Closing Stock Market SummaryThe stock market had a decent showing to start the day but gave way to steady selling pressure that began around 11:00 a.m. ET. Economic slowdown and rate-hike concerns weighed on investor sentiment. In addition, market participants were contending with another weak session from Apple (AAPL 138.20, -4.28, -3.0%), a disconcerting inventory build reported by Dow component Nike (NKE 83.12, -12.21, -12.8%), and an uptick in the August Core PCE Price Index. Treasury yields started to rise in the afternoon, adding fuel to the sell-off in stocks. The S&P 500 closed below the 3,600 level, and settled at a new low for 2022 (3586.47).
Nike reported a huge inventory increase (+44% yr/yr) and gross margin pressure for its fiscal Q1 and warned of continued gross margin pressure for fiscal Q2. This stoked slowdown concerns while a year-over-year increase in the August Core PCE Price Index (to 4.9% from 4.7%) fed into worries that the Fed will continue with its unfavorable monetary policy.
The 10-yr note yield, which was at 3.70% earlier, settled the session up four basis points to 3.79%. The 2-yr note yield, which was at 4.13% earlier, settled the session up three basis points to 4.20%.
The upward drift in Treasury yields and losses in the mega cap stocks, especially Apple, weighed down index level performance as the session progressed. The Vanguard Mega Cap Growth ETF (MGK) closed down 1.8% versus a 1.1% loss in the Invesco S&P 500 and a 1.5% loss in the S&P 500.
Most issues pulled back in the afternoon trade. Declining issues outpaced advancing issues by a 4-to-3 margin at both the NYSE and the Nasdaq, reversing an earlier position where advancers led decliners.
Ten of the 11 S&P 500 sectors closed in the red with losses ranging from 0.4% (materials) to 2.0% (utilities). Real estate (+1.0%) was the lone holdout in positive territory.
One bright spot in the market today was Micron (MU 50.10, +0.09, +0.2%), albeit closing well off the session high. It squeezed out a modest gain after reporting better-than-expected fiscal Q4 earnings and warning of an earnings shortfall for fiscal Q2.
Energy complex futures settled the session lower. WTI crude oil futures fell 2.5% to $2.02/bbl and natural gas futures fell 0.6% to $6.82/mmbtu.
Looking ahead to Monday, market participants will receive the September final IHS Markit Manufacturing PMI reading (prior 51.8) at 9:45 a.m. ET. The September ISM Manufacturing Index (prior 52.8%) and the August Construction Spending report (prior -0.4%) are out at 10:00 a.m. ET.
Reviewing today's economic data:
- Personal income increased 0.3% month-over-month in August (consensus 0.3%) in after a revised 0.3% increase (from 0.2%) in July. Personal spending rose 0.4% month-over-month in August (consensus 0.2%) after a revised 0.2% decrease (from +0.1%) in July.
- The key takeaway from the report is that the inflation the Fed says it can control (i.e. core inflation) did not move in a friendly direction in August; therefore, market participants can continue to expect the Fed not to be their friend with monetary policy.
- Final September University of Michigan Consumer Sentiment reading came in at 58.6 ( consensus 59.5) after the prior reading of 59.5.
- The key takeaway from the report is that the decline in consumer sentiment across the income distribution (low to high) has been consistent for the past six months, underscoring the shared concerns about inflation pressures.
- September Chicago PMI came in at 45.7 ( consensus 51.9) after the prior reading of 52.2.
Dow Jones Industrial Average: -21.0% YTD
S&P Midcap 400: -22.5% YTD
S&P 500: -24.8% YTD
Russell 2000: -25.9% YTD
Nasdaq Composite: -32.4% YTD