Stocks Braved Higher Ahead of Rate Decision, Mortgage Applications Dropped to 28-year Low

Barry Adams
01 Nov, 2023
New York City

Stocks braved higher, investors digested another batch of fresh earnings, and they awaited the Fed's rate decision later in the day.

Bond market volatility overshadowed stock markets, and the U.S. Treasury outlined its plan to finance the federal government deficit.

The Treasury Department is planning to auction $112 billion in debt next week as the federal government prepares to finance its rising debt, which neared $34 trillion at the end of the fiscal year 2023.

The federal government increased its deficit by 23%, or $320 billion, to $1.7 trillion in the fiscal year 2023, and the deficit is expected to approach $2 trillion in the current fiscal year if the government continues to spend at its current levels.

The White House is seeking $106 billion to finance wars in Israel and Ukraine, and the president's office is looking for an additional $56 billion for childcare and disaster relief.

 

Private Sector  Hiring  Accelerated in October 

Private sector payrolls expanded to a weaker-than-expected 113,000 in October, the ADP survey showed on Wednesday.

Payrolls expanded at a faster pace after rising by 89,000 in September, after education and healthcare added 45,000 jobs in the month.

The U.S. Labor Department is set to release its October nonfarm payroll estimate on Friday, and economists polled by Ticker.com are looking for payrolls to expand by 195,000.

The ADP survey and the nonfarm payrolls survey significantly diverge at times because the government data is based on a larger sample size and has a greater diversity of employers in its sample size.

 

28-year Low In Mortgage Application Volume

Mortgage applications declined by 2.1% in the week ending October 27, following a 1% fall in the previous week and extending the weekly decline to the third week in a row.

The 30-year fixed rate dipped slightly to 7.86% but remained close to 23-year highs and has been above the 7-percent level since early August 2023.

The refinance share of mortgage activity decreased to 31.2% of total applications from 31.4% the previous week.

The adjustable-rate mortgage share of activity increased to 10.7% of total applications as buyers struggled with elevated interest rates and home affordability and hoped they would be able to later refinance mortgages at a lower rate.

 

U.S. indexes and Yields

The S&P 500 index increased 0.7% to 4,224.71, and the Nasdaq Composite advanced 0.9% to 12,964.44.

The yield on 2-year Treasury notes decreased to 5.0%, 10-year Treasury notes inched lower to 4.78%, and 30-year Treasury bonds edged down to 4.95%.

Crude oil decreased $1.96 to $82.98 a barrel, and natural gas prices fell 11 cents to $3.43 a thermal unit.

Gold increased $8.05 to $1,990.58 an ounce ahead of the Fed's interest rate decision later in the day.

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged higher to 106.66, and the index traded volatile after the euro and the pound eased for the second day in a row and the yen fell to a multi-year low after the Bank of Japan left its ultra-loose policy intact.

 

U.S. Stock Movers

Wayfair Inc. declined 4.5% to $40.46 after the online furniture retailer reported weak third-quarter revenue, reflecting a weak demand for home goods and residential furniture.

Advanced Micro Devices, Inc. jumped 4.4% to $102.64 after the advanced chip maker reported mixed quarterly results and offered a positive 2024 outlook for its data center segment.

Wework Inc. plunged 52% to $1.08 after a report in the Wall Street Journal noted that the company is looking to file Chapter 11 bankruptcy protection as early as next week.

Caesars Entertainment Inc. decreased 0.7% to $39.63 after the resorts and casinos operator reported rising revenue and earnings in the third quarter, helped by steady demand at its properties in Las Vegas.

Revenue rose 3.7% to $2.99 billion, and earnings increased to 34 cents from 24 cents a year ago.

Match Group Inc. plunged 16.8% after the dating services provider forecast fourth-quarter revenue that fell short of market expectations.

In the third quarter, revenue rose 8.9% from a year before to $881.6 million, and earnings per share eased to 57 cents from 58 cents a year ago.

Active paying subscribers declined 5% from the previous quarter to 15.7 million, and average subscriptions increased 15% from the previous quarter to $18.39.

During the quarter, the company repurchased $300 million of stock and a total of $445 million in the year-to-date, reducing its share count by 2.8% from the beginning of the year.

About $667 million is available under the $1 billion stock repurchase program, and the company declared its plan to return to shareholders at least 50% of its free cash flow.

Paycom Software Inc. plunged 37.7% to $152.38 after the payroll processor forecasted weak fourth-quarter revenue.

In the third quarter, non-GAAP net income increased to $102.4 million, or $1.77 per diluted share, up 39% from the prior-year period.

During the quarter, the company repurchased over $76 million worth of stock and paid nearly $22 million in cash dividends.