Before The Bell
The futures market declined in the after-hours market following yesterday’s pullback. This marked the first time that the indices posted a decline in eight days, as several large companies recorded lackluster earnings reports and issued fourth-quarter guidance. Additionally, Tesla (TSLA) stock dropped 12% yesterday on news that CEO Elon Musk is considering selling his company’s stock. However, former Dow Industrial component General Electric’s (GE) stock rose on news that the company would split into three separate entities.
Overall, the markets moved lower throughout the day and ended not too far off their daily session lows. All told, the S&P 500 fell 16 points, the Dow Jones Industrial Average was off 112 points, and the NASDAQ declined 96 points. The futures market continued to trade in the red throughout the evening, it recovered a bit through the night before resuming its downward trend. Inflation figures were reported before the bell, with the Consumer Price Index increasing 6.2% year over year in October, which was considerably more than expected and is the highest reading since 1990. The futures market sold off a bit, as these figures suggest that the Fed may need to hike interest rates earlier than initially expected to fight inflation. Several hundred companies are slated to report quarterly results today, including Dow-30 component The Walt Disney Company (DIS) after the closing bell. Overall, the negative futures point to a weak start to the trading session.
Market breadth was slightly negative yesterday, as decliners outpaced advancers by a 1.1-to-1.0 ratio. Utility stocks were the best performers, suggesting that a move towards less volatile assets was occurring. Consumer discretionary issues were among the weakest.
In commodity news, oil prices rose to a seven-year high yesterday, as traders think demand will continue to outpace supply. A colder winter season and smaller supply of crude, due to less drilling, would likely keep prices higher. Meantime, U.S. Treasury Bond yields were mostly lower, as a move to the safe-haven asset occurred. The VIX Volatility Index rose as demand for options protection increased.
Looking ahead, economic news will be slow tomorrow as the Veterans Day holiday occurs. However, it will pick up on Friday, as the University of Michigan Consumer Sentiment Index for November should show how well the consumer is faring. Meantime, plenty of earnings reports will be released on Thursday and Friday, though we are past peak earnings season. Overall, we think the market will continue to trade on any changes in sentiment toward inflation, earnings results, supply chain issues, and potential changes in interest-rate policy. Of note, initial weekly jobless claims, issued a day earlier due to Veterans Day holiday tomorrow, came in at 267,000 in the latest week, a COVID-19 pandemic era low.
– John E. Seibert III
At the time of this article’s writing, the author held one or more positions in the companies mentioned.
