U.S. and European Markets Trimmed Monthly Losses, Fed and BoE Decisions Awaited

Barry Adams
31 Oct, 2023
New York City

Market indexes closed higher on the final day of the month but fell for the third month in a row on interest rate uncertainties and elevated geopolitical tensions in the Middle East.

On the final day of the month, market indexes on Wall Street rebounded from earlier losses as investors booked losses in the month after Treasury yields surged to 16-year highs.

The S&P 500 index and the Nasdaq Composite declined about 3% in October, and both indexes extended losses for the third month in a row.

Investors are focused on the Fed's interest rate decision on Wednesday, and the central bank is expected to hold rates steady for the second time in a row.

Market participants are also hoping that the Fed policymakers may provide more clarity on the future direction of interest rates and hold rates at the final and next meeting in December.

In today's trading, investors reacted to another batch of earnings releases and awaited Apple Inc.'s quarterly results after the close on Thursday.

 

NAR and Residential Brokerages Conspired to Inflate Commissions    

Real estate brokers were in focus after a Missouri jury awarded $1.8 billion in damages against the National Association of Realtors, Keller Williams, and Berkshire Hathaway's HomeServices of America.

The jury found the industry association and residential brokerages guilty of colluding to keep high brokerage commissions.

Immediately after the verdict, Keller Williams and HomeServices said they planned to appeal the decision. 

Decades ago, when the commission system was designed, average home prices were below $50,000.

Over the decades, home prices have jumped multi-fold, but commissions have not adjusted to reflect higher home prices, making homes more expensive for buyers.

Zillow Group declined 7%, Redfin Corp. dropped 5.4%, and Compass Inc. plunged 6%.

In a separate case, the Justice Department is seeking damages from the industry association and others for sharing commissions between agents for buyers and sellers. 

 

U.S. indexes and Yields

The S&P 500 index increased 0.5% to 4,187.15, and the Nasdaq Composite advanced 0.4% to 12,831.43.

The yield on 2-year Treasury notes decreased to 5.07%, 10-year Treasury notes inched lower to 4.83%, and 30-year Treasury bonds edged down to 5.0%.

Crude oil decreased $1.02 to $81.28 a barrel, and natural gas prices rose 23 cents to $3.58 a thermal unit.

Gold increased $10.15 to $1,985.17 an ounce following the weakness in 10-year Treasury yields.

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged higher to 106.63, and the index is set to decline in the month after rising for two months in a row.

 

U.S. Stock Movers

Caterpillar Inc. declined 5.8% to $226.77 after the industrial equipment maker reported better-than-expected third-quarter results.

Revenue in the third quarter rose to $16.8 billion, and adjusted earnings were $5.52 per share.

However, the company forecasted sales in the current quarter would be "slightly higher" than the same year ago.

JetBlue Airways Corporation plunged 14.6% to $3.59 after the regional airline reported lower-than-expected sales and a wider-than-expected loss in the third quarter.

Revenue in the quarter was $2.35 billion, and the adjusted loss was 39 cents.

Chewy Inc. jumped 4.8% to $19.26 after Morgan Stanley analysts upgraded the stock to "overweight" from "equal weight" and lowered the stock price target to $28 from $31.

Arista Networks Inc. soared 10.5% to $193.75 after the networking gear maker reported better-than-expected quarterly results and lifted its sales outlook for the current quarter on the back of higher enterprise demand.

Simon Property Group Inc. increased 1.4% to $106.80 after the real estate mall developer lifted its annual fund flow estimate and reported better-than-expected quarterly results.

Revenue in the quarter ending in September increased 7.2% to $1.41 billion, and earnings per share rose to $3.20 from $1.65 a year ago.

Pfizer Inc. decreased 0.6% to $30.39 after the drugmaker recorded charges related to its COVID vaccine and COVID antiviral treatment Paxlovid.

The company took a $5.6 billion inventory write-down in the third quarter related to COVID products.

 

European Bond Yields Eased After Inflation Dropped to 2-year Low

European market indexes rebounded after inflation in the eurozone, France, and the Netherlands declined.

