Closing Stock Market SummaryToday's trade was mixed with little conviction on either side of the tape. The stock market opened to modest losses before the S&P 500 tested yesterday's low, and the new low for 2022 (3568.45), where it found support from buyers. The major averages ultimately closed with losses, but little changed from the flat line.
The stock market proved to be fairly resilient considering the hotter-than-expected September Producer Price Index (PPI) market participants received this morning. PPI was up 8.5% year-over-year while core PPI, which excludes food and energy, was up 7.2% year-over-year indicating inflation remains "sticky" at the wholesale level.
Market participants also digested the FOMC Minutes from the September meeting today, which reiterated what Fed officials have been saying recently about raising rates and keeping them at a restrictive level for longer; therefore, they didn't contain any surprises. Equities took a modest step higher in the immediate aftermath, but quickly returned to levels seen before the Minutes were released.
The Treasury market did not have a big reaction to the PPI report and showed some added improvement following the release of the FOMC Minutes for the September meeting. The 10-yr note yield fell four basis points to 3.90% despite a disappointing 10-yr note auction and the 2-yr note yield fell one basis point to 4.29%.
Apple (AAPL 138.34, -0.64, -0.5%) was an important directional driver today. It supported the market with its gains before losing steam late in the day and falling into negative territory, dragging the indices down with it. Other driving factors included a nice gain in PepsiCo (PEP 169.39, +6.80, +4.2%) after it posted better-than-expected earnings and raised its FY22 EPS guidance, the well-behaved Treasury market and gilt market, and a prevailing wait-and-see mindset in front of the Consumer Price Index report on Thursday.
Outsized gains in PepsiCo boosted the S&P 500 consumer staples sector (+0.5%) to second place on the day. Energy (+0.8%) sat in first place despite falling oil prices. WTI crude oil futures fell 2.2% to $87.22/bbl on festering concerns about a global growth slowdown.
On the flip side, the S&P 500 utilities (-3.4%) and real estate (-1.4%) sectors were the worst performers today.
Looking ahead to Thursday, market participants will receive September CPI (consensus 0.2%; prior 0.1%) and core CPI, which excludes food and energy (consensus 0.4%; prior 0.6%), along with weekly initial jobless claims ( consensus 225,000; prior 219,000) and continuing claims (prior 1.361 million) at 8:30 a.m. ET.
Other data released tomorrow includes: weekly EIA Natural Gas Inventories (prior +129 bcf) at 10:30 a.m. ET, weekly EIA Crude Oil Inventories (prior -3.36 million) at 11:00 a.m. ET, and the September Treasury Budget (-$219.6 billion) at 2:00 p.m. ET.
Reviewing today's economic data:
- Weekly MBA Mortgage Applications Index fell 2.0% compared to last week's 14.2% decline.
- PPI rose 0.4% in September (consensus 0.2%) following a revised 0.2% decline in August (from 0.1%). Core PPI, excluding foods and energy, rose 0.3% in September (consensus 0.3%) following a revised 0.3% increase in August (from 0.4%)
- The key takeaway from the report is that it shows producer inflation sticking at levels that will pressure profit margins and stoke concerns about negative pass-through effects to the consumer. In turn, that understanding will stoke concerns that there hasn't been enough improvement on the inflation front to convince the Fed to take a more guarded approach with its rate hikes.
Dow Jones Industrial Average: -19.6% YTD
S&P Midcap 400: -20.7% YTD
S&P 500: -25.0% YTD
Russell 2000: -24.8% YTD
Nasdaq Composite: -33.4% YTD