Stocks fall as Nasdaq loses nearly 4%
Last updated at 4:15 PM EST
Stock indices ended Friday’s trading session in the red. The Dow Jones Industrial Average, S&P 500 and Nasdaq 100 fell 2.11%, 2.8% and 3.9% respectively.
The technology sector lagged the session, falling 4.12%. Conversely, the energy sector was the leader of the session, with a loss of 0.74%. Additionally, WTI crude oil surged above $90 a barrel.
Additionally, the 10-year US Treasury yield rose to 3.88%, an increase of 5.2 basis points. Similarly, the two-year Treasury yield also rose, hovering around 4.31%.
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 2.9% in the third quarter.
This figure is higher than its previous estimate of 2.7%, which can be attributed to today’s report on non-farm wages in the United States from the United States Bureau of Labor Statistics, as well as the report on US Census Bureau wholesale.
The latest updates represent a significant reversal from September, when the estimate was for around 0.3% growth for the quarter. At this point, it looks like the US economy has had a strong third quarter after two straight quarters of decline.
Losses Accelerate As Closing Approaches
Last Updated 3:00 PM EST
Stocks are negative heading into 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 down 2.2%, 2.7% and 3.7%, respectively.
Like the United States, Canada released its employment change figures for the month of September, which were also higher than expected. The Canadian economy added 21,100 jobs compared to a forecast of 20,000. This ends a three-month decline that saw the country lose around 114,000 jobs during this period.
However, a closer look at the numbers shouldn’t excite investors. Of the 21,100 new jobs, 15,400 were part-time. This means that only 5,700 people found full-time employment.
It should also be noted that the majority of these gains came from the education sector. This is because the new school year in Canada starts in September. As a result, the positive result does not really inspire confidence.
This suggests that the Bank of Canada’s interest rate hikes are indeed slowing the Canadian economy. As the largest trading partner of the United States, this will eventually cause ripple effects within the US economy.
Stocks fall as bond yields rise
Last Updated 12:00 PM EST
Stock indices remain in the red midway through today’s trading session. As of 12:00 p.m. EST, the Dow Jones Industrial Average, S&P 500 and Nasdaq 100 are down 1.6%, 2.1% and 3%, respectively.
The technology sector (XLK) is lagging so far, down 3.4%. Conversely, the energy sector (XLE) is the leader of the session with a gain of 1.1%.
WTI crude rose above $90 a barrel as concerns over production cuts continue to give the commodity positive momentum.
Meanwhile, bond yields are higher, with the 10-year US Treasury yield now hovering around 3.85%. This represents an increase of more than two basis points from the previous close.
Similar moves can be seen with the two-year yield, which is now at 4.29%. However, the spread between 10-year and 2-year US Treasury yields is still negative, currently standing at -44 basis points.
Stocks in the red after economic data reports
Last updated at 10:05 a.m. EST
Stocks are in the red to start Friday’s trading session. As of 10:05 a.m. EST, the Dow Jones Industrial Average, S&P 500 and Nasdaq 100 were down 1.7%, 2.2% and 2.8%, respectively. Investors who may be on the lookout for a wage-price spiral may have reason to be relieved after the Bureau of Labor Statistics released its Average Hourly Earnings report, which measures the change in wages from a month to month.
A wage-price spiral occurs when the price of goods rises due to higher wages, but also leads workers to demand higher wages due to higher prices. As a result, this creates a perpetual loop of price and wage increases.
One way for investors to gauge the presence of a wage-price spiral is to compare average hourly earnings to inflation. If earnings are higher than inflation, this could be a harbinger that the loop is starting to form.
Wages rose 0.3% in September from the previous month, in line with estimates. The bad news is that the most recent consumer price index recorded a 0.1% month-over-month growth, mainly caused by lower energy and food prices. However, when looking at the core consumer price index, the latest reading was a 0.6% month-over-month increase, outpacing wage growth.
However, the most recent CPI figures are from August. Nonetheless, economists’ forecasts for September inflation figures paint a similar picture. Core CPI, which is probably the best measure to use to compare wage growth, is expected to come in at 0.5%, which is higher than wage growth.
If the economists are right, or if inflation surprises on the upside, we could continue to avoid a wage-price spiral.
Stocks in the red after non-farm payrolls report
Last updated at 8:39 a.m. EST
U.S. stocks were in the red on Friday when nonfarm payrolls data arrived.
The Dow Jones Industrial Average (DJIA) fell 1.2%, while the S&P 500 (SPX) was down 1%, as of 8:39 a.m. EST Friday. Meanwhile, the Nasdaq 100 (NDX) fell 0.7%.
While the forecast for nonfarm payroll employment was expected to rise by 250,000 in September, it actually rose by 263,000. However, the expansion was the weakest since April last year. The unemployment rate was expected to remain at 3.7%, but fell to 3.5%.
First post at 7:27 a.m. is
U.S. stock futures were mixed early Friday as traders dealt with various signs of a severe economic downturn.
Futures contracts on the Dow Jones Industrial Average (DJIA) rose 0.21%, while those of the S&P 500 (SPX) gained 0.05%, as of 7:14 a.m. EST Friday. Meanwhile, the Nasdaq 100 (NDX) futures fell 0.24%.
Several economic data showed that major sectors of the economy are slowing down due to inflation combined with interest rate hikes, indicating that the Federal Reserve’s plan has started to bear fruit. However, investors are somewhat sensitized that the Fed is unlikely to change its stance until a few months of deflation is achieved, which is unlikely to happen by the end of this year at least.
On Thursday, the S&P 500, Dow and Nasdaq 100 closed the regular session with losses of 1.02%, 1.15% and 0.76%, respectively. The only sector that finished in the green was energy, up 1.82%.
Pressure from rising bond yields further weighed on equities. The yield on the 10-year Treasury rose above 3.8%, while the more policy-sensitive 2-year yield rose above 4.2%.
The labor market may have started to cool
On Wednesday, an ADP report revealed that 208,000 jobs were added in the private sector in September, indicating a strong labor market. Nonetheless, investors are now eagerly awaiting Friday’s employment report from the Bureau of Labor Statistics, which will give us a more credible view of how the labor market fared last month. A Dow Jones A survey found that economists expect 275,000 more jobs in September, with the jobless rate holding steady at 3.7%.
Any good news about any part of the labor market can mean bad news for investors. This means that a strong labor market could fuel more aggressive monetary policy tightening by the Fed.
However, Thursday’s initial jobless claims for the week ended Oct. 1 showed more jobless claims than expected. Notably, 219,000 initial jobless claims were revealed by the US Department of Labor (DOL) last week, up from the previous week’s revised number of 190,000 and above market expectations of 200,000. That leaves predict a slowdown in the labor market.
The DOL also said that in August, US employers reduced job vacancies by 10% from the previous month and increased layoffs, again indicating a slowdown in the labor market.
‘More needs to be done,’ says Fed official
Ahead of the September Consumer Price Index (CPI) release on Oct. 13, Fed Governor Lisa Cook reiterated that the Fed will wait for a steady cooling in inflation to ease its stance.
Additionally, another Fed Governor, Christopher Waller, said the central bank would likely continue to raise interest rates through early 2023. He also mentioned that he was encouraged to see some signs of a slowdown. policy-induced economy, which has been the Fed’s goal all along. of this year. However, he still believes more needs to be done to effectively put the economy on a clear path to the Fed’s 2% inflation rate target.
Meanwhile, mortgage rates also fell for the first time since August, indicating a slowdown in the housing market. Mortgage company Freddie Mac revealed the average 30-year fixed rate was 6.66% this week, down from 6.7% last week. Nonetheless, the rate is still hovering near multi-year highs.
The IMF will reduce its growth outlook
It was also revealed on Thursday that the International Monetary Fund (IMF) expects weaker global economic growth in 2023 than the previously guided 2.9%. The institution has not yet set a revised estimated rate. For this year, global economic growth is expected to be 3.2% year-on-year, down sharply from 6.1% in 2021.
IMF Managing Director Kristalina Georgieva also encouraged policymakers around the world to take more action to fight inflation and avoid lasting impacts. It also creates a strong case for the Fed to drive interest rates high enough to slow economic activity and calm inflation.
Volatility to continue
Markets are likely to remain volatile until the Fed shows signs of pivoting, which isn’t likely to happen until next year, or at least until interest rates hit 4.4% at 4.6%. Moreover, a short-term bearish case should remain intact at least until a few months of steady deflation is achieved through policy tightening efforts.