Oct 23 (The Street Press) – On Monday, the S&P 500 and the Nasdaq came close to their lowest points in almost five months. This happened as the interest rate on the important 10-year U.S. Treasury note reached the significant 5% level. Investors were also eagerly waiting for the financial results of the biggest technology companies in the world and important economic data.
The 10-year note’s yield reached a level it hasn’t seen since July 2007, which it briefly tried to reach last week. It was last recorded at 4.9758%. Yields on the 2-year and 30-year notes also went up.
Rupert Thompson, the chief economist at Kingswood Group, told Reuters, “This continued (economic) strength has cast doubt over whether interest rates really have peaked, even if the Fed does still look very likely to leave rates unchanged.”
Additionally, the upward push on yields has been driven by growing worries about the substantial government debt that the market needs to handle.
As a result, the S&P 500 dropped below the 4,200-point mark, a critical level that many in the market think could lead to more declines toward the 4,000 level.
The spotlight continues to be on the mostly favorable earnings season. Four out of the ‘Magnificent Seven,’ which have been the driving force behind the S&P 500’s performance in 2023 while other indexes have trailed behind, are scheduled to report their earnings later this week.
Out of the 86 companies within the S&P 500 that have already reported their third-quarter earnings, an impressive 78% have exceeded analysts’ expectations, as reported by LSEG data.
Notable companies such as chipmaker Intel, oil giant Exxon Mobil, and General Motors are among the major players set to announce their results this week.
Investors are closely watching developments in the Middle East, with Israel conducting strikes in both Gaza and southern Lebanon, signaling an expanding conflict.
The U.S. GDP report, expected on Thursday, will be of significant interest, as there are expectations that the economy grew at a strong 4.2% rate in the third quarter, which could influence discussions about tighter monetary policies.
Additionally, investors will keep a close eye on the personal consumption expenditure (PCE) price index, the Federal Reserve’s favored measure of inflation, due at the end of the week.
As of 9:38 a.m. Eastern Time, the Dow Jones Industrial Average was down by 204.23 points, marking a 0.62% decline to 32,923.05. The S&P 500 showed a decrease of 25.94 points, or 0.61%, standing at 4,198.22, and the Nasdaq Composite saw a drop of 93.95 points, equivalent to 0.72%, with a value of 12,889.86.
In this scenario, all 11 major subsectors within the S&P 500 were experiencing losses, with utilities and energy leading the decline.
Salesforce saw a 2.3% dip following a downgrade to “neutral” from “overweight” by Piper Sandler, while pharmacy chain operator Walgreens Boots Alliance gained 1.5% after receiving an “overweight” upgrade from J.P. Morgan.
Chevron saw a significant drop of 3.2% in its stock value after announcing a $53 billion all-stock acquisition of smaller rival Hess Corp. In contrast, Hess experienced a modest increase of 0.6%.
FMC, an agricultural products supplier, faced a substantial decline of 16.7% as it revised its third-quarter revenue and earnings forecasts downwards.
Market conditions were unfavorable, with declining stocks outweighing advancing ones by a ratio of 5.24-to-1 on the NYSE and 2.95-to-1 on the Nasdaq.
Within the S&P index, 47 new 52-week lows were recorded, while no new highs were reported. In contrast, the Nasdaq saw seven new highs and 223 new lows.