Tuesday’s market closing was largely unchanged following the unexpectedly strong retail sales figures and the accelerating earnings season.
S&P 500 (^GSPC) and the Dow Jones Industrial Average (^DJI) remained close to the flatline, although contracts on the tech-heavy Nasdaq 100 (^NDX) ended the day down by 0.25%.
At 4.85%, the 10-year Treasury yield is at its highest since July 27 after rising by more than 13 basis points. On October 6, the 10-year yield reached a 16-year high of 4.89%.
According to the most recent statistics released on Tuesday, retail sales increased 0.7% in September over the prior month, more than double Wall Street’s forecast for a 0.3% uptick. The unexpected number shows that American consumers are still resilient in the face of downturn forecasts.
Even though earnings season is still early, there are already positive indications that the recent earnings slump may be coming to an end for corporate America. The tech sector’s results on Wednesday are led by Tesla (TSLA) and Netflix (NFLX), which provide further context for the impact of rising borrowing costs.
As the US stepped up its diplomatic efforts and expectations rose that it will lift sanctions against oil producer Venezuela, oil prices stabilised. While Brent crude (BZ=F) finished at slightly under $90 per barrel, crude oil (CL=F) settled above $86 per barrel.
Tuesday’s market closing was largely unchanged due to strong retail sales figures. S&P 500 (^GSPC) and the Dow Jones Industrial Average (^DJI) remained close to the flatline, although contracts on the tech-heavy Nasdaq 100 (^NDX) ended the day down by 0.25%.
The yield on the 10-year Treasury note surged by over 13 basis points, reaching a level of 4.85%, the highest since July. On October 6, the 10-year yield reached a 16-year high of 4.89%.
According to recent data from Goldman Sachs, 15 million US adults—not including those with diabetes—will be on anti-obesity drugs by 2030, accounting for 13% of the adult population in the country.
Goldman Sachs has increased its forecast for chronic weight management revenues globally from $6 billion annualised earlier this year to $100 billion by 2030.
A group of Goldman Sachs analysts led by Chris Shibutani wrote in a research note on Monday, “We believe the chronic weight management market is undergoing an inflection and has potential for solid growth ahead and a peak opportunity that, by our estimates, could ultimately yield some of the highest grossing drugs of all time.”
Wall Street has been paying attention to the recent chatter regarding the effects of weight-loss medications. Drugs like Ozempic have raised concerns among analysts over their potential to reduce fast food demand and food sales at stores like Walmart (WMT), which has reported that the medicine is generating lesser income.
The enthusiasm has resulted in stock increases for Novo Nordisk (NVO) and Eli Lily (LLY), manufacturers of prescription medications. Because to Ozempic, Novo Nordisk’s diabetic medication, having stronger-than-expected sales, the company increased its full-year sales guidance last week. Although the medication isn’t specifically licenced for weight loss, this is still a common usage for it. Eli Lily, however, upgraded its own sales projection due to higher demand during its most recent quarterly results report, which was released in August.
Following the market close on Wednesday, Netflix (NFLX) is scheduled to release its fiscal third quarter results report. Investors want information on the company’s efforts to stop people from revealing their passwords, about its ad-supported products, and about any future price increases.
Having just been downgraded by Wall Street, Netflix let investors down in the second quarter when sales below projections and the firm issued a lower-than-expected Q3 guidance.
The company’s advertising layer hasn’t completely developed, which is reflected in the revenue lag and puts its aim of double-digit revenue growth at jeopardy.
The average revenue per membership (ARM), which the business had predicted would be flat to slightly down in Q3 compared to the same time in 2022, was also revealed to be lower than planned. This is in spite of an anticipated 6 million increase in new users during the third quarter as a result of the password cracking.
The Dow Jones Industrial Average (^DJI) dropped 0.2%, or more than 75 points, in late afternoon trade. Contracts on the tech-heavy Nasdaq 100 (^NDX) were down almost 0.4%, while the benchmark S&P 500 (^GSPC) fell by nearly 0.3%.
However, Treasury rates kept rising. The benchmark 10-year Treasury’s yield (^TNX) increased by almost 14 basis points to trade at 4.86%. On October 6, the 10-year yield reached a 16-year high of 4.89%.
Following the announcement that President Joe Biden will visit Israel on Wednesday, oil prices stabilised. While Brent crude (BZ=F) finished at slightly under $90 per barrel, crude oil (CL=F) settled above $86 per barrel.
A thriving labour market is driving up consumer expenditure.
September retail sales up 0.7% over August, above Wall Street’s 0.3% growth forecast, according to newly released Commerce Department statistics released on Tuesday. Six months in a row, retail sales have increased over the previous month, indicating a steady trend in consumer spending.
Economists claim that throughout the same time span, an average of about 270,000 new nonfarm payroll increases have supported this. The robust state of the US consumer going into the fourth quarter of 2023 might pose upside risks to inflation and therefore further Fed rate rises, since there are no obvious signals that the labour market is totally cooling.
In a research report published on Tuesday, head US economist Michael Pearce of Oxford Economics stated, “The economy is entering Q4 with more momentum than we previously thought.” “There is a strong chance that our prediction of a modest decline in consumption in Q4 will come true. Additionally, because of the economy’s strength, Fed officials will keep the door open for more rate increases.”
Fed Chair Jerome Powell has already stated that more rate rises by the Fed may be necessary if the US economy grows.
Powell declared in September that “we’re not looking for a decrease in consumer spending.” “It’s fortunate that the economy is robust…If the economy performs better than anticipated, further monetary policy adjustments will be required.
Over the last week, Fed officials have allayed investor fears about the possibility of another rate rise by the central bank by outlining how credit tightening brought on by increasing bond rates could essentially replace another rate hike. Bond rates were relieved by the conversation, and stock prices increased.
However, that changed on Tuesday. According to the CME FedWatch Tool, markets are now pricing in a nearly 40% possibility that the Federal Reserve rises interest rates at its December meeting, up from a 25% chance only one week ago. Bond rates increased on the announcement, and stocks also started lower. The yield on the 10-year Treasury note surpassed 4.85%, marking a weekly high and a slight down from its 16-year peaks.
EY-Parthenon Senior Economist Lydia Boussour stated in a research note on Tuesday, “Today’s strong report along with a recent string of positive economic surprises suggest the economy carried more momentum than previously thought over the summer.” “The Federal Reserve will remain vigilant about high inflation as a result of this, and while it won’t influence the FOMC to raise interest rates again in November, the December meeting will still be a ‘live’ one.”
The limitations on American corporations selling chips to China are being tightened by the Biden administration.
As the wider IT sector lags the market generally, chip stocks including Nvidia (NVDA), Advanced Micro Devices (AMD), and VMware (VMW) all declined on the announcement, falling about 6%, 3%, and 8%, respectively.
The newest attempt by US authorities to restrict China’s access to AI chips is the crackdown, which is certain to worsen relations between the two nations as their technological rivalry heats up.
The objective, according to US Commerce Secretary Gina Raimondo, is to prevent China from obtaining “advanced semiconductors that could fuel breakthroughs in artificial intelligence and sophisticated computers that are critical to (Chinese) military applications.”
The second-largest US bank, Bank of America, had a 10% increase in third-quarter earnings compared to the same period last year because to increased interest income and solid Wall Street performance.
It revealed $25.2 billion in revenue and $7.8 billion in profits, a 3% increase over the previous year. The difference between the amount it receives from loans and the amount it pays for deposits is known as net interest income, and it increased by 4% annually.
Revenues from trade and investment banking increased as well, suggesting that a decline in dealmaking is beginning to thaw.
As the Wall Street behemoth resumed its expensive withdrawal from consumer banking and attempted to rebound from a protracted slowdown in dealmaking, Goldman Sachs’ third-quarter profits decreased.
Its earnings for the year were $2.06 billion, a 33% decrease from $3.07 billion. A $506 million write-down on GreenSky, a specialised lender it agreed to sell, and $358 million in real estate investment impairments had an impact on that outcome.
Its performance in the quarter lagged behind that of other large bank competitors, including Wells Fargo (WFC), Bank of America (BAC), Citigroup (C), and JPMorgan (JPM), all of which posted year-over-year gains in profits.