Stock indices finished today’s trading session in the green ahead of a busy earnings week. Indeed, the Nasdaq 100 (NDX), S&P 500 (SPX), and the Dow Jones Industrial Average (DJIA) gained 1.18%, 1.06%, and 0.93%, respectively.
The energy sector (XLE) was the session’s laggard, as gained 0.69%. Conversely, the consumer discretionary sector (XLY) was the session’s leader, with a gain of 1.6%.
Furthermore, the U.S. 10-Year Treasury yield increased to 4.71%, a jump of 10 basis points. Similarly, the Two-Year Treasury yield also increased, as it hovers around 5.1%.
In addition, today’s comments from Harker (see previous update) appear to have investors convinced that there will be no more rate hikes for the rest of the year. Indeed, the market is assigning a 67% chance that rates will remain unchanged, according to the CME FedWatch Tool.
Last updated: 12:28PM EST
Stocks are in the green so far in today’s session. Philadelphia Fed President Patrick Harker recently indicated his support for keeping interest rates steady unless significant changes arise in economic data. Speaking at the Mortgage Bankers Association Annual Convention, Harker highlighted the ongoing disinflation, balanced labor markets, and the resilience of economic activity.
He expects the economy to grow steadily through 2023 and experience a slight moderation in 2024, with no recession in sight. He projected an unemployment rate of around 4% by the end of 2023, peaking at about 4.5% in 2024 and stabilizing back to 4% by 2025. Despite this, he doesn’t predict widespread layoffs, pointing to factors like technological changes, child care, and immigration influencing the labor market.
Meanwhile, Tony Pasquariello, Global Head of Hedge Fund Coverage for Goldman Sachs, voiced his confidence in the U.S. economy and tech stocks ahead of the third quarter earnings, although he expressed caution regarding potential risks from rising interest rates.
While not foreseeing a new major bull market, Pasquariello highlighted last week’s strong labor market report and anticipated growth in real household disposable income. Goldman Sachs predicts 1% EPS growth for the S&P in 2023, followed by 55% in 2024 and another 5% in 2025.
Last updated: 9:30AM EST
Stocks opened higher at the start of a busy earnings week, with the Nasdaq 100 (NDX) and the S&P 500 (SPX) down by 0.65% each, while the Dow Jones Industrial Average (DJIA) ticked higher by 0.69% at 9:35 a.m. EST, October 16.
Meanwhile, the New York Fed’s Empire State Index, a gauge of manufacturing activity in the state, slid 6.5 points in October to a negative 4.6. Economists had expected a negative reading of 6. A negative reading indicates a contraction in the economy. The index for new orders dropped by 9.3 points to a negative 4.2 in October.
Analysts from UBS have predicted that the S&P 500 is likely to reach 4,700 points only by December next year instead of the middle of next year. UBS has revised its outlook as it expects U.S. interest rates to stay higher for longer.
David Lefkowitz, head of the chief investment office at UBS, commented, “We still expect a soft-ish landing in the U.S. economy, which should drive a recovery in earnings growth and close to a double-digit total return in U.S. large-cap stocks over the coming year. While valuations are high relative to history, they are reasonable in the context of low unemployment and falling inflation.”
The analysts at UBS perceive a strong rebound for U.S. treasury bonds if the economy enters into a recession in response to the Fed’s interest rate hikes. UBS believes that 10-year Treasury bonds could see a total return of 19% by June next year in case of a recession over the coming months.
First published: 4:23AM EST
U.S. Futures are jittery on Monday morning as Wall Street gears up for important earnings releases this week. The three major averages finished the prior trading week mixed, with the SPX and DJIA closing in the green while the Nasdaq Composite lost ground due to a 1.23% fall on Friday. Futures on the Nasdaq 100 (NDX) and the S&P 500 (SPX) are down by 0.20% and 0.02%, respectively, while those on the Dow Jones Industrial Average (DJIA) are up by 0.11% at 4:23 a.m. EST, October 16.
In the meantime, the U.S. 10-year treasury yield is up, floating near 4.68% at the time of writing. And the WTI crude oil futures are trimming down, hovering near $87.27 per barrel as of the last check. Oil prices gained over 5% on October 13 owing to the intensified battle between Israel and Hamas.
Turning to earnings, three major banks, namely Citigroup (C), JP Morgan Chase (JPM), and Wells Fargo (WFC) kicked off the bank’s earning season with a bang. All three delivered surprise earnings that beat Wall Street’s expectations. Meanwhile, investors await earnings reports from the likes of Netflix (NFLX), Tesla (TSLA), Johnson & Johnson (JNJ), Bank of America (BAC), Goldman Sachs (GS), Lockheed Martin (LMT), Morgan Stanley (MS), Procter & Gamble (PG), and American Express (AXP) this week.
Further, healthcare giant Pfizer (PFE) slashed its full-year revenue outlook by $9 billion to reflect lower-than-anticipated sales of its COVID-19 vaccine Comirnaty and COVID-19 treatment Paxlovid. PFE stock was down 3.7% in Friday’s extended trading session following the news. Also, automaker Ford (F) said it is mulling over halting one assembly line shift for its F-150 pickup trucks, citing multiple reasons. The pause could begin today, October 16, and will affect 700 jobs at the Dearborn, Michigan, plant.
Notably, activist hedge fund Starboard Value has taken a stake in News Corp. (NWSA). The hedge fund believes the stock is trading at a considerable discount to its fair market value and plans to implement some strategic and governance changes in the company.
Elsewhere, European indices are trading in the red on Monday morning as traders assess the global implications of the ongoing war in the Middle East.
Asia-Pacific Markets End in the Red on Monday
Asia-Pacific indices ended in the red on Monday as traders anticipate a slew of economic releases from across the nations in the week ahead. Also, the unsettling situation in Israel and Gaza continues to weigh on investors’ appetites.
Hong Kong’s Hang Seng index and China’s Shanghai Composite and Shenzhen Component indices finished down by 0.97%, 0.46%, and 1.42%, respectively.
Similarly, Japan’s Nikkei and Topix indices ended lower by 2.03% and 1.53%, respectively.
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