Benchmark indexes in Frankfurt, Paris, and London advanced more than 0.5%, and bond yields decreased after inflation measures eased.

 

Eurozone Inflation Slowed

The consumer price index in the eurozone eased to 2.9% in October, the lowest since July 2021, Eurostat reported Tuesday.

The core rate of inflation in the currency union, which excludes volatile energy and food prices, also slowed to 4.2%, the lowest since July 2022.

 

Eurozone Q3 GDP Contracted

The Euro Area economy contracted 0.1% on the quarter in the three months to September, following an upwardly revised 0.2% increase in the second quarter, the statistical agency reported in a separate report.

On an annual basis, the economy barely expanded by 0.1%, the weakest economic growth since the decline in 2021.

 

French Economy Barely Expanded 

The French economy barely expanded 0.1% on the quarter in the third quarter, following an upwardly revised 0.6% increase in the second quarter, the statistical agency INSEE reported Tuesday.

On an annual basis, the economy expanded by 0.7% in the third quarter, slower than the upwardly revised 1.2% growth in the second quarter.

Italian GDP stalled in the third quarter from the previous quarter, following the 0.4% contraction in the second quarter, the Italian statistical agency ISTAT reported Tuesday.

 

Europe Indexes and Yields

The DAX index increased 0.4% to 14,810.34, the CAC-40 index advanced 0.9% to 6,888.65, and the FTSE 100 index edged lower by 0.05% to 7,321.72.

The yield on 10-yetrar German bonds decreased to 2.78%, French bonds traded lower to 3.39%, the UK gilts edged up to 4.49%, and Italian bonds inched higher to 4.69%.

The euro hovered near a three-month low at $1.066, the British pound at $1.219, and the U.S. dollar at 90.18 Swiss cents.

Brent crude decreased $1.21 to $85.0 a barrel, and the Dutch TTF natural gas edged higher by €2.54 to €48.01 per MWh.

 

Europe Stock Movers

Anheuser-Busch Inbev SA jumped 3.9% to €52.86 after the company reported higher-than-expected sales growth in the third quarter.

Carlsberg A/S Class B declined 1.3% to €111.90 after the brewery warned of weak consumer sentiment in Europe and Southeast Asia.

BP Plc decreased 4.0% to 505.70 pence after the U.K.-based energy company reported a sharp decline in quarterly profit and smaller-than-expected results from its gas trading operation.

Last week, Exxon Mobil and Chevron also reported a sharp decline in quarterly revenue and profit, reflecting lower crude oil and natural gas prices from a year ago.

BBVA SA declined 1.1% to €7.42 despite the Spanish bank reporting strong third-quarter earnings.

Wartsila Oyj Abp soared 16.2% to €11.32 after the power engineering company reported improved profitability in the third quarter.

Spectris Plc advanced 4% to 3,127.0 pence after the precision instrumentation and control company said 2023 revenue is expected to be near the top end of previous guidance.

Thales SA declined 2.6% to €137.35 after the French defense electronics contractor said new order inflow in the nine-month period ending in September declined 18% from a year ago.

Order intake in the period declined to €12.4 billion from €15.5 billion, a decrease of 20% in nominal terms and 18% on an organic basis from a year ago.

In the nine-month period, sales increased 4.5% to €12.8 billion, and in the third quarter, sales rose 2.4% to €4.1 billion.

The company reiterated full-year 2023 organic sales growth between 5% and 7%, or between €17.9 billion and €18.2 billion.

Elementis plc gained 4.9% to 118.0 pence, despite the chemical company reporting a decline in revenue in the third quarter.

BASF SE increased 4.2% to €43.39 after the German chemical company announced its plan to cut investment and reduce its operating costs.

Siemens Energy AG declined 2.4% to €8.23 after the company said it plans to sell its India-listed Siemens Ltd. to its former parent, Siemens AG.

Uniper SE jumped 7.3% to €4.74 after the German utility company swung to a nine-month profit of €9.8 billion.

Bouygues SA increased 4.4% to €33.16 after the diversified French conglomerate reported strong nine-month results and reiterated its financial year 2023 outlook.