S&P 500 and Nasdaq Halted 4-day Rally After Treasury Yields Rebounded

Barry Adams
12 Oct, 2023
New York City

Stocks lacked direction in morning and accelerated decline in after three hours of trading and investors reviewed the latest inflation report. 

Market indexes struggled to stay above flatline after consumer price inflation held steady in September on an annual basis but rose from the previous month in September. 

Despite the weakening inflation, prices are still rising at faster than 2% target rate set by the Federal Reserve, supporting the case for higher interest rates through 2024. 

A separate report showed that initial jobless claims were unchanged from the previous week at 209,000 in the week ending October 7, the U.S. Department of Labor reported Thursday. 

The weekly claims were near the seven-month low of 202,000, indicating tight labor market conditions and supporting the case of higher interest rates through 2024.  

Continuing claims rose 30,000 from the previous week to 1.702 million.

 

Overall Inflation Held Steady In September 

The Consumer Price Index, a measure of overall inflation, rose 0.4% in September and jumped 3.7% from a year ago, the U.S. Bureau of Labor Statistics reported Thursday. 

Core inflation, which excludes volatile food and energy prices, rose 4.1% from a year ago, the slowest pace of increase since September 2021. 

On a monthly basis, overall consumer price inflation declined to 0.4% from 0.6% increase in the previous month and core inflation held steady at 0.3%. 

The annual pace of inflation in September matched the rate in August.

 

U.S. Indexes & Yields 

The S&P 500 index decreased 0.8% to 4,344.06 and the Nasdaq Composite eased 1.1% to 13,509.64. 

The yield on 2-year Treasury notes increased to 5.06%, 10-year Treasury notes inched higher to 4.61% and 30-year Treasury bonds held at 4.75%. 

Crude oil prices were in focus on the worries that the latest  flare up between Israel and Hamas may spread to neighboring oil producing states and disrupt global oil supply. 

Crude oil decreased $0.89 to $82.59 a barrel and natural gas prices eased 4 cents to $3.32 a thermal unit. 

The dollar index edged higher to 106.56, the level last seen in November 2022 and extended gains from the low of 99.85 on July 13, 2023.  

 

U.S. Stock Movers 

Delta Air Lines jumped 3% to $37.10 after the international carrier said third-quarter earnings soared 60% from a year ago on strong travel demand.  

Walgreens Boots Alliance increased 0.8% to $22.89 after the retail pharmacy chain reported mixed quarterly results and forecasted weak annual earnings growth outlook. 

Ford Motor Company declined 2.2% to $11.98 after United Auto Workers expanded its strike to a key plant in Kentucky where the company builds popular SUVs. 

Domino's Pizza Inc declined 3.4%  to $346.50 after the food company reported weaker-than-expected earnings and sales at U.S. comparable locations declined 0.6%. 

 

European Markets Reverse Early Gains

Stocks extended weekly gains and investors debated future direction and level of interest rates. 

Benchmark indexes in London, Paris and Frankfurt jumped more than 0.5% and investors reacted to corporate news as earnings season gathered pace. 

In economic news, the U.K. gross domestic product increased 0.2% in August from July, when the economy shrank revised 0.6%, the Office for National Statistics reported  Thursday. 

From a year ago, GDP advanced 0.5% after service sector expansion overwhelmed the decline in production and construction. 

In the three months to August, GDP increased 0.3% and manufacturing, services and construction showed growth.  

 

Europe Indexes & Yields

The DAX index decreased 0.2% to 15,425.03, the CAC-40 index fell 0.4% to 7,104.53 and the FTSE 100 index advanced 0.3% to 7,644.78.

The yield on 10-year German bonds decreased to 2.72%, French bonds traded lower to 3.24%, the UK gilts edged up to 4.35% and Italian bonds rose to 4.66%.

The euro edged lower to a three-month low to $1.06, the British pound to $1.23 and the U.S. dollar fetched 89.97 Swiss cents.

Brent crude decreased $0.14 to $85.67 a barrel and the Dutch TTF natural gas edged higher by €6.93 to €53.00 per MWh.

 

Europe Stock Movers

LM Ericsson Class B advanced 3.5% to skr 55.28 after the Swedish telecom company booked a $2.9 billion charge linked to its acquisition of Vonage in 2022. 

EasyJet plc decreased 5.2% to 414.0 pence despite the U.K.-based discount airline reporting record fiscal fourth quarter profit.

Givaudan SA increased 1.5% to CHF 2,937.0 despite the  Swiss fragrance company reporting a decline in sales in its latest quarter. 

Restaurant Group Plc soared 37.6% to 66.4 pence after the operator of pubs and restaurants agreed  to go private in a deal with Apollo Global Management. 

Suedzucker AG increased 1.4% to €14.30 after the world's largest sugar producer revised its annual earnings outlook.

The sugar and starch products maker said consolidated sales in the first-half ending in August rose 10% to €5.08 billion from €4.6 billion a year ago. 

Operating earnings in the first half increased to €739 million from €465 million a year ago. 

The company forecasted full-year revenue to range between €10.0 billion and €10.5 billion compared to €9.5 billion and operating earnings in the range of €1.3 billion to €1.4 billion compared to the previous estimate between €1.2 billion and €1.4 billion and €1.1 billion a year ago. 

Siemens Energy AG added 2.3% to €12.48 after the company agreed to sell its Trench business to an investment firm Triton as the company sharpened its focus on its core business. 

Publicis Groupe SA increased 4.8% to €76.84 after the public relations and advertising company reported an increase in revenue in the third quarter. 

Publicis revised higher its organic growth outlook for the full-year to range between 5.5% and 6% from the previous estimate of 5.0%.