Last Updated 4:25PM EST
Stock indices finished today’s trading session in the green. The Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 increased by 1.4%, 1.83%, and 2.07%, respectively. The energy sector was the session’s laggard, as it fell by 1.16%. Conversely, the utilities sector was the session’s leader, with a gain of 3.13%. In addition, WTI crude oil lost 6%, reaching $81.66 per barrel.
Furthermore, the U.S. 10-Year Treasury yield decreased to 3.277%, a decrease of more than seven basis points. Similarly, the Two-Year Treasury yield also decreased, as it hovers around 3.443%. This brings the spread between them to -16.6 basis points. The negative spread indicates that investors still have fears of a recession.
The Atlanta Federal Reserve updated its GDPNow reading, which allows it to estimate GDP growth in real-time. Currently, it estimates that the economy will see an annualized expansion of 1.36% in the third quarter after experiencing two consecutive quarters of decline.
This is down considerably from the previous reading of 2.59%. The “nowcast” becomes more accurate as more economic data is released throughout the quarter. Therefore, it will be interesting to see how the estimate changes, going forward. In the previous quarter, the estimate started off positive and eventually ended up correctly estimating a GDP decline by the end of Q2.
Because of this, investors should invest carefully, as we are not in the clear just yet.
Gas Prices Continue to Decline
Last Updated 3:00PM EST
Stocks are in the green heading into the final 30 minutes of trading. The Dow Jones Industrial Average, the S&P 500, and the Nasdaq are up 1.6%, 2%, and 2.3%, respectively.
However, WTI crude oil is down 5.2% as the market’s fear of a recession continues to outweigh other developments in the oil industry. Nevertheless, the decrease in oil prices is good news for consumers.
The commodity’s downtrend has led to lower gas prices across the country. The national average for regular gas was last $3.764 per gallon, down from yesterday’s reading of $3.779. This is significantly lower than the all-time high of $5.016 per gallon on June 14.
The highest prices can be found in Hawaii, where prices are substantially higher than the national average, at $5.301 per gallon. On the other hand, Texas is the state with the lowest gas prices, at $3.233 per gallon.
It’s likely that this downward trend will continue going forward as the Federal Reserve looks to raise interest rates to fight inflation. However, higher rates will destroy demand throughout the whole economy. As a result, lower gas prices might have to come at the cost of a recession.
Stocks are Positive, Mortgage Rates Increase
Last Updated 12:00PM EST
Stocks are in the green halfway into today’s trading session. As of 12:00 p.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are up 0.7%, 0.9%, and 1%, respectively. On Wednesday, the Mortgage Bankers Association released its weekly report for the U.S. 30-Year mortgage rate. The mortgage rate increased to 5.94% compared to last week’s reading of 5.8%.
Due to the higher rates, the number of mortgage applications decreased week-over-week by 0.8%, following last week’s decrease of 3.7%. This indicates that sentiment in the real estate market is falling, which is consistent with other data that has been released so far.
In addition, mortgage application volume is down substantially on a year-over-year basis, with the Mortgage Market Index at 258.1 compared to 705.6 on September 1, 2021.
Meanwhile, the U.S. 10-Year Treasury yield is hovering around 3.288%, which is down 6.3 basis points compared to yesterday’s close. The spread between the 10-Year and Two-Year U.S. Treasury yields remains negative, as it currently sits at -18 basis points.
Stocks are Positive, Oil Continues to Fall
Last Updated 10:00AM EST
Stock indices are in the green 30 minutes into today’s trading session. As of 10:00 a.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are up 0.3%, 0.4%, and 0.8%, respectively.
The energy sector (XLE) is the laggard so far, as it is down 2%. Conversely, the utilities sector (XLU) is the session’s leader, with a gain of 1.6%.
WTI crude oil remains below $90 per barrel as demand concerns weigh heavily on the price. Indeed, traders are worried that an aggressive Federal Reserve and lockdowns in China will destroy demand. As a result, the price is hovering around the low-$83 per barrel range.
Meanwhile, bond yields are lower, as the U.S. 10-Year Treasury yield is now hovering around 3.29%. This represents a decrease of more than five basis points from the previous close.
Similar movements can be seen with the Two-Year yield, which is now at 3.48%. However, the spread between the 10-Year and Two-Year U.S. Treasury yields is still negative, currently sitting at -19 basis points.
Pre-Market Update
Stock futures moved slightly higher early on Wednesday as investors look to find an appropriate approach to playing in the market amid mixed economic updates and events. Historically, September is a difficult month for the stock market, primarily because this is the month in which fund managers typically rid their portfolios of underperforming stocks.
Futures on the Dow Jones Industrial Average (DJIA) inched 0.04% higher, while those on the S&P 500 (SPX) gained 0.10%, as of 6.16 a.m. EST, Wednesday. Meanwhile, the Nasdaq 100 (NDX) futures advanced 0.20%.
Bond yields surged on Tuesday, pushing stock prices lower. The yield on the 10-year Treasury note rose to 3.365% during the regular trading session Tuesday, while that on the 30-year Treasury note recorded its highest in eight years.
At Tuesday’s market close, the S&P 500, the Dow, and the Nasdaq 100 recorded losses of 0.41%, 0.55, and 0.72%, respectively.
Some Good News for the Inflation Situation
Meanwhile, amid high inflation, U.S. consumers’ relative purchasing power also seems to be moving higher, as evidenced by the record dollar strength against currencies of major U.S. trading partners. This is attracting investors from all over the world to U.S. stocks as well as bonds.
Also, experts are upbeat about the easing of global inflation in July, which is being driven in part by the global weakening of demand. It does sound like an oxymoron, but according to JP Morgan economist Nora Szentivanyi, weaker demand and recessionary fears are blowing steam off inflationary pressures by reducing demand for commodities (thus, pushing down on commodity prices), and reducing demand for imports (thus, helping in the recovery of supply-chain logjams).
A clash in PMI data Causes Confusion
Moreover, on Tuesday, the Institute for Supply Management revealed through its Services PMI that the U.S. services sector recorded better year-over-year growth in August than in July. The index involves surveys made of industries including healthcare, finance, agriculture, and construction.
Interestingly, however, separate data on the same day released by S&P Global revealed that the services sector shrank more in August than in July, due to dwindling demand.
This conflict in key economic data from two credible sources can also be behind the ambivalence in market sentiments.
On Wednesday, the Federal Reserve’s Beige Book of economic condition updates will be read, which will shed more light on what to expect of the economy for the rest of this year.
