Financial sector awaits forthcoming consumer data release on pause
Following yesterday's record-breaking performances, Wall Street displayed a mild downturn during the midweek. The prospect for an additional rise seemed less probable, according to the chatter. The Dow-Jones Index and S&P-500 had hit new peaks the previous day. Nevertheless, there's still a lingering unease in the market about the US economy potentially experiencing a rough landing, despite the interest rate reductions by the US central bank. The day prior, consumer sentiment indicators showed a decline. US consumers, who contribute around 70% to the country's GDP, are a pivotal factor in the economy.
The Dow-Jones Index dipped by 0.7% to reach 41,915 points. The S&P-500 decreased by 0.2%. However, the Nasdaq Composite showed a slight gain of 8 points. Over the course of the day, 799 stocks (previously 1695) experienced rises, while 2,007 (originally 1066) had losses. A total of 59 stocks (previously 97) ended the day undisturbed.
There were still uncertainties surrounding whether inflation could be kept in check. More insights into this matter could be provided by the PCE price index, set to be released on Friday. This index is the Fed's preferred measure of price. Investors anticipate gaining indications from this regarding the Fed's future interest rate policy. Apart from economic action, the agenda was rather quiet throughout the week. New home sales for August showed a decrease, though not as much as anticipated. The actual decline was 4.7%, compared to the predicted 5.3%.
Amgen takes the biggest hit in Dow-Jones
Amgen took the hardest hit in the Dow-Jones Index, with a decrease of 5.5%. The biotech corporation reported unimpressive results for two closely observed drug candidates.
The shares of Alphabet (-0.5%) and Microsoft (+0.7%), the corporations behind Google, showed minimal fluctuations. Google has purportedly filed a formal complaint with the EU competition authority against Microsoft, intensifying an ongoing dispute concerning the cloud computing sector. Google accuses Microsoft of exploiting its market dominance in the enterprise software sector to pressure companies into utilizing its Azure cloud platform and maintain their loyalty to it.
KB Home dropped by 5.4%. The homebuilder managed to boost its earnings per share in the third quarter, but fell short of market expectations. Progress Software, on the other hand, surpassed market expectations with its third-quarter results and raised its annual forecast. The stock soared by 11.8%.
Dollar rebounds - oil prices drop
On the forex market, the dollar made a strong recovery after recent losses. The dollar index increased by 0.5%. However, the expectation of a 50 basis point rate cut by the Fed in November continues to impact the dollar's sentiment. According to Marc Chandler of Bannockburn, "weak US consumer confidence, particularly concerning the labor market, has sparked speculation about a further 50 basis point cut by the Fed." The likelihood of a 50 basis point rate cut by the Fed in November is currently 58%, as per the FedWatch tool of the CME.
Bond yields surged significantly on the secondary market. The yield on ten-year bonds increased by 5.7 basis points to 3.79%. The hike came before critical US economic data and a series of speeches by Fed representatives, including Fed Chair Powell, which investors closely watch for hints about the US central bank's future monetary policy. The oil prices dropped despite a substantial decrease in US crude oil inventories due to persistent concerns about global demand. Prices for WTI and Brent crude fell by up to 2.5%. The substantial decrease in US consumer confidence in September cast a shadow over demand prospects in the world's largest oil-consuming nation, stated Fawad Razaqzada, analyst at StoneX. It remains to be seen if China's new economic measures will be sufficient to propel growth. The gold price climbed for the sixth consecutive trading day, reaching another record high. An ounce of gold increased by 0.1% to $2,660. The gold price continues to be supported by expectations of lower US interest rates, which weaken the dollar, explained Ricardo Evangelista, senior analyst at ActivTrades. Traders are now focusing on three significant risk events: the release of US GDP on Thursday, a speech by Fed Chair Powell, and US personal consumption expenditure data on Friday.
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The downturn in Wall Street might be influenced by the lingering unease towards the US economy, as there are concerns about a potential rough landing despite interest rate reductions. Despite Amgen taking a significant hit in the Dow-Jones Index, the gold price continues to climb due to expectations of lower US interest rates, which weaken the dollar.
