U.S. stocks faced another setback on Wednesday due to uncertainty surrounding interest rates and inflation. Bond yields eased slightly but remained above recent levels. Traders are closely monitoring statements from multiple Federal Reserve speakers today.
Mixed earnings reports are affecting market sentiment, with Tesla Inc‘s (NASDAQ:TSLA) third-quarter print being the top draw for Wednesday. Other factors influencing traders include the spike in oil prices, sluggish Chinese economic growth, Middle East tensions, and the ongoing House Speaker election stalemate in Capitol Hill.
A robust September retail sales report caused bond yields to surge, raising concerns about more Fed interest rate hikes. Geopolitical tensions in the Middle East, particularly Israel’s actions, and the House Speaker election deadlock added to the market’s challenges.
Major indices opened lower and later rebounded into positive territory but couldn’t maintain those gains. The final result was mixed, with the S&P 500 and Nasdaq in the red, while the Dow Industrials saw marginal gains, boosted by positive earnings reports from some of its components.
Small-cap stocks continued their recent upward trend and are now positive for the year.
In sector performance, IT and real estate stocks declined, while energy, IT services, financial, and material stocks made gains.
The S&P 500 Index may not move above the 4,800 range, said Comerica Chief Investment Officer John Lynch. “As it stands, we are not yet convinced corporate profits can sustain a move above the 4,800-range the S&P 500 achieved in early 2022, particularly given geopolitics and the current levels of interest rates and inflation,” he said.
For calendar year 2023, the analyst models essentially flat EPS of about $220.00 for the S&P 500 Index. Comerica’s preliminary 2024 S&P 500 EPS projection of $237.50 is about $10 less than the consensus forecast, Lynch said.
“Of course, the combination of liquidity and hopes for an easing of Fed policy can play a role in valuation,” he added.
In premarket trading on Wednesday, the SPDR S&P 500 ETF Trust (NYSE:SPY) slipped 0.39% to $434.34 and the Invesco QQQ ETF (NASDAQ:QQQ) declined 0.53% to $366.25, according to Zenger News Pro data.
The Commerce Department is scheduled to release its housing starts report for September at 8:30 a.m. EDT. Economists, on average, expect housing starts to come in at a seasonally adjusted annual rate of 1.380 million units compared to 1.283 million units in August. Building permits, a measure of future housing activity, may have come in at 1.455 units, down from 1.541 million units in August.
The Energy Information Administration will release its customary weekly oil report at 10:30 a.m. EDT.
Fed Governor Christopher Waller is due to speak at 12 p.m. EDT, followed by New York Fed President John Williams, a member of the Federal Open Market Committee, at 12:30 p.m. EDT.
Fed Governor Michelle Bowman and Philadelphia Fed President Patrick Harker, also a FOMC member, are due to speak at 1 p.m. EDT and 3:15 p.m. EDT, respectively.
The Fed will release its Beige Book, which provides anecdotal evidence of economic conditions in the 12 Federal Reserve districts, at 2 p.m. EDT.
Fed Governor Lisa Cook will make a public appearance at 6:55 p.m. EDT.
Stocks In Focus:
- J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT) fell over 4% in premarket trading following the company’s quarterly results.
- United Airlines Holdings, Inc. (NASDAQ:UAL) moved down more than 5.50%, also in reaction to its quarterly earnings release.
- Morgan Stanley (NYSE:MS), State Street Corp. (NYSE:STT), U.S. Bancorp. (NYSE:USB), M&T Bancorp. (NYSE:MTB), Travelers Companies, Inc. (NYSE:TRV), Procter & Gamble Company (NYSE:PG) and Abbott Laboratories (NYSE:ABT) are among the companies due to release their quarterly results before the market open.
- Those reporting after the close include Tesla, Netflix, Inc. (NASDAQ:NFLX), Discover Financial Services (NYSE:DFS), Alcoa Corp. (NYSE:AA), Las Vegas Sands Corp. (NYSE:LVS) and Steel Dynamics, Inc. (NASDAQ:STLD).
Crude oil futures rallied 2.89% to $87.91 in early European session on Wednesday following Tuesday’s modest advance.
The benchmark 10-year Treasury note fell 0.0025 percentage points to 4.822% on Thursday.
Most Asian markets declined as a slew of economic data released by China dampened the mood of investors. China’s GDP year-over-year growth slowed in the third quarter and most other monthly metrics, though coming in above expectations, pointed to a soft patch.
European stocks traded moderately lower by late-morning trading despite the September consumer price inflation data for the eurozone region coming in line with expectations. Traders in the region apparently are focused on the aggravation of the situation in the Middle East and the earnings reports from the region.
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