The U.S. stock futures market is trading in the red this morning, slipping as a slew of earnings reports hit the tape. Dow-30 component Procter & Gamble (PG), a consumer product maker with brands such as Tide and Cascade, reported a better-than-expected top- and bottom-line performance, with higher prices offsetting lower volumes. Elsewhere, earnings for Morgan Stanley (MS), a diversified banking institution, declined on lower investment banking revenue, and the stock pulled back on the news. Other stocks were lower on the day, causing the broader indices to decline.
Additionally, economic data related to housing starts and building permits also came out this morning. These showed that 1,358,000 housing starts (annualized rate) occurred in September, representing the best number since July of this year. Building permits were 1,473,000 in the month, which was the best since October of 2022. Overall, today’s futures market action suggests weaker trading.
The stock market started trading much lower yesterday, following a report that showed retail sales increased 0.7%, and were stronger than expected, causing concerns that the U.S. consumer is faring well and that inflationary pressures will remain sticky. This report caused 10-year Treasury bond yields to reach their highest levels since October 6th, and traders sold off their positions. However, stocks rebounded through much of the morning before eventually settling not too far from breakeven levels. Overall, the S&P 500 was off nearly a half point (down 0.01%), the NASDAQ declined 34 points (down 0.25%), and the Dow Jones Industrial Average finished up 13 points (up 0.04%). Though the markets nearly broke even on the day, underlying market breadth was stronger, with advancers outpacing decliners by a 1.4-to-1.0 ratio. Energy stocks were among the best performers, while REITs were among the worst.
In commodity news, oil prices rose yesterday following weeks of heightened geopolitical risks arising from wars in Ukraine and the Middle East. Elsewhere, U.S. Treasury bond yields were mixed, with short-term rates rising and long-term yields falling. The yield curve remains heavily inverted, though, with bonds with shorter terms having higher yields than those with longer durations. The Chicago Board Options Exchange Volatility Index, or VIX, more commonly known as the fear index, rose yesterday but remains well off of highs reached earlier in October.
A few economic reports will be released in the days ahead, including initial jobless claims and the Philadelphia Fed Manufacturing Survey on Thursday. Additionally, Federal Reserve Chairman Powell, along with several Federal Reserve regional Presidents, will be giving remarks on the broader economy in the days ahead. Elsewhere, earnings announcement season for third-quarter results and fourth-quarter outlooks is heating up. Overall, most eyes will be looking towards any hints of future interest-rate policy over the next few days. - John E. Seibert III
At the time of this article’s writing, the author held positions in one or more of the companies mentioned.
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