Closing Stock Market Summary
The stock market had a downtrend day. The major indices were under pressure from the start, but faded to session lows in the late afternoon trade. The indices ultimately closed near those levels with losses ranging from 1.1% to 1.8%. The S&P 500, which closed just above 4,400 yesterday, spent the whole session below that level today.
The biggest factor driving the weakness was the bump in market rates that started yesterday afternoon in response to the Fed's hawkish hold. Specifically, the Fed indicated that it may not be done yet raising rates, that it is unlikely to cut rates in 2024 as much as the market had been thinking, and that the neutral rate might be higher than the estimated longer-run rate (2.5%).
The 2-yr note yield was at 5.05% just before yesterday's FOMC decision was released, but settled at 5.14% today after hitting 5.20% earlier. The 10-yr note yield, at 4.32% just before the FOMC decision was released, rose another 13 basis points from yesterday's settlement to 4.48% -- its highest level since 2007.
Losses were broad based, led by the mega caps and growth stocks. The Vanguard Mega Cap Growth ETF (MGK) fell 2.0% and the Russell 3000 Growth Index fell 1.9%.
Ten of the 11 S&P 500 sectors declined more than 1.0% today. The health care sector (-0.9%) saw the slimmest loss while the real estate sector (-3.5%) registered the sharpest decline by a decent margin.
There were some standout winners that had specific catalysts to account for the relative strength on this otherwise downbeat day. Paramount Global (PARA 13.30, +0.06, +0.5%), Warner Bros. Discovery (WBD 11.51, +0.01, +0.1%), and FOX Corp. (FOXA 32.14, +0.99, +3.2%) logged gains after CNBC reported that a resolution to the Hollywood writers' strike may be reached soon.
Splunk (SPLK 144.43, +24.84, +20.8%) was another top performer after news that it's being acquired by Cisco (CSCO 53.34, -2.16, -3.9%) for $28 billion, or $157.00 per share, in cash.
In other news, the Bank of England voted 5-4 to leave its bank rate unchanged at 5.25%. The Hong Kong Monetary Authority and Swiss National Bank also left their key interest rates unchanged at 5.75% and 1.75%, respectively, whereas the Riksbank and Norges Bank both raised their key interest rates by 25 basis points to 4.00% and 4.25%, respectively.
- Nasdaq Composite: +26.4% YTD
- S&P 500: +12.8% YTD
- S&P Midcap 400: +2.8% YTD
- Dow Jones Industrial Average: +2.8% YTD
- Russell 2000: +1.2% YTD
Reviewing today's economic data:
- Weekly Initial Claims 201K (consensus 225K); Prior was revised to 221K from 220K; Weekly Continuing Claims 1.662 mln; Prior was revised to 1.683 mln from 1.688 mln
- The key takeaway from the report is that the low level of initial claims shows that the labor market is still operating in a tight mode, which is going to remain a basis for the Fed to keep operating with a restrictive interest rate mindset.
- September Philadelphia Fed Index -13.5 (consensus -2.0); Prior 12.0
- Q2 Current Account Balance -$212.1 bln (consensus -$222.0 bln); Prior was revised to -$214.5 bln from -$219.3 bln
- August Existing Home Sales 4.04 mln (consensus 4.10 mln); Prior 4.07 mln
- The key takeaway from the report is that existing home sales continue to be crimped by a confluence of factors: higher mortgage rates and higher prices that are hurting affordability; limited supply; a lack of mobility due to remote work opportunities; and disinterest in moving by existing homeowners who are reluctant to give up a low-rate mortgage for a higher-rate mortgage.
- August Leading Indicators -0.4% (consensus -0.4%); Prior was revised to -0.3% from -0.4%
Friday's economic calendar will feature:
- 9:45 ET: Preliminary September S&P Global US Manufacturing PMI (prior 47.9) and preliminary September S&P Global US Services PMI (prior 50.5)