Stocks End Lower In Volatile Session
3:30 pm Thursday, October 20th, 2022
The stock market took cues from the Treasury market today. The major averages started the session on a lackluster note but then flipped into rally mode as longer dated yields backed down from their overnight high (4.18%) and the S&P 500 reclaimed a posture above 3,700. They have since turned lower, however, as the 10-yr note yield has moved to 4.20%.
The Treasury market has reacted to Philadelphia Fed President Harker (2023 FOMC voter) saying he expects the fed funds rate to be well above 4.00% by end of the year, according to CNBC.
Notably, the 2-yr note hasn’t had a big reaction as the fed funds futures market was already positioned for a fed funds rate well above 4.00% by the end of the year. The 2-yr note yield was at 4.56% around the time the stock market put in its highs and it sits at 4.57% now.
Relative strength in the mega cap space has been an integral support factor for the broader market. The notable exception in that area is Tesla (TSLA), which suffers a heavy loss after disappointing quarterly results. The Vanguard Mega Cap Growth ETF (MGK) trades flat while the S&P 500 sports a 0.3% loss and the Invesco S&P 500 Equal Weight ETF (RSP) is down 0.6%.
Only three of the 11 S&P 500 sectors remain in positive territory, communication services (+1.1%), energy (+0.7%), and information technology (+0.6%). Communication services is boosted by earnings-driven gains in AT&T (T) while information technology is benefitting from gains in IBM (IBM) and Lam Research (LRCX) following their earnings reports.
