The U.S. stock market has been quite choppy lately, and it remains to be seen if any progress will made this week on Wall Street. Earlier this morning, the broader equity market futures were trading nicely higher, which may indicate a positive start to today’s session.
In economic news, there are no major reports scheduled for today. Tomorrow, we will get a look at the industrial production numbers for the month of September. Later this week, the housing market will take the spotlight. On Wednesday, the monthly housing starts and building permits will be released, followed by the existing home sales figures on Thursday. These reports will likely show that the real estate market is starting to lose steam, due to a softer economic backdrop and higher borrowing costs. Specifically, the interest rate on the 30-year mortgage now stands close to the 7% mark, compared to around 3% last year. Moreover, mortgage rates will likely rise further, as the Federal Reserve seems committed to a restrictive monetary policy. Notably, the housing market accounts for a sizable portion of the nation’s GDP (Gross Domestic Product), and is an area worth monitoring. Further, many individuals view their home as a primary asset, and declining prices probably won’t help confidence.
In corporate news, the third-quarter earnings season has officially started. Last week, we heard from a handful of large financial companies. This morning, Bank of America (BAC) weighed in with its results, sending the stock higher in pre-market trading. Tomorrow, we will hear from a wider assortment of names, including Netflix (NFLX), Johnson & Johnson (JNJ), and Lockheed Martin (LMT). At the current time, the nation’s largest corporations are expected to post only meager profit advances for the third quarter. Moreover, cautious guidance will probably be issued for the remainder of 2022. Certainly, if numerous companies miss profit forecasts, stock prices could come under further pressure. It is also little help that the 10-year Treasury bond yields over 4%, which is far above the dividend yield provided by most equities.
From a technical perspective, stocks remain quite volatile. For example, last Thursday, the S&P 500 Index fell to the 3,500 mark, and then in a stunning rebound, finished the session dramatically higher. The following day, a good portion of those gains were erased. Nonetheless, despite large daily swings, the market has not been able to sustain a meaningful advance for some time. Sentiment remains pessimistic, and there is no shortage of negative news streaming in from around the globe. In such an environment, it is not clear what might serve as a positive catalysts for stocks. – Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
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