Stocks End Lower Ahead Of Fed Decision
1:43 pm Tuesday, November 01st, 2022
The first session of November got started on an upbeat note, driven by some optimism about China potentially entertaining a shift in coming months to its zero-COVID policy, falling Treasury yields, and some M&A buzz after Johnson & Johnson (JNJ) said it would acquire Abiomed (ABMD) at a 47% premium over yesterday’s closing price.
The S&P 500, Dow, and Nasdaq, were up 1.0%, 1.5%, and 0.7%, respectively, at this morning’s highs. The market quickly shifted to retreat mode, though, after the release of economic data at 10:00 a.m. ET.
That data included a weaker-than-expected ISM Manufacturing Index for October, a stronger-than-expected Construction Spending Report for September, and a JOLTS – Job Openings Report for September that, well, jolted the Treasury market and in turn the stock market.
The 10-yr Treasury note yield, which was below 4.00% while stocks rallied, now sits at 4.05%. The 2-yr note yield, at 4.43% earlier, sits at 4.51% now.
The main sticking point in the economic data today was that the JOLTS number remained elevated, indicating the labor market remains strong and that wage-based inflation pressures are likely to continue. That understanding created some concerns that the Fed might not soften its rate hike approach following the November meeting.
Both the stock and Treasury markets saw buyers step away in the wake of the data and retreat to lower price levels. The stock pullback has not been outsized, however, and there is still underlying strength in the market. Advancing issues outpace declining issues by a nearly 2-to-1 margin at the NYSE and a 5-to-3 margin at the Nasdaq.
Semiconductor stocks are a specific pocket of strength today. The PHLX Semiconductor Index (SOX) is up 1.1% with nearly every component trading up after some pleasing earnings news from Lattice Semi (LSCC) and NXP Semi (NXPI).
Uber (UBER) is a winning standout for growth stocks after posting quarterly results and raising its Q4 adjusted EBITDA guidance.
Most of the 11 S&P 500 sectors exhibit a loss with consumer discretionary (-1.3%) falling to the bottom of the pack. It’s weighed down by Amazon.com (AMZN 97.10, -5.33, -5.2%), which has fallen to a new 52-week low.
Meanwhile, energy (+1.1%) leads the outperformers as oil prices rise. WTI crude oil futures are up 2.5% to $88.67/bbl in response to the prospect of China “reopening” in coming months.
