Tech Stocks Rebounded, Crude Oil Plunged 5%,Treasury Yields Edged Lower

Barry Adams
04 Oct, 2023
New York City

Tech stocks rebounded after a weaker-than-expected private payrolls data edged bond yields lower. 

Worries of higher interest rates dragging the U.S. economy into a recession kept buyers' enthusiasm in check on Wall Street. 

Moreover, mortgage rates inching closer to 8% dampened the demand for mortgages to the level last seen in 1996. 

The average mortgage contract interest rate for conforming loan balances jumped 12 basis points to 7.53% in the week ended on September 29, the Mortgage Bankers Association reported Wednesday. 

A year ago, mortgage rates were one percentage point lower at 6.75%. 

For two months  the direction of interest rates has been determining the direction of stock prices, and that trend was in full-display again today. 

The S&P 500 index and the Nasdaq Composite struggled to advance and yields on Treasury notes and bonds edged lower from 2007-highs reached in the previous session. 

Private sector payrolls data released by the ADP suggested weaker-than-expected jobs gain of 89,000 in September. 

The increase in payrolls fell sharply from 180,000 in July. 

The ADP data series is highly volatile and the monthly estimates are subject to significant revisions, but the gains fell short of expectations of an increase of as much 155,000 by economists surveyed by Ticker.com.

Investors shifted attention to the upcoming earnings season and banks were in focus. 

Investors are looking to get more clues about the impact of higher interest rates and new capital requirements at banks of all sizes amid rising losses in Treasury securities held-to-maturity and available-for-sale. 

 

Manufactured Goods Orders Increased In August 

New orders for manufactured goods in August, up five of the last six months, increased $6.7 billion or 1.2% to $586.1 billion, the U.S. Census Bureau reported Wednesday. 

New orders rose at a slower pace after rising 2.1% in July. 

Durable goods orders increase in August was revised lower to 0.1% from the previous estimate of an increase of 0.2%. 

Excluding transportation, new orders increased 1.4% and excluding volatile defense orders rose 0.8%. 

 

U.S. Indexes & Yields 

The S&P 500 index gained 0.7% to 4,265.33 and the Nasdaq Composite rose 1.5% to 13,246.53. 

The yield on 2-year Treasury notes increased to 5.12%, 10-year Treasury notes inched lower to 4.77% and 30-year Treasury bonds edged down to 4.89%. 

Crude oil decreased $4.39 to $84.83 a barrel and natural gas prices increased 6 cents to $3.11 a thermal unit. 

The dollar index edged lower to 106.71, the level last seen in November 2022 and extended gains from the low of 99.85 on July 13, 2023.  

 

U.S. Stock Movers 

Cal-Maine Foods Inc plunged 7.7% to $44.05 after the egg producer reported sharply lower sales in its latest quarter after prices declined. 

The company also reported earnings of 2 cents per share, lower than the estimate of as high as 30 cents set by some analysts. 

Intel Corporation declined 0.4% to $35.57 after the  advanced chipmaker said it plans to operate its programmable chip division as a standalone unit in preparation of a public offering in the next two years. 

 

European Markets Rebounded After Wholesale Inflation Data

European market indexes reversed early losses in the session and investors reviewed the latest batch of economic data in the region. 

Market indexes opened lower tracking losses on Wall Street and bond yields in the region advanced after the U.S. Treasury yields jumped to 16-year highs. 

Market averages traded around flatline after the European Central Bank president Christine Lagarde reiterated today that interest rates are likely to stay elevated for some time to cool inflation. 

Tough talk from central bank president rang hollow as central bank has no timeline in bringing down inflation to its target rate of 2%. 

Moreover the decline in wholesale price index also supported market advance in today's session. 

 

Euro Area Retail Sales Declined In August 

Retail sales in the Euro Area decreased 1.2% from the previous month in August, Eurostat reported Wednesday. 

Automotive fuel sales declined 3% in the month compared to 0.6% fall in July after prices rose. 

Sales of food, drink and tobacco decreased 1.2% after staying flat in the previous month and sales of non-food products fell 0.9% after rising for four months in a row. 

Retail sales declined 2.1% from a year ago, following a 1% decline in July and extended fall for the 11th month in a row. 

 

Record Fall In Wholesale Inflation

Wholesale price index or producer prices declined 11.5% from a year ago in August. Eurostat reported Wednesday. 

The measure of wholesale inflation declined at the fastest pace on record after energy prices dropped 30.6% compared to 24.2% in July and intermediate goods prices decreased 4.5% compared to 4% in the previous month. 

Prices rose at a slower pace for capital goods at 4.3% compared to 4.7%, for durable goods at 4.7% from 5.1% and non-durable goods at 6.7% from 7.6% in the previous month respectively. 

Excluding energy, core producer prices decreased 1% compared to 1.6% in July. 

 

Europe Indexes & Yields

The DAX index increased 0.1% to 15,099.99, the CAC-40 index decreased 0.005% to 6,996.73 and the FTSE 100 index dropped 0.7% to 7,412.25. 

The yield on 10-year German bonds increased to 2.94%, French bonds traded higher to 3.52%, the UK gilts edged up to 4.59% and Italian bonds rose to 4.93%.

The euro edged lower to a three-month low to $1.05, the British pound to $1.21 and the U.S. dollar fetched 91.76 Swiss cents.

Brent crude decreased $5.05 to $86.34 a barrel and the Dutch TTF natural gas edged lower by €1.44 to €38.24 per MWh.

 

Europe Stock Movers 

Novartis AG decreased 4.5% to CHF 88.01 after the Swiss pharmaceutical company completed the spinoff of its generic pharma division Sandoz though a dividend-in-kind distribution to its shareholders and American Deposit Receipt holders. 

Tesco Plc rose 3.9% to 269.60 pence after the British grocery retailer lifted its annual earnings outlook. 

Spirent Communications Plc plunged 31.3% to 90.35 pence after the British Telecom controlled testing services provider lowered its outlook.

Superdry Plc soared 20% to 52.06 pence after the struggling fashion retailer said it plans to sell its digital and intellectual assets in South Asia to Reliance Retail.    

SAS AB plunged 82.5% to 0.053 Swedish kronor after the Scandinavian airline announced restructuring plan late Tuesday that wipes out shareholders and hybrid bond holders. 

 After the restructuring, U.S. investment group Castlelake will control 32% stake in the airline followed by 20% held by Air France-KLM Group.

The Danish government is expected to hold 26% stake in the airline and the Danish investment company Lind will own 8.6% stake.