Closing Stock Market SummaryThe stock market started the day in rally mode, bouncing from oversold conditions, with the Nasdaq up 2.2% and the S&P 500 up 1.7% at this morning's highs. A drop in Treasury yields, a weaker dollar, and strong mega caps were all support factors for the rebound. Each of these support factors weakened, however, and as they did, the major indices gave up their gains and spent most of the day in negative territory. The S&P 500 set a new intraday low for 2022 (3,623.29), having fallen below the June low (3,636.87) in afternoon trade.
Moves in the stock market were largely driven by moves in the Treasury market. The 10-yr note yield sat at 3.80% before today's open, but settled the day at 3.96%. The major indices were able to lift off session lows when the 10-yr note yield failed to breach 4.00%. Still, the sharp move towards that level undercut the early rebound efforts.
Another driving factor was the roller-coaster action in the currency market. The U.S. Dollar Index traded down to 113.33 this morning, as the euro and British pound rebounded; however, that rebound effort lost steam and the U.S. Dollar Index bounced back to 114.23, up 0.1%.
Separately, the mega cap stocks were unable to hold a stronger line as well. The Vanguard Mega Cap Growth ETF (MGK), up as much as 2.2% early on, finished the session flat. The movement in the mega cap stocks had a heavy influence on the movement of the major indices.
Most of the S&P 500 sectors closed in the red with consumer staples (-1.8%) and utilities (-1.7%) bringing up the rear. On the flip side, energy (+1.2%) and consumer discretionary (+0.3%) sat atop the leaderboard.
Energy outpaced the other sectors by a sizable margin as oil prices rose. WTI crude oil futures settled up 2.8% to $78.77/bbl. Natural gas futures fell 3.1% to $6.79/mmbtu.
The advance-decline line painted a mixed picture of the market. Advancers were roughly in-line with decliners by the close at both the NYSE and Nasdaq.
There was mixed Fed speak for market participants to digest today. Chicago Fed President Evans (not an FOMC voter) acknowledged to CNBC Europe that he is a little nervous that the Fed is moving too much, too quickly, but added that he remains "cautiously optimistic" that the U.S. can avoid a recession.
In contrast, Cleveland Fed President Mester (2022 FOMC voter) said policy rates need to be at a restrictive level for longer to bring inflation down and to make sure inflation expectations do not move up. St. Louis Fed President Bullard (2022 FOMC voter) said the U.S. has a serious inflation problem and that the credibility of inflation targeting is at risk, according to Bloomberg. Minneapolis Federal Reserve Bank President Kashkari (2023 FOMC voter) said the Fed is united and will move to bring down inflation at an "appropriately aggressive" pace, according to Reuters.
Looking ahead to Wednesday, market participants will receive the following economic data:
- 7:00 ET: Weekly MBA Mortgage Index (prior 3.8%)
- 8:30 ET: August advance international trade in goods (prior -$89.10 bln), advance Retail Inventories (prior 1.1%), and advance Wholesale Inventories (prior 0.8%)
- 10:00 ET: August Pending Home Sales (prior -1.0%)
- 10:30 ET: Weekly crude oil inventories (prior +1.14 mln)
Reviewing today's economic data:
- August Durable Orders fell 0.2% (consensus -0.1%) following the prior revised 0.1% decrease in July (from 0.0.%). Durable Orders, Excluding Transportation rose 0.2% (consensus 0.3%) following the prior revised 0.2% increase (from 0.3%)
- The key takeaway from the report is that business spending held up remarkably well. That point resonated in the 1.3% month-over-month increase for nondefense capital goods orders, excluding aircraft, that came on top of a 0.7% increase in July.
- July FHFA Housing Price Index fell 0.6% after the prior 0.1% increase in June
- July S&P Case-Shiller Home Price Index came in at 16.1% ( consensus 17%) after the prior 18.6% reading in June
- September Consumer Confidence Index rose to 108.0 (consensus 105.0) from prior revised reading of 103.6 (from 103.2)
- The key takeaway from the report is that the increase in confidence was bolstered partly by consumers' view of jobs and wages. That could be a good portent for spending, yet it won't help assuage concerns about Fed tightening given the Fed's belief that there needs to be some softening in the labor market to help temper wage-based inflation pressures.
- New home sales surged 28.8% month-over-month in August to a seasonally adjusted annual rate of 685,000 units (consensus 500,000) from an upwardly revised 532,000 (from 511,000) in July. On a year-over-year basis, new home sales were down 0.1%
- The key takeaway from the report is that new home sales were much stronger than expected, aided by a sense of urgency to sign contracts as mortgage rates came down. This strength, however, is apt to be an aberration given the surge in mortgage rates that has occurred in the ensuing period.
Dow Jones Industrial Average: -19.8% YTD
S&P Midcap 400: -22.4% YTD
S&P 500: -23.5% YTD
Russell 2000: -26.0% YTD
Nasdaq Composite: -30.8 YTD