The stock market futures were in the red this Halloween morning, ahead of the release of multiple new economic data. The headline data point this morning before the bell was the Personal Consumption Expenditures (PCE) Price Index, which showed that prices increased 0.2% for the month of September (or 2.1% on an annualized basis), matching expectations and demonstrating declining inflationary pressures. Elsewhere, the U.S. employment cost index showed that compensation costs for private sector workers increased by 3.9%. The markets moved down further on this economic information, our view is that the still-strong labor market and economy may lead the Federal Reserve to measure the pace of future interest rate reductions.
Earnings outcomes from large technology companies Microsoft (MSFT) and Meta (META), the owner of Facebook, were mixed. These companies both posted significant growth while forecasting higher spending on Artificial intelligence initiatives, leaving the Street feeling underwhelmed by future earnings prospects.
The stock market initially declined yesterday following mixed economic news early in the day. This included the Automatic Data Processing (ADP) jobs report for October, showing that private payrolls had increased by 233,000, far exceeding average expectations. U.S. gross domestic product (GDP) was up 2.8% annualized, aided by a sharp increase in consumer spending. Still, this number was lower than the prior quarter. These reports caused an initial decline in the major market averages, which then bounced back after reaching an oversold condition. The market averages then declined the rest of the day. Overall, the S&P 500 fell 19 points (down 0.33%), the NASDAQ finished off 105 points (down 0.56%), and the Dow Jones Industrial Average was off 92 points (down 0.22%). Market breadth was slightly positive, with advancers outpacing decliners by a 1.1-to-1.0 ratio. Communications stocks were amongst the best performers on the day, while technology equities were amongst the weakest.
In commodity news, oil prices bounced back a bit, recovering some of the price decline over the weekend following reduced fears about escalating tensions in the Middle East. Estimated inventory draws in the energy commodity also helped to improve sentiment. Elsewhere, U.S. Treasury bond yields were mixed, though the recent trend continued as long-term interest rates rose and short-term rates fell. This steepening of the yield curve is usually a positive for banks, which borrow short and lend long. The Chicago Board Options Exchange Volatility Index, or VIX, commonly known as the fear index, rose rapidly yesterday, as traders demanded more options protection.
Several economic reports will be released in the days ahead. These include the U.S. employment report for October, which includes hourly wages and the U.S. unemployment rate and comes out tomorrow. Additionally, construction spending for September and the Institute for Supply Management’s manufacturing index for October will be released. Earnings season continues as companies across a wide array of industries will release their quarterly results. - John E. Seibert III
At the time of this article’s writing, the author did not hold any positions in the companies mentioned.
CLICK HERE for more information on our services or call 1-800-VALUELINE (1-800-825-8354). Our account managers are available Monday through Friday, 8:00 AM to 6:00 PM Eastern Time.
