The futures were in the red this morning ahead of the Automatic Data Processing (ADP) employment report. The major equity indexes exhibited weak market action yesterday on the first day of fourth-quarter trading. This report showed that private sector payrolls increased by 143,000 jobs in September, and annualized pay increases were 4.7% year over year for job-stayers and 6.6% for job-changers. Around 61,000 jobs were added in the Southeast, while smaller gains were seen across the rest of the U.S. Additionally, most of the hiring occurred at larger companies. The futures market remains somewhat in the red as we write this shortly after release of the ADP report, suggesting a sluggish start to the trading day.
The stock market was notably weak yesterday on the first day of the fourth quarter, as traders weighed heightened geopolitical risks and the beginning of a strike from the International Longshoreman’s Association, which comprises port workers across the East and Gulf Coasts. This strike would significantly delay shipments into the U.S. ahead of the Christmas shopping season, while potentially driving inflation higher due to fewer goods being available for sale. The White House has said the government would not intervene in the stoppage. Traders sold off the broader market Tuesday before the market reached an oversold condition, and bounced back some in the final portion of the trading session. Still, the major market indexes ended not far from their daily lows. Overall, the S&P 500 fell 54 points (down 0.93%), the NASDAQ declined 279 points (down 1.53%), and the Dow Jones Industrial Average was off 173 points (down 0.41%). Market breadth was quite negative, with decliners outpacing advancers by a 1.4- to 1.0 ratio. Energy stocks were amongst the best performers on the day as conflict continued in the oil-rich Middle East. On the other hand, technology stocks were amongst the weakest performers.
In commodity news, oil prices surged rapidly yesterday following an increase in geopolitical pressures, while recovering from an oversold condition. Israeli troops on the ground entered Lebanon, and Iran launched a major missile attack on Israel Tuesday afternoon (New York time).
Elsewhere, U.S. Treasury bond yields largely fell across the board as traders moved into the safe-haven asset amid heightened geopolitical risk and declining stock markets. The Chicago Board Options Exchange Volatility Index, or VIX, commonly known as the fear index, rose rapidly as traders rushed to protect their holdings against further price volatility.
The days ahead will see the release of several key economic reports that will likely influence market movements. These include initial jobless claims, Standard & Poor’s Final U.S. Services Purchasing Manager’s Indices for September, and the Institute for Supply Management’s Services Index for September on Thursday. On Friday, the U.S. employment report, including new jobs, hourly wage growth and the unemployment rate, will be released. Additionally, earnings data releases will start to pick up in the days ahead now that the books are closed for the third quarter. - John E. Seibert III
At the time of this article’s writing, the author did not hold positions in any of the companies mentioned.
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