Stock Market Today – Thursday, August 25: What You Need to Know

Stocks Finish Thursday’s Session in Positive Territory

Last Updated 4:20 PM 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 0.98%, 1.41%, and 1.75%, respectively.

The consumer staples sector (XLP) was the session’s laggard, as it gained 0.44%. Conversely, the materials sector was the session’s leader, with a gain of 2.28%. In addition, WTI crude oil lost 2.55%, reaching $93.89 per barrel.

Furthermore, the U.S. 10-Year Treasury yield decreased to 3.03%, a decline of 7.9 basis points. Similarly, the Two-Year Treasury yield also decreased, as it hovers around 3.37%. This brings the spread between them to -34 basis points. The negative spread indicates that investors still have fears of a recession.

Compared to Yesterday, the market is pricing in a higher chance of a higher Fed Funds rate for the end of the year. In fact, the market’s expectations for a rate in the range of 3.75% to 4% increased to 41.1%, which is up from Wednesday’s expectations of 37.3%. In addition, the market is now also assigning a 14% probability to a range of 3.25% to 3.5%. For reference, investors had assigned a 15.9% chance yesterday.

Gas Prices Continue to Decline

Last Updated 3:00PM EST

Equity markets are in the green heading into the final hour of today’s trading session. As of 3:00 p.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are up 0.4%, 0.8%, and 1%, respectively.

The communications sector is the laggard so far, as it is down 2.9%. Conversely, the energy sector is the session’s leader. Nevertheless, it is still down 0.5%.

WTI crude oil is currently hovering around $93 per barrel, as it trades not too far away from its session low of $92.30 per barrel. The commodity is down 2.5% after hitting a high of $95.73.

Fortunately, oil’s overall downtrend has led to lower gas prices across the country. The national average for regular gas was last $3.878 per gallon, down from yesterday’s reading of $3.883. This is significantly lower than the all-time high of $5.016 per gallon on June 14.

The highest price can be found in Hawaii, where prices are substantially higher than the national average, at $5.313 per gallon. On the other hand, Arkansas is the state with the lowest gas price, at $3.395 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.

Initial Jobless Claims Come in Lower than Expected

Last Updated 12:25PM EST

Stock indices are in the green halfway into today’s trading session. As of 12:25 p.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are up 0.04%, 0.5%, and 0.7%, respectively.

On Thursday, the Department of Labor released its Initial Jobless Claims report, which came in better than expected. In the past week, 243,000 people filed for unemployment insurance for the first time. Expectations were for 253,000 individuals.

When using the four-week average, initial jobless claims were 247,000, up from last week’s reading of 245,500. It’s worth noting that this figure has been in an overall uptrend since the start of April 2022.

In addition, Continuing Jobless Claims, which measures the number of unemployed people who qualify for unemployment insurance, came in at 1.415 million, better than the forecast of 1.442 million and lower than last week’s 1.434 million.

Continuing Jobless Claims are currently sitting near their lowest levels since 1970. Relatively speaking, this suggests that individuals aren’t struggling to find other jobs after being laid off.

However, this figure has been on an overall uptrend since the beginning of June. It will be interesting to see if this trend continues as interest rates rise while economic growth continues to slow down.

Stocks are in the Green to Start Thursday’s Trading Session

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%, 0.7%, and 0.9%, respectively.

The utilities sector (XLU) is the laggard so far, as it is down 0.1%. Conversely, the materials sector (XLB) is the session’s leader with a gain of 1.6%.

WTI crude oil is slightly down as investors weigh a draft agreement with Iran that would increase its oil exports. As a result, the price is hovering around the high-$94 per barrel range.

Meanwhile, bond yields are lower, as the U.S. 10-Year Treasury yield is now hovering around 3.108%. This represents a decrease of 0.1 basis point from the previous close.

Similar movements can be seen with the Two-Year yield, which is now at 3.38%. However, the spread between the 10-Year and Two-Year U.S. Treasury yields is still negative, as it currently sits at -27.2 basis points.

Pre-Market Update

U.S. stock market futures rose early on Thursday morning as delegates from the Federal Reserve arrived at Jackson Hole for the first day of the annual economic symposium. More information is expected to be out by Fed Chair Jerome Powell on the central bank’s next move in its inflation-fighting campaign.

Futures on the Dow Jones Industrial Average (DJIA) inched 0.35% higher, while those on the S&P 500 (SPX) gained 0.54%, as of 5.44 a.m. EST, Thursday. Meanwhile, the Nasdaq 100 (NDX) futures advanced 0.60%.

However, experts are of the opinion that a drastic change in stance shouldn’t be expected from the Fed, especially because the target inflation rate is still very far below the current rate. Plus, the job market also seems to be holding up impressively, giving the Fed more encouragement to keep increasing the interest rates aggressively. This indicates that regardless of what Powell says, market activity is expected to pick up pace after the event is over.

What is Driving Pre-Market Action On the Earnings Front?

As the market reaches the last leg of the earnings season, chip giant Nvidia (NVDA) tumbled more than 3% during the pre-market trading Thursday after announcing weak guidance on Wednesday. Moreover, software provider Salesforce (CRM) also dipped almost 6% early on Thursday after providing a dismal guidance for fiscal 2023.

There was good news too on the earnings front, with data-software company Snowflake (SNOW) surging almost 18% in pre-market trading after posting a revenue beat and encouraging guidance in its quarterly earnings report.

More Economic Updates Released and Upcoming

A routine annual revision of the labor market by the Labor Department, on Wednesday, revealed the remarkable volume of jobs churned out by the economy last year which ended in March. Job additions exceeded the agency’s estimates by 462,000, which means about 39,000 roles were added per month on average for the year.

Moving on, weekly jobless claims for the week ended August 19 is on the deck to be released on Thursday. After rising to a peak number in the week ended August 5, claims for unemployment benefits cooled for the week ended August 12.

This apart, the personal consumption expenditures (PCE) data is expected to be out on Friday. Looking back, the PCE data has influenced the Fed’s actions meaningfully before, and is expected to have some influence on the policy tightening path for 2022.

Is Biden’s Student Loan Waiver Likely to Fuel Inflation?

On August 24, U.S. President Joe Biden made a bold move and waived off student loans by $10,000 per student earning less than $125,000 annually, and $20,000 per student from low-income families registered for Pell grants.

While this comes as welcome news for scores of students, experts believe that this does not solve the unaffordability issues in the U.S. education system, and most importantly, may cost an average increase of $2,000 in taxes per taxpayer.

This cannot be good at a time when civilians are struggling to pay for basic necessities like food and fuel. Eventually, this hike in taxes may find its way into the prices of consumer goods, adding to inflation woes.

Disclosure