S&P 500 and Nasdaq Resumed Downward Slide After Treasury Yields Rebounded

Barry Adams
18 Oct, 2023
New York City

Stocks on Wall Street struggled and investors reviewed the latest batch of earnings. 

Investors welcomed positive earnings from Procter & Gamble, United Airlines, Morgan Stanley but cautious outlook also turned several stocks volatile.

But bond yields resumed their advances  and the yield on 10-year U.S. Treasury notes inched higher to 4.8%, nearing the 2007-high. 

 

Mortgage Applications Dropped to 28-year Low

Elevated interest rates continued to dampen demand for mortgage rates and applications for mortgages declined 6.9% from the previous week in the week ending on October 13. 

The data from Mortgage Bankers Association showed that the demand for housing loans fell to the lowest level since 1995 and applications for home loan refinancing plunged 9.9%. 

“Applications decreased to their lowest level since 1995, as the 30-year fixed mortgage rate increased for the sixth consecutive week to 7.70% – the highest level since November 2000,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist.

 

Housing Starts and Permits Fell and Completions Rose In September 

Housing starts and permits fell in September but completions rose from a year ago, according to the latest data released by the U.S. Census Bureau and the Department of Housing and Urban Development. 

Building permits declined 4.2% from the previous month and dropped 7.2% from a year ago to a seasonally adjusted rate of 1.47 million. 

Housing starts rose 7.0% from the previous month but fell 7.2% from a year ago to a seasonally adjusted rate of 1.358 million. 

Housing completions rose 6.6% from the previous month and edged up 1.0% from a year to a seasonally adjusted rate of 1.453 million.  

 

Volatile Crude Oil 

Crude oil prices surged more than 2% as traders feared supply disruptions and Israel military's ground invasion in Gaza. 

Diplomats in the region worry that Israel's reaction to Hamas' kidnapping and attacks may be perceived as aggressive by the militants in Lebanon, Iran and Egypt.  

On Monday, an Israeli bombing campaign killed at least 500 people at a hospital in Gaza City, prompting worries of more retaliatory attacks from Hamas led militants. 

Israel denied the attack and said that the explosion was linked to the mishandled rocket launch by Hamas-controlled operators. 

 

Positive China Economic Data Surprised Markets 

In Asia, China's economy expanded at 4.9% annual pace in the third quarter, slower than the 6.2% increase in the second quarter, National Bureau of Statistics reported Tuesday. 

Economists were looking for the second quarter growth of 4.5%, and faster-than-expected growth raised hopes that the second largest economy may achieve the government' annual growth target rate of 5.0%.  

China's retail sales rose at the fastest pace in four  months in September by 5.5% after rising at 4.6% in the previous month, the statistical agency said in a separate report.  

 

U.S. Indexes & Yields 

The S&P 500 index decreased 0.2% to 4,364.92 and the Nasdaq Composite fell 0.4% to 13,515.26. 

The yield on 2-year Treasury notes decreased to 5.20%, 10-year Treasury notes inched higher to 4.88% and 30-year Treasury bonds edged up to 4.97%. 

Crude oil increased $1.25 to $87.86 a barrel and natural gas prices rose 7 cents to $3.15 a thermal unit. 

The dollar index edged higher to 106.48, the level last seen in November 2022 and extended gains from the low of 99.85 on July 13, 2023.  

 

U.S. Stock Movers 

United Airlines Holdings Inc dropped 5.1% to $37.65 after the international airline forecasted weak performance in the current quarter largely because of expensive fuel. 

Revenue in the third quarter rose to $14.5 billion from $12.9 billion and net income advanced 20% to $1.1 billion. 

Morgan Stanley decreased 4.6% to $77.60 despite the financial services provider reporting higher-than-expected quarterly sales and earnings but revenue in wealth management unit disappointed investors. 

Procter & Gamble Co increased 1.2% to $148.0 after the consumer goods maker reported quarterly earnings that surpassed estimates set by some analysts. 

Revenue in the latest quarter was $21.9 billion and diluted earnings per share $1.83. 

J B Hunt Transport Services Inc declined 3.6% to $188.80 after the logistics and transportation services provider reported quarterly earnings that fell short of market expectations.

Interactive Brokers Group, Inc dropped 4.5% to $82.51 after the online institutional brokerage service provider reported adjusted earnings and revenues that fell below market's expectations.