Before The Bell
The futures market started negatively after a mixed trading session yesterday. Large technology and REITs mostly fell yesterday, while other industries, such as financials and energy, had positive outcomes. Durable goods orders were better than expected, which along with the rise in Treasury yields, prompted some cyclical rotation. Overall, these factors led the S&P 500 to finish lower by 12 points, while the NASDAQ was off 78 points. On the other hand, the Dow Jones Industrial Average was up 71 points at the end of trading. The futures market had moved to the upside by midnight. Still, it could not hold the positive momentum overnight ahead of today’s testimony from Fed Chairman Jerome Powell and Treasury Secretary Yellen in front of the Senate Banking Committee. Overall, the price action suggests a negative start to the trading day.
Market breadth was quite positive yesterday, as advancers outpaced decliners by a 1.5-to-1.0 ratio. Energy issues were among the strongest performers, aided by a rise in the related commodity. Conversely, REITs were among the weakest performers, hurt by a surge in lending rates.
In commodity news, oil prices were higher yesterday, as fears about an undersupplied market emerged. Traders have also been hiking their demand expectations for natural gas, as a cooler winter is now expected. Meantime, as noted above, U.S. Treasury bond yields have moved higher, as concerns about inflation persist and some traders back away from the safe-haven asset. This movement helps earnings at financials and hurts profits at REITs. The VIX Volatility Index was higher yesterday, as demand for options protection rose a bit.
Looking ahead, a few key economic reports will come out this week, including the latest reading on consumer confidence at 10:00 A.M. (EDT) this morning. Additionally, we will get data on initial and continuing weekly jobless claims on Thursday and manufacturing activity for September on Friday. The final revision to the second-quarter GDP estimate also is due on Thursday.
Meanwhile, U.S. Federal Reserve Chairman Powell will speak on Wednesday at the European Central Bank forum, which could give further insight into the Fed’s thinking on interest-rate policy. In legislative news, the U.S. House of Representatives is expected to vote on a few key bills later in the week, including the bipartisan infrastructure bill passed by the Senate. Additionally, a debt ceiling vote may occur later in the week, as a possible government shutdown looms. These votes will likely cause higher levels of stock-market volatility over the short term. On the earnings calendar, few companies are slated to report this week, suggesting that most traders will focus on any developments on the economy and any decisions or lack thereof on Capitol Hill.
– John E. Seibert III
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
