This morning the economic calendar is rather light, with the only notable report coming at 8:30 P.M. (EST) from the Labor Department. That report showed jobless claims for the week ending November 4th came in at 217,000, which was down slightly from the previous week’s revised tally of 220,000. The claims figures come after the October employment data, released last week, showed some signs of weakening in the labor market and a drop in the average hourly wage, which increased at its slowest rate (+4.1% for the 12-month period) in over two years. The equity futures, which were relatively unchanged after the release of the jobless claims data, are pointing to a modestly higher opening to the trading day stateside.
Third-quarter earnings season is nearing the finish line, and for the most part has exceeded expectations. More than 80% of the reporting S&P 500 companies have surpassed forecasts and that has provide some support for equities, along with the recent notable retreat in Treasury market yields. Since the close of yesterday’s trading, we received a few significant reports, including the latest quarterly results from Walt Disney Company (DIS). Shares of the entertainment giant are higher in pre-market action after the company posted better-than-expected earnings per share in the September quarter. Wall Street also liked the company’s forecast of significant cash flow gains, alongside deeper cost cuts, as it could lead to the restoration of the dividend over the coming year. Conversely, the stock of Arm Holdings Plc (ARM) is looking at a lower opening today after the chip maker gave a disappointing sales forecast in its first quarterly report since the company went public earlier this year.
Given the limited economic and earnings news this morning, the attention of Wall Street will probably be focused on the Federal Reserve during today’s session. The sluggish labor market data and the Federal Reserve’s decision to keep the benchmark short-term interest rate in the range of 5.25% to 5.50% has created a “goldilocks” scenario for Wall Street, pushing Treasury market yields lower and fueling the recent equity market rally. This afternoon, at 2:00 P.M. (EST), investors will be eyeing the latest commentary on monetary policy from Federal Reserve Chairman Jerome Powell, who is scheduled to speak on a panel at an International Monetary Fund (IMF) conference. Chairman Powell’s commentary last week following the Federal Open Market Committee’s decision to hold rates steady gave a big boost to equities and bonds. European Central Bank President Christine Lagarde is also scheduled to deliver remarks later today.
The recent retreat in Treasury market yields has been the primary catalyst behind the sharp rally for stocks over the last fortnight. The technology-dominated NASDAQ Composite has led the move higher, and is currently on a nine-session winning streak. This rally has been rather encompassing, with the Dow Jones Industrials Average, the S&P 500 Index, and the small-cap Russell 2000 also delivering nice gains over the last several days. The broader S&P 500 Index has recorded eight consecutive gains, and if it finishes in positive territory today it would mark the longest winning streak for the index since 2004. Stocks have historically performed well in a falling interest-rate environment, and that has been the case once again, as Treasury market yields have backed off of their recent highs. Specifically, the yield on the 10-year Treasury note, which hit 5.00% a few weeks ago, is now hovering around 4.55% this morning.
In the commodities sector, oil is modestly higher this morning after the price of crude plunged to a three-month low yesterday on concerns about global consumption. West Texas Intermediate (WTI) and Brent crude futures are trading around $76 and $80 a barrel, respectively. The recent uneven economic data both here and abroad have weighed on oil and gas prices and are taking a bite out of the gains the energy stocks have produced thus far in 2023. – William G. Ferguson
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
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