What you need to know…
The S&P 500 Index ($SPX) (SPY) Friday fell by -0.48%, the Dow Jones Industrials Index ($DOWI) (DIA) fell by -1.12%, and the Nasdaq 100 Index ($IUXX) (QQQ) rose by +0.50%.
Tech stocks saw support Friday from positive earnings news from Amazon (AMZN) and Intel (INTC). The Nasdaq 100 Friday closed mildly higher after the sharp sell-offs of -1.89% seen on Thursday and -2.47% on Wednesday on negative Google and Meta news.
The Dow Jones Industrials Index Friday fell sharply due to a -6.72% drop in Chevron (CVX) and a -3.60% drop in JP Morgan Chase (JPM) on news CEO Dimon is selling $141 million of stock. Also, Amgen fell -3.02%, and Verizon fell by -2.99%.
Stocks Friday were undercut by Middle East tensions. The U.S. Thursday night carried out aircraft strikes on two Iranian-backed facilities in Syria. The U.S. strikes were in response to attacks against U.S. personnel in Iraq and Syria since October 17.
Also, an Israeli defense spokesman said Friday that Israeli forces are "expanding ground activity this evening." Israel, on Wednesday and Thursday nights, launched ground raids into Gaza before withdrawing. The markets are waiting for Israel’s all-out ground invasion, which could spark an expansion of the war to include Hezbollah in Lebanon and possibly other Iranian-backed groups.
Friday’s U.S. PCE deflator report, which is the Fed’s preferred inflation measure, was mostly in line with market expectations and had little impact on expectations for Fed policy. The Sep PCE deflator report of +0.4% m/m was slightly higher than expectations of +0.3%, but the year-on-year figure of +3.4% was in line with market expectations. The Sep core PCE deflator report of +0.3% m/m and +3.7% y/y was in line with market expectations.
Friday’s U.S. Sep personal income report of +0.3% m/m was slightly weaker than expectations of +0.4%, but the Sep personal spending report of +0.7% m/m was stronger than expectations of +0.5%.
Friday’s final-Oct U.S. consumer sentiment index from the University of Michigan was revised higher by +0.8 points to 63.8, which was stronger than expectations for an unchanged level but was still a 5-month low. The index was down by -4.1 points from September, marking the third consecutive monthly decline in consumer sentiment.
The markets are discounting a zero percent chance that the FOMC will raise the funds rate by +25 bp at next week’s FOMC meeting (Oct 31-Nov 1), an 18% chance for that +25 bp rate hike at the following meeting on Dec 12-13, and a 10% chance for that +25 bp rate hike at the FOMC meeting after that on Jan 30-31, 2024. The markets are then expecting the FOMC to begin cutting rates later in 2024 in response to an anticipated slowdown in the U.S. economy.
U.S. and European bond yields Friday were mixed. The 10-year T-note yield rose by +0.3 bp to 4.837%. The 10-year German bund yield fell -2.9 bp to 2.834%. The 10-year UK gilt yield fell by -5.3 bp to 4.544%.
Overseas stock markets closed mixed on Friday. The Euro Stoxx 50 closed down -0.87%. China’s Shanghai Composite Index closed up +0.99%. Japan’s Nikkei 225 closed up +1.27%.
Today’s stock movers…
Amazon.com (AMZN) closed up +7.2% after positive earnings and revenue news and positive news about its cloud prospects.
Intel (INTC) closed up +9.48% after positive management guidance for Q4 revenue and earnings.
Chevron (CVX) closed -6.56% after missing its earnings consensus and warning of lower margins.
Exxon (XOM) closed down -1.74% on an earnings miss, although the company had higher-than-expected cash flow and raised its dividend more than expected.
JP Morgan Chase (JPM) fell -3.43% on news that CEO Jamie Dimon plans to sell $141 million JPM shares in 2024, ostensibly for financial diversification and tax-planning purposes.
Ford (F) fell -12.09% after an earnings miss. Ford also withdrew its guidance due to the effects of the UAW strike and as it waits for ratification of the tentative agreement with the UAW that it announced late Wednesday.
Across the markets…
December 10-year T-notes (ZNZ23) closed +3 ticks, and the 10-year T-note yield rose by +0.3 bp to 4.837%. T-note prices saw some downward pressure after the PCE deflator report was slightly stronger than expected on a month-on-month basis at +0.4% m/m. Also, the Sep personal spending report of +0.7% m/m was stronger than expectations of +0.5%.
However, T-note prices saw support from safe-haven demand with the news that the U.S. carried out airstrikes against two Iranian-connected facilities in Syria and that Israel appears to be getting closer to launching its ground invasion into Gaza.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
