The S&P 500 and the Nasdaq Composite Pause, Treasury Yields Inch Lower

Barry Adams
08 Nov, 2023
New York City

The stock market struggled to hold early morning advances while attempting to extend the latest rally.

The S&P 500 index and the Nasdaq Composite extended the gains of the previous week after interest rate uncertainties receded, but popular indexes faced headwinds and erased morning gains.

Despite the choppy trading in the last five months, market indexes have managed to extend this year's gains because of several positive factors driving investors back to stocks.

Solid corporate earnings, resilient consumer spending, sustained economic growth, and an expanding labor market have helped investors overcome rate anxieties.

In addition, investors are hoping that the Federal Reserve may be able to navigate the U.S. economy to a soft landing and avoid future rate hikes.

The central bank is attempting to keep economic growth intact while slowing inflation to its target rate of 2% and keeping the labor market from shrinking.

For more than a year, most economists cautioned that the central bank is most likely to dip the economy into a recession and cause widespread job losses, increasingly seen as a less likely outcome by many market watchers.

Investors are feeling more confident that the Federal Reserve is likely to engineer a so-called soft landing, keeping the economy humming and inflation in check.

That change in stance by investors fueled a five-plus percent advance last week, the best weekly return in about a year.

Moreover, investors are hoping that the Federal Reserve will hold interest rates steady after the next policy meeting in December, clearing the deck for market advance all the way until the end of January, when the rate-setting committee regroups.

In today's trading, investors bid up big tech stocks and reacted to earnings releases but struggled to make more headway after rallying for seven sessions in a row.

The electric vehicle maker Rivian jumped more than 6% on better-than-expected quarterly results and production outlook; Robinhood fell 9% after transaction-based revenue declined 11% from a year ago; and Toast Inc. plunged 15% on worries of stronger macroeconomic headwinds.

 

U.S. indexes and Yields

The S&P 500 index decreased 0.02% to 4,377.71, and the Nasdaq Composite was nearly unchanged at 13,639.20.

The yield on 2-year Treasury notes increased to 4.93%, 10-year Treasury notes inched higher to 4.55%, and 30-year Treasury bonds edged down to 4.69%.

Crude oil decreased $1.89 to $75.51 a barrel, and natural gas prices rose 3 cents to $3.10 a thermal unit.

Gold decreased $19.48 to $1,948.92 an ounce after bond yields edged lower and the dollar weakened.

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 106.65.

 

U.S. Stock Movers

Robinhood Markets Inc. dropped 12.4% to $8.55 after the online trading platform reported weaker-than-expected sales of $467 million in the third quarter.

Revenue in the third quarter increased by 29% to $467 million, driven by a 96% increase in net interest income to $251 million.

Net loss in the quarter shrank to $85 million from $175 million, and diluted loss per share fell to 9 cents from 20 cents a year ago.

Average revenue per user increased by 27% to $80, and monthly active users fell 16% to 10.3 million.

Net deposit inflow in the quarter was $4 billion, and assets under custody surged 34% to $87 billion, reflecting higher equity valuations and a continued net inflow of assets.

eBay declined 5.8% to $38.45 after the online marketplace reported mixed quarterly results.

Revenue in the third quarter increased 5% to $2.5 billion from $2.4 billion, the company swung to a net profit of $1.3 billion from a loss of $69 million, and diluted earnings per share increased to $2.47 from a loss of 13 cents a year ago.

The company guided fourth-quarter revenue to fall between $2.47 and $2.5 billion and diluted earnings per share between 70 cents and 75 cents.

eBay estimated full-year 2023 revenue to range between $10.02 billion and $10.08 billion and diluted earnings per share between $4.53 and $4.58.

 

European Markets Extend Recent Rally

European markets trended lower in cautious trading, and bond yields declined for the second week in a row.

Benchmark indexes in Frankfurt, London, and Paris fell after investors reassessed the economic outlook and future rate path.

The latest retail sales data suggests consumers are still challenged amid elevated food and energy prices and rising interest rates.

 

Euro Area Retail Sales Declined for Third Consecutive Month

Retail sales in the Euro Area decreased by 0.3% in September from the previous month and dropped by 2.9% from a year ago, Eurostat reported Wednesday.

The volume of retail trade declined by 1.9% for non-food products and by 0.9% for automotive fuels, while food, drink, and tobacco sales rose by 1.4%.

Among the largest economies in the currency union, retail sales declined by 0.8% and fell for the fourth consecutive month in a row in Germany, decreased by 0.4% in Italy, and edged lower by 0.8% in the Netherlands.

However, sales in France rose by 0.4%, and sales in Spain edged up by 0.2%.

 

Europe Indexes and Yields

The DAX index increased 0.5% to 15,229.62, the CAC-40 index rose 0.7% to 7,034.16, and the FTSE 100 index decreased 0.1% to 7,401.72.

The yield on 10-year German bonds decreased to 2.64%, French bonds traded lower to 3.23%, the UK gilts edged down to 4.26%, and Italian bonds inched higher to 4.54%.

The euro rebounded to $1.066, the British pound at $1.22, and the U.S. dollar at 90.20 Swiss cents.

Brent crude decreased $2.03 to $79.63 a barrel, and the Dutch TTF natural gas edged higher by €0.28 to €45.78 per MWh.

 

Europe Stock Movers

Credit Agricole SA increased 1.8% to €11.79 after the French bank reported better-than-expected earnings in the third quarter.

Continental AG jumped 2.2% to €63.14 after the company reported slightly higher earnings in the latest quarter.

Consolidated sales in the third quarter declined 1.5% to €10.2 billion from €10.4 billion, but net income increased to €299 million from a loss of €211 million.

The company tightened its consolidated annual sales outlook to between €41.0 billion and €43.0 billion, up from the previous range of between €41.5 billion and €44.5 billion.

The company also slightly raised its adjusted operating earnings margin outlook to between 12.5% and 13.5% from the previous range of between 12% and 13%.

Commerzbank AG declined 3% to €10.08, despite the German bank reporting profit in the third quarter that more than tripled.

ITV plc decreased 5.6% to 61.92 pence after the British television network operator reported flat revenue.

Serco Group plc gained 1.3% to 146.0 pence after the company won a £200 million monitoring service contract for the Ministry of Justice.

Marks & Spencer Group plc soared 10.6% to 249.17 pence after the retailer reported a jump in profit in the fiscal first half.

Revenue in the first half jumped 10.8% to £6.1 billion from £5.5 billion in the corresponding period a year ago.

Statutory profit in the first half jumped to £325.6 million from £208.5 million, and basic earnings per share increased to 10.6 pence from 8.5 pence a year ago.

ABN AMRO Bank dropped 9.5% to €11.91 after the Dutch bank reported weaker-than-expected net interest income in the third quarter because of deposit migration to higher-yielding products.

Net income in the quarter increased to €759 million from €743 million, and earnings per share rose to 85 cents from 80 cents a year ago.

Net interest income increased 20% from a year ago to €1.5 billion but fell from the previous quarter because of deposit migration and lower results in trading activities.