Stocks Remain Hostage to Bond Market Volatility

Barry Adams
28 Sep, 2023
New York City

Surging bond yields and crude oil prices kept benchmark indexes down in early trading, but market sentiment reversed after bond yields edged lower and investors hunted for bargains. 

Divided investors worry about the U.S. economy's health and the Federal Reserves' next policy moves after the latest weekly jobless claims were below expectations.

Initial jobless claims for the week ending September 23rd edged 2,000 higher to 204,000, but stayed near a 7-month low reached in the previous week, the U.S. Department of Labor reported Thursday.  

The weaker-than-expected jobless claims followed durable goods orders and new homes sales data, suggesting that the U.S. economy is resilient and labor market conditions are still tight. 

In other economic news, the U.S. Commerce Department said real gross domestic product increased at 2.1% in the second quarter from a year ago. 

The government report left the growth estimate unrevised after third and final estimate but the agency also significantly revised the first quarter growth estimate between 2020 and 2022. 

First quarter GDP growth in 2020 was revised to a decline of 5.3% from the previous estimate of 4.6%, in 2021 to 5.2% from 6.2% and in 2022 to a decline of 1.6% from 2.2% reported previously.   

The yield on 10-year U.S. Treasury bonds jumped to a 16-year high after the release of jobless claims as investors feared that the Federal is more likely to keep its  higher-for-longer stance well into 2024.  

 

U.S. Indexes & Yields 

The S&P 500 index is set to close down the month by 4% and the Nasdaq index by 5% and both indexes are down 3% in the third quarter. 

The S&P 500 index increased 0.6% to 4,300.65 and the Nasdaq Composite fell 0.8% to 13,201.90. 

The yield on 2-year Treasury notes increased to 5.11%, 10-year Treasury notes inched lower to 4.56% and 30-year Treasury bonds edged down to 4.80%. 

Crude oil decreased $1.94 to $91.70 a barrel and natural gas prices rose 5 cents to $2.95 a thermal unit. 

The dollar index edged higher to 106.21, the level last seen in November 2022 and extended gains from the low of 99.85 on July 13, 2023.  

 

U.S. Stock Movers 

Micron Technology Inc declined 4.5% to $65 after the advanced chipmaker reported smaller-than-expected loss in the fiscal fourth quarter. 

However, investors were disappointed with the company's adjusted earnings per share outlook of $1.07 in the fiscal first quarter. 

GameStop Corp edged up 0.1% to $17.17 after the company appointed activist investor Ryan Cohen as the company's chief executive effective immediately. 

The company fired its chief executive Matthew Furlong three months after the retailer continued to struggle with sales and its restructuring plan. 

  

Inflation In Germany Eased, Accelerated In Spain

European markets lacked direction amid twin fears of inflation and interest rate path kept investors on sidelines. 

 Benchmark indexes in Paris and Frankfurt hugged  flatline and investors debated policymakers' next step amid persistent inflation. 

Spain's consumer price inflation accelerated for the third month in a row 3.5% in September from 2.3% in August, the National Statistics Institute INE reported Thursday. 

Consumer price inflation soared to a five-month high because of higher fuel and utility prices. 

Core inflation on an annual basis eased to 5.8% in September from 6.1% in August. 

On a monthly basis, consumer price inched higher 0.2%, slower pace than 0.5% in August, the report from the statistical agency showed.   

Germany's consumer price inflation eased to 4.5% in September from 6.1% in August, the Federal Statistics Office reported Thursday. 

Inflation dropped to the lowest level since the outbreak of the war in Ukraine in February 2022. as goods prices advanced at a slower pace of 4.0% compared to 7.1% and services prices rose at 4.0% compared to 5.1% in August.   

Oil-driven inflation fears persisted after Brent oil prices hovered near a one-year high of $97 a barrel after the latest U.S. crude oil inventories report showed a sharp decline. 

U.S. crude oil inventories declined 2.2 million barrels last week, significantly higher than the market estimate of a decline in 220,000 barrels. 

Moreover, crude oil inventories at a key storage hub in Oklahoma also dropped to the lowest level since July 2022.  

 

Europe Indexes & Yields

The DAX index increased 0.2% to 15,323.50, the CAC-40 index advanced 0.6% to 7,113.27 and the FTSE 100 index added 0.1% to 7,601.55. 

The yield on 10-year German bonds increased to 2.93%, French bonds traded higher to 3.49%, the UK gilts edged up to 4.49% and Italian bonds rose to 4.90%.

The euro edged lower to a three-month low to $1.055, the British pound to $1.22 and the U.S. dollar fetched 91.84 Swiss cents.

Brent crude decreased $1.06 to $95.48 a barrel and the Dutch TTF natural gas edged higher €0.44 to €39.48 per MWh.

 

Europe Stock Movers 

Pepco Group NV plunged 17% to 21.68 zloty after the Polish retailer cut its profit outlook for the second time in a month. 

Ryanair Holdings Plc declined 0.5% to €15.47 after the discount airline cut its winter schedule citing delivery delays in Boeing aircraft.

Banco Santander SA increased 3.0% to €3.60 after the bank said it plans to repurchase 1.2 billion of its own stock. 

Home builders in the UK declined on the worries of rising mortgage rates following the recent increase in bond yields. 

Taylor Wimpey decreased 1.7% to 116.60 pence and Barratt Developments PLC fell 5.9% to 440.42 pence. 

Phoenix Group Holdings Plc decreased 6.5% to 474.60 pence despite the insurance company reporting a narrower pre-tax loss in the first-half of 2023. 

888 Holdings PLC dropped 15% to 93.35 pence after the online gambling platform trimmed its full-year earnings outlook.