Daily Markets: Focus Remains on Treasury Yields

Today’s Big Picture

Asia-Pacific equity markets finished the day lower. India’s SENSEX declined 0.48%, Taiwan’s TAIEX fell 0.62%, Australia’s ASX All Ordinaries gave back 1.31%, and Japan’s Nikkei lost 1.64%. Hong Kong’s Hang Seng closed off 2.69% in a broad decline led by Real Estate and Energy names. China’s markets are closed today and through the rest of the week as the country celebrates National Day, sometimes referred to as Golden Week until Friday, October 5th. Korea’s markets are closed as the country marks its National Day today. Korean markets will be open again tomorrow. European markets are down in midday trading and U.S. equity futures point to a flat to positive open.

Once again, the market appears to be in the thrall of the 10-year Treasury yield that is inching higher this morning, adding to its continued climb over the last several weeks. That move has punished small-cap stocks, with the Russell 2000 having fallen to -0.3% year-to-date as of last night’s market close. Utilities and other interest rate-sensitive sectors have also been hard hit over the last several weeks. And while the S&P 500 is still up 11.7% so far in 2023, it’s well off its July peak and its equal-weighted counterpart is up only 0.5% YTD 2023.

The market’s focus on Treasury yields means comments from Fed officials will be top of mind today and later this week. Yesterday, Cleveland Fed President Loretta Mester shared the Federal Reserve may need to raise the federal funds rate one more time in 2023 and then "hold it there for some time." Also yesterday, Federal Reserve Governor Michelle Bowman said she remains willing to support another increase if incoming data shows progress on inflation is stalling or proceeding too slowly. Federal Reserve Vice Chair of Supervision Michael Barr shared his view that is a more important question than whether an additional rate increase is needed this year. Current market expectations depicted by the CME FedWatch Tool see the first rate cut occurring in July of next year.

All this sets the stage for Atlanta Fed President Raphael Bostic who will be speaking at 8 AM ET this morning at a Leadership Atlanta roundtable event as well as other Fed heads making the rounds later this week. Should Bostic’s comments reinforce those from Mester and Bowman, we’re likely to see Treasury yields and the dollar remain a headwind for stocks.

Data Download

International Economy

There are no market-moving international economic data points expected today. Tomorrow we will have September Service PMIs from Japan, the Eurozone, and the UK as well as several other data points.

Domestic Economy

At 10 AM ET, the August JOLTS Job Openings Report will be published, giving another perspective on the jobs market. The market expects to see 8.8 million job openings for the month, down slightly from 8.827 million in July.

U.S. shale producers say they will keep drilling under wraps even if oil prices top $100 per barrel, citing the need for financial discipline during what they see as President Biden's "war" on fossil fuel production. Tomorrow an OPEC+ ministerial panel will be meeting to review the global supply-demand market balance.

Gold fell for the sixth straight trading session yesterday to its lowest in nearly seven months, hit by a strong dollar and continually rising U.S. interest rates that powered new multiyear highs.

Markets

Equities were mixed yesterday as heavyweights Apple (AAPL) [1.48%] and Microsoft (MSFT) [1.92%] helped prop up the Dow while names like Boeing (BA) [-2.01], 3M (MMM) [-3.63], and McDonald's (MCD) [-2.16%] put pressure the index, leading to its -0.22% return. On similar price action, the S&P 500 ended the day flat, eking out a 0.01% gain while the Nasdaq Composite gained 0.67% and small caps traded off as the Russell 2000 declined 1.58%, putting the index underwater YTD. Utilities took a big hit, as the sector fell 4.65% as NextEra Energy (NEE) got punished, trading down 8.97% after a number of downward price target revisions from various analyst firms. Energy (-1.99%), Real Estate (-1.82%), and Materials (-1.32%) also weighed on markets while the only bright spots were Technology and Communication Services which gained 1.07% and 0.75%, respectively. The Consumer Discretionary sector ended the day essentially flat, up a mere 0.08%.

Here’s how the major market indicators stack up year-to-date:

• Dow Jones Industrial Average: 0.86%
• S&P 500: 11.69%
• Nasdaq Composite: 27.15%
• Russell 2000: -0.25%
• Bitcoin (BTC-USD): 66.41%
• Ether (ETH-USD): 38.97%

Stocks to Watch

Before U.S. equity markets begin trading today, McCormick & Co. (MKC) will report its latest quarterly results.

In pre-market action, Monster Beverage (MNST) is up about 5% and Airbnb (ABNB) is under pressure, trading down just over 2%.

General Motors (GM) and Chrysler maker Stellantis (STLA) will likely face around $9.B in overall fines under the Biden administration's proposal to hike fuel economy standards through 2032.

Kia America (KIMTF) reported its best-ever 3Q sales total of 210,341 units, which marks the third time in company history that quarterly sales passed the 210,000 unit mark.

Molson Coors (TAP) will hold its Strategy Day event today and Zoom Video's (ZM) annual Zoomtopia event kicks off as well.

IPOs

Near-term the calendar for such activity looks relatively thin. Readers who want to dig deeper into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.

After Today’s Market Close

Cal-Maine Foods (CALM) will issue its latest quarterly results and guidance after equities stop trading today. Those looking for more on upcoming quarterly earnings reports should head on over to Nasdaq’s Earnings Calendar.

On the Horizon

Wednesday, October 4

• Japan: Jibun Bank Services PMI (Final) - September
• Eurozone: HCOB Services PMI (Final) – September
• Eurozone: Retail Sales, Producer Price Index - August
• UK: S&P Global/CIPS Services PMI (Final) - September
• US: ADP Employment Report – September
• US: S&P Global US Services PMI (Final) – September
• US: ISM Non-Manufacturing Index – September
• Open: Helen of Troy (HELE)
• Close: Resources Connection (RGP)

Thursday, October 5

• Germany: Imports/Exports – August
• Open: Conagra (CAG), Constellation Brands (STZ), Lamb Weston (LW)
• Close: Levi Strauss

Friday, October 6

• Japan: Leading Economic Index (Preliminary) – August
• US: Employment Report – September
• US: Consumer Credit – August
• US: Total Vehicle Sales, Used Car Prices - September

Thought for the Day

“It never ceases to amaze me: we all love ourselves more than other people, but care more about their opinion than our own.” – Marcus Aurelius

Disclosures

• Apple (AAPL), Microsoft (MSFT) are constituents of the Tematica Research Thematic Dividend All-Stars Index

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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