future.
Meanwhile, the oil companies have been trying to please their investors by keeping production flat as they increase their dividends. Investors have indeed been flocking to oil stocks: Exxon Mobil (XOM) has risen by nearly 19% in the past three months, and Schlumberger (SLB) has risen by 40% in the same period.
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