After falling about 2% on Thursday, an exchange-traded fund worth $192 billion that tracks the Nasdaq 100 (QQQ) rose in late trading. The selloff also put the S&P 500, which has dropped over 10% from its peak in July, on the verge of a “correction.” Following the closing, Ford Motor Co. fell due to weak financial results. Treasury rates decreased as investors continued to bet on a Federal Reserve pause despite economic data indicating inflation pressures are still declining amid strong growth.
According to Geir Lode, head of global equities at Federated Hermes Ltd., “earnings season has left much to be desired as typically economically sensitive stocks, that have held up well against a difficult backdrop, begin to creak under the pressure.” “Investors are concerned about a weaker macroeconomic backdrop, so good results are no longer enough for these economically sensitive stocks to gain traction.”
Tradesmen also paid special attention to geopolitical developments. Israel’s military claimed to have assassinated the deputy chief of intelligence for Hamas, claiming that he was responsible for aiding in the planning of the October 7 assaults. Moreover, the army conducted a small-scale ground assault into northern Gaza overnight. A barrel of oil fell below $84 today. The European Central Bank held rates steady, which caused the euro to slightly decline.
The yield on two years, which is more susceptible to impending movements by the Fed, fell eight basis points to 5.04%. In the current tightening cycle, swap contracts forecast a 32% chance of one more rate rise from the Fed.
According to Treasury Secretary Janet Yellen, predictions that interest rates may need to remain higher for an extended period of time and a robust economy are the reasons behind the recent spike in longer-term bond yields.
According to a survey by 22V Research, 71% of investors surveyed do not believe that the 10-year yield, which just surpassed 5%, has peaked. With a median projection for the high of 5.5%, they anticipate it to continue rising. According to 19%, the yield will peak at or above 6%.
According to Edward Moya, senior market analyst for the Americas at Oanda, “the stock market isn’t ready to rally until bond yields are sharply lower, which probably won’t happen until we see inflation a lot closer to the Fed’s target.”
Last quarter, the US economy expanded at its quickest rate in over two years thanks to a spike in consumer spending. Unexpectedly, a highly monitored indicator of underlying inflation fell to its lowest level since 2020.
“Recessions are still a possibility.” However, as the days go by and the data gets better, it appears like the Fed is successfully implementing a gentle landing with little negative impact on the economy. As an investor in the broad market, you should find some solace in the knowledge that the worst-case situation appears to be eliminated.
The payments network anticipated revenue growth for the upcoming quarter that above analyst estimates, which caused Mastercard Inc. to decline even as customers continued to use their cards extensively and endure rising interest rates.
After discussions for a transaction with Kioxia Holdings Corp. collapsed, Western Digital Corp.’s stock fell, dashed dreams of combining their flash memory operations.
Hasbro Inc. fell following the release of quarterly results that fell short of Wall Street forecasts for sales and profitability, as well as a reduction in its projected yearly revenue because of a softening toy market leading up to the Christmas season.
Harley-Davidson Inc. fell as sales and earnings fell short of projections in the face of high borrowing rates in the US and global economic instability.
Following the announcement of declining internet and cable subscriber numbers and the prediction of further losses, Comcast Corp. pulled back.
Hertz Global Holdings Inc. fell as a result of missing earnings projections and grappling with rising car depreciation costs—which were very low in 2022.
Gains were recorded by International Business Machines Corp., indicating that its focus on software and hybrid cloud services is paying off. The business also confirmed its full-year projection and posted revenues that above expectations.