Futures markets indicate a bounce upward at today’s open, after stocks continued to slide Thursday, marking a fourth-consecutive day in the loss column. The Dow Jones Industrial Average fell 146 points yesterday, or about half a percentage point, the broader S&P 500 shed 39 (1.1%), and the tech-focused NASDAQ took the biggest hit, dropping 181 points, or 1.7%. In terms of sector performance, results were evenly split between gainers and losers. Technology stocks lost 3%, followed closely by communication services (-2.8%). On the plus side, energy shares advanced 2%, while industrials gained 1%.
In the wake of the Federal Reserve’s announcement of a fourth-straight rate hike of 0.75% on Wednesday, the yield on two-year treasury notes advanced to 4.71%, its highest point in 15 years. Meanwhile, the 10-year Treasury, which is a widely used benchmark for other borrowing rates, hit 4.14%.
Investors had been hoping that the Fed soon would give some indication that it was ready to ease up on the monetary brakes. Instead, Chairman Jerome Powell said that it was too early to talk about a pause, and that the latest data suggested that rates will go higher than previously expected. The central bank’s goal is to tame inflation, which has been running near 40-year highs of late. By raising borrowing costs, it aims to reduce overall demand, causing price increases to ease.
This morning’s report on October nonfarm payrolls provided the latest data point on the Fed’s progress. The U.S. economy added 261,000 positions last month, topping forecasts by about 55,000. On the other hand, this was well below the 372,000 jobs per month averaged from July through September. Meanwhile, the unemployment rate increased to 3.7%, whereas the consensus was looking for it to come in at 3.5%. Also of note, average hourly earnings increased 4.7% year over year, keeping upward pressure on inflation.
While the employment reading wasn’t expected to sway the lead bank’s next decision dramatically, the fact that the numbers came in well above estimates suggests the battle is far from over. The consumer price index, or CPI, report, due out next Thursday, will be more influential, as it will give the latest reading on inflation.
Just a little before the start of today’s trading session, futures are indicating a positive open for the major U.S. indexes. In overnight trading, markets in Asia were mostly up, except for a notable 1.7% drop in Japan’s NIKKEI Index. Meanwhile, stocks in Europe are showing strong gains. Elsewhere, oil futures have jumped about 4%, with benchmark West Texas Intermediate at around $91.65 a barrel. Mario Ferro
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
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