The gap