Closing Stock Market Summary
The stock market started, and finished, this session on a positive note. Around 1:45 p.m. ET, however, the three major indices were all in negative territory before bouncing off their session lows. The S&P 500 and Nasdaq Composite closed near their best levels of the day, bolstered by their mega cap components.
Notably, stocks were moving lower mid-morning despite a drop in long-term rates, which has been supportive for stocks of late. The 10-yr note yield declined seven basis points to 4.59% and the 2-yr note yield rose one basis point to 5.00%.
Some participants attributed the downside moves to lingering nervousness related to reports that Iran-backed Hezbollah made some provocative moves in the north. Israel, however, said those reports were a "false alarm," according to Bloomberg.
Other factors cited as a possible catalyst for the mid-morning slide were hesitation ahead of the September Consumer Price Index tomorrow at 8:30 a.m. ET following this morning's hotter-than-expected Producer Price Index, and tax-related selling in front of the October 16 deadline.
Total PPI was up 0.5% month-over-month (Briefing.com consensus 0.3%) and core PPI, which excludes food and energy, was up 0.3% (Briefing.com consensus 0.2%). Those gains left PPI up 2.2% year-over-year, versus 1.6% in August, and core PPI up 2.7%, versus 2.2% in August, reversing the trend of disinflation that had been seen.
Many stocks recovered in the afternoon trade, riding the coattails of the mega cap stocks. The Vanguard Mega Cap Growth ETF (MGK) ended the day 0.9% higher after being up just 0.1% at its worst level. The Invesco S&P 500 Equal Weight ETF (RSP), which had been down 0.5% at its low, finished the session up 0.2%. Eight of the 11 S&P 500 sectors closed in positive territory. The real estate (+2.0%), utilities (+1.6%), communication services (+1.1%), and information technology (+1.0%) sectors all jumped more than 1.0%.
The energy sector (-1.4%) was the worst performer, weighed down by Exxon (XOM 106.49, -3.96, -3.6%) after it announced a $59.5 billion all-stock acquisition of Pioneer Natural Resources (PXD 240.82, +3.41, +1.4%), and a 2.5% drop in WTI crude oil futures to $83.75/bbl. The consumer staples (-0.6%) and health care (-0.4%) sectors were the next worst performers.
- Nasdaq Composite: +30.5% YTD
- S&P 500: +14.0% YTD
- S&P Midcap 400: +3.1% YTD
- Dow Jones Industrial Average: +2.0% YTD
- Russell 2000: +0.7% YTD
Reviewing today's economic data:
- The weekly MBA Mortgage Applications Index rose 0.6% following last week's 6.0% decline
- The Producer Price Index for September was up 0.5% month-over-month (Briefing.com consensus 0.3%) following a 0.7% increase in August. The Producer Price Index, excluding food and energy, rose 0.3% month-over-month (consensus 0.2%) following a 0.2% increase in August. On a year-over-year basis, PPI was up 2.2%, versus 1.6% in August, and core PPI was up 2.7%, versus 2.2% in August
- The key takeaway from the report is that it marked an interruption in the disinflation seen in producer prices, which will keep market participants worried about pass-through effects to the consumer and rates staying higher for longer because inflation is staying higher for longer than the Fed would like.
Looking ahead to Thursday, the September Consumer Price Index will be released at 8:30 a.m. ET. Other notable data include the weekly jobless claims report at 8:30 a.m. ET, the weekly EIA Natural Gas Inventories at 10:30 a.m. ET, the weekly EIA Crude Oil Inventories at 11:00 a.m. ET, and the September Treasury Budget at 2:00 p.m. ET.