us stock Archives – Financial Market News

The Treasurys’ Role: Will They Spark a U.S. Stock Market Surge Before Year-End?

ABC Trader / October 15, 2023

Thierry Wizman of Macquarie suggests that the Federal Reserve will continue to maintain its “higher-for-longer” interest rate stance until it detects weaknesses in the consumer side of the market. The recent turbulence in the world’s largest bond market has placed significant pressure on U.S. stocks, as investors come to terms with the idea that high interest rates may persist well into 2024, pending a reduction in underlying inflationary pressures. The U.S. Treasury market, a cornerstone of the global financial system, has weathered a series of sell-offs since late September, pushing yields on 10-year and 30-year Treasurys to levels not seen since the lead-up to the 2008 financial crisis before experiencing a recent decline. In September, a bond market sell-off was triggered by the Federal Reserve’s hawkish outlook, along with concerns about the U.S. fiscal deficit, federal debt, and the potential for a government shutdown if the 2024 fiscal year budget remains unresolved by mid-November. However, this week, increased uncertainty related to the Middle East conflict led to heightened demand for safer assets, resulting in an increase in long-term bond prices and a decrease in yields. On Thursday, a Treasury bond auction saw reduced demand, despite notably higher yields, leading to another increase in longer-term rates. Concurrently, investors were confronted with inflation data showing elevated consumer prices in September, contributing to a drop in U.S. stocks. Investors are now questioning the conditions required for interest rates and bond yields to decrease in the coming months, potentially boosting stock markets as they approach year-end. Tim Hayes, the Chief Global Investment Strategist at Ned Davis Research, suggests that excessive pessimism in the bond market could set the stage for a relief rally in both stocks and bonds. According to Hayes, there may be less inflationary pressure than the market has anticipated, and a change in sentiment in the Treasury market may drive bond yields lower, benefiting equities. However, some analysts argue that disinflation might not be sufficient to prompt the Federal Reserve to abandon its “higher-for-longer” interest rate narrative, which has been a major driver of the surge in yields since September. Thierry Wizman of Macquarie believes that a slowdown in the consumer sector is necessary to alter the Fed’s stance and encourage a more flexible long-term outlook among policymakers. While the Fed is not currently signaling a removal of the “higher-for-longer” narrative, Wizman is confident that U.S. consumption data will weaken in the coming months, potentially due to consumer-product and -service companies providing guidance for the fourth quarter and consumers adjusting their spending for the holiday shopping season. While a consumer-side slowdown could benefit bonds, investors should remain cautious about buying into the stock market, as stock valuations could still appear elevated with Treasury yields at 16-year highs. The “higher-for-longer” narrative has been used by Fed officials to indicate the potential for sustained higher interest rates. However, Wizman sees it as a “publicity stunt” designed to tighten financial conditions in the short term. If consumer sector slowdown and ongoing disinflation can temper the Fed’s rate expectations, Treasury yields may continue to decline without requiring a major economic downturn. Additionally, the historical seasonality of the stock market suggests the possibility of a rally, as the fourth quarter has historically been strong for the U.S. stock market. The S&P 500, Dow Jones Industrial Average, and Nasdaq Composite have shown positive movements in the fourth quarter, contributing to the growing sentiment that bond yields may have reached their peak and equities could rally towards the end of the year. Yields on 10-year and 30-year Treasurys have experienced recent declines, with the 30-year yield posting its largest weekly drop in a while.

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U.S. Stock Market Watch: The Effect of Trend-Following Fund Adjustments

ABC Trader / October 5, 2023

Adding to the array of challenges facing the U.S. stock market, a new concern emerges: systematic trend-following funds are reducing their market exposure, potentially exacerbating downward pressure on the markets in the upcoming weeks. Goldman analysts estimate that commodity trading advisors (CTAs), a subset of trend-following hedge funds typically engaged in futures markets, shed approximately $40 billion worth of exposure to U.S. stocks last week. This rapid pace of CTA selling, according to Goldman’s data, sets a record. Fortunately, the Goldman team anticipates that the selling pressure from systematic funds will diminish in the coming days. However, not everyone shares this optimistic outlook. A team at UBS, in a recent note obtained by MarketWatch, forecasts an additional $20 billion to $30 billion in CTA selling over the next two weeks. According to their analysis, this would result in systematic funds holding a net short position on stocks for the first time since November of the previous year. The S&P 500 faced a 3.6% decline in the quarter ending in September, marking its first quarterly downturn in a year. Since then, stocks have continued to slide, with the index decreasing by another 0.5% since the beginning of October. In total, the S&P 500 has experienced a nearly 7.5% drop since its peak on July 31. By comparison, the index closed at 4,263.75 on Wednesday following a 0.8% increase, marking its most significant daily gain in three weeks, according to FactSet data. On the flip side, the Nasdaq Composite saw a 1.4% rise on Wednesday, closing at 13,236.01, while the Dow Jones Industrial Average climbed 127.17 points, or 0.4%, reaching 33,129.55. Easing Treasury yields were seen as a potential factor in this uptick, offering stocks a temporary respite. Increasing yields on Treasury bonds, particularly for longer-dated maturities, have exerted pressure on stocks, with the yields on the 10-year and 30-year Treasury bonds reaching their highest levels in 16 years earlier this week. Rising bond yields can lead to higher borrowing costs for corporations, potentially impacting economic growth, while also diminishing the appeal of U.S. equity valuations compared to bonds. For instance, these rising yields have recently driven the U.S. equity risk premium to its lowest level in over two decades, hovering just under 0.90 earlier this week, as per Dow Jones Market Data. This indicates that the compensation investors can expect for holding stocks rather than bonds is currently less attractive, at least in theory. Investors have also pointed to the lofty valuations of mega-cap technology stocks and concerns about the Federal Reserve’s plan for higher interest rates as contributing factors to the ongoing market selloff.

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Dollar Surge Rattles U.S. Stock Futures

ABC Trader / September 21, 2023

The interest rate on the 10-year Treasury note has reached the highest level it has been in 16 years. On Thursday, the futures for U.S. stock indexes saw a substantial decrease. The opening of the Dow Jones Industrial Average was expected to be down by 200 points. This decline was influenced by rising Treasury yields and a stronger U.S. dollar, causing additional pressure on the stock market. How are stock-index futures trading Yesterday, the Dow Jones Industrial Average (DJIA) fell by 77 points or 0.22% to a level of 34,441. Similarly, the S&P 500 (SPX) experienced a decrease of 42 points or 0.94% to reach 4,402. Additionally, the Nasdaq Composite (COMP) witnessed a decline of 209 points or 1.53%, with a closing value of 13,469. What’s driving markets Based on the Federal Reserve’s recent statement, it seems probable that U.S. stocks will persist in their decline, as the intention is to keep interest rates higher for a longer duration. Additionally, it is anticipated that there will only be one more rate hike within the year. The Federal Reserve’s projections, known as the “dot plot,” and the hawkish comments made by Powell during the press conference, had an impact in driving up Treasury yields to their highest level in 16 years and causing the US dollar to reach its highest value in more than six months. These factors were viewed as detrimental to the stock market. The rise of the US dollar was additionally supported by the Bank of England’s choice to maintain the current interest rates on Thursday. Moreover, American investors analyzed fresh economic data on Thursday. The number of people in the United States who applied for jobless benefits fell to 201,000 in the previous week, reaching the lowest level in the past eight months. After the press conference on Wednesday, Stephen Innes, who is a managing partner at SPI Asset Management, remarked that Powell’s suggested policies appeared to have a significantly negative impact on the American stock market. In a note, it was noted by Innes that the narrative has changed, with interest rates hitting record highs and affecting the stock markets. This connection between interest rates and the stock markets leads to a more intricate trading atmosphere, as any rise in rates brings a certain amount of disturbance to the American equity market. The interest rate on the 10-year Treasury note, with the ticker symbol BX:TMUBMUSD10Y, rose to 4.474%. This increase of 10 basis points marked its highest level since late 2007. It is important to note that bond prices and yields have an inverse correlation. Additionally, the ICE U.S. Dollar Index DXY, which gauges the strength of the dollar against a selection of other currencies, climbed by 0.5$, reaching a value of 105.63. Companies in focus

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U.S. Stock Futures Seek Recovery Path Amid Persistent High Yields

ABC Trader / September 18, 2023

On Monday, there was a slight increase in stability in the U.S. stock market. However, investors were still being careful because of the rise in bond yields and their anticipation for the Federal Reserve policy meeting that would conclude on Wednesday. How are stock-index futures trading The S&P 500 futures, referred to as ES00, decreased by 1.75 points or slightly under 0.1%, to reach a value of 4,496.25. The Dow Jones Industrial Average futures were indicating a slight decrease of 0.01%, but were still in positive territory with a gain of 14 points or less than 0.1%, reaching a value of 34,941. The Nasdaq 100 futures declined by 0.1% and fell by 22.75 points, reaching a level of 15,369.50. Last week, the Dow Jones Industrial Average saw a small rise of 0.1%, while the S&P 500 had a decline of 0.2% and the Nasdaq, which focuses on technology, experienced a drop of 0.4%. Both the S&P 500 and Nasdaq suffered losses for two consecutive weeks. What’s driving markets Stocks were encountering challenges in rebounding after experiencing a major drop in value, whereas interest rates on benchmark bonds were gradually getting back to levels that had not been witnessed in 16 years. Investors were carefully monitoring a week filled with notable activities conducted by central banks. Worries about inflation staying higher than the Federal Reserve’s desired rate of 2% were voiced when the S&P 500 saw a 1.2% decrease on Friday due to a mix of better-than-anticipated economic updates and rising oil costs. The concerns were reflected in the prices of government bonds, with the implied costs of borrowing for 10-year Treasury bonds rising to 4.353%. This rate is just slightly below the highest rate observed since 2007. Furthermore, the price of U.S. crude oil futures exceeded $91 per barrel, marking the highest price since November of the previous year. Investors are growing concerned about the recent surge of data indicating a rise in inflation and the potential for long-lasting higher interest rates. This situation could adversely affect the S&P 500 Index, especially considering its significant reliance on large technology companies. Stephen Innes, who works as a managing partner at SPI Asset Management, expressed this apprehension. The central banks’ outlook on these happenings will become more evident in the following week. The Federal Reserve will reveal its decision on policies during the middle of the week, while the Bank of England will do so on Thursday and the Bank of Japan on Friday, all based on their own local dates. Richard Hunter, who is the head of markets at Interactive Investor, believes that even though the Federal Reserve’s decision on Wednesday is expected to remain unchanged, the additional comments made alongside the decision could offer valuable insights into their present viewpoint. Hunter stated that investors have differing opinions on the future prospects for the upcoming year. Consequently, the most recent perspectives expressed by the Federal Reserve might potentially have a notable effect on the market. According to Jonathan Krinsky, a technical strategist at BTIG, the rising value of the dollar (DXY) is leading to a decrease in overall sentiment. He points out that last week, three significant factors affecting various assets – the dollar, interest rates, and crude oil – all continued to rise. However, it was not until Friday that the impact of these factors became noticeable in the stock market. Jonathan Krinsky, a technical strategist at BTIG, suggests that the expanding worth of the dollar is also having a negative effect on enthusiasm. In a written statement, he stated that the three primary challenges in several financial sectors (the dollar, interest rates, and crude oil) have been consistently growing, but it wasn’t until Friday that the stock market appeared to become aware of this. The U.S. economy will receive updates on Monday, which will include the release of the September home builder confidence index at 10 a.m. Eastern time. Companies in focus Following Mizuho’s upgrade of DoorDash Inc.’s rating to a buy, the company’s stock experienced a rise of more than 2% in premarket trading.

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U.S. Stock Futures Rally Amidst Positive ARM IPO News

ABC Trader / September 14, 2023

U.S. stock index futures displayed strength in the early hours of Thursday, with a stable bond market and close attention on two key factors: the release of August’s retail sales data and the debut of ARM Holdings’ IPO. The performance of stock-index futures at the time was as follows: In the prior trading session, the Dow Jones Industrial Average (DJIA) slipped by 70 points, translating to a 0.2% decrease, closing at 34576. Meanwhile, the S&P 500 (SPX) managed to eke out a 6-point gain, representing a 0.12% uptick and closing at 4467. The Nasdaq Composite (COMP) saw an increase of 40 points, or 0.29%, closing at 13814. Market sentiment appeared cautiously optimistic on Thursday’s early trading session as declining government bond yields indicated reduced concerns about the Federal Reserve’s potential interest rate hikes, especially after the latest inflation data. A report from the previous day showed that annual core consumer prices, excluding volatile elements like food and energy, had increased by 4.3% in August, down from the previous month’s 4.7%, marking the lowest level in nearly two years. Henry Allen, a strategist at Deutsche Bank, noted, “Following much anticipation, the markets largely shrugged off the U.S. CPI release yesterday. Bonds and equities remained fairly stable before eventually experiencing a bond rally.” At present, the market was pricing in a minimal probability of the Federal Reserve increasing borrowing costs following its upcoming meeting next week. The likelihood of a 25 basis point hike in November remained uncertain and would depend on forthcoming releases, including August producer prices and retail sales data, both scheduled for 8:30 a.m. Eastern Time. Additionally, other U.S. economic updates set for Thursday included the release of weekly initial jobless benefit claims at 8:30 a.m. and July business inventories at 10 a.m. Investors were also closely monitoring the initial trading of ARM Holdings (ARM) following the pricing of its IPO at $51 per share, which was positioned near the upper end of the anticipated range. This valuation gave the U.K.-based company a market capitalization of $52 billion. A well-received ARM IPO was expected to potentially reinvigorate the IPO market and enhance overall bullish sentiment. Susannah Streeter, head of money and markets at Hargreaves Lansdown, commented, “Given the enthusiasm among investors, it appears that ARM could have sought an even higher price. However, the company seems to be taking a cautious approach to ensure a surge in the share price once trading commences.” Another significant event for the day was the policy decision by the European Central Bank (ECB), scheduled for 2:15 p.m. Frankfurt time and 8:15 a.m. Eastern Time. While ECB decisions typically have a limited impact on U.S. markets, it was unusual for a major central bank meeting to be approached without a clear market consensus. The ECB faced a two-in-three chance of implementing a 25 basis point interest rate hike, as it grappled with persistent inflation and slowing economic activity, particularly in Germany.

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U.S. Stock Futures Slip as Economy Continues to Show Resilience

ABC Trader / September 8, 2023

U.S. stock market futures took a downward turn on Friday, concluding a challenging and shortened week with negative sentiment on Wall Street. Here’s a breakdown of the current situation: In the previous trading session, the Dow Jones Industrial Average (DJIA) managed to gain 58 points, representing a 0.2% increase, while both the S&P 500 (SPX) and the Nasdaq Composite (COMP) recorded declines. The S&P 500 has now closed lower for three consecutive sessions, resulting in a total retreat of 1.4%. Nevertheless, it has still demonstrated a substantial gain of nearly 16% year-to-date. Factors Influencing the Market: Highlighted Companies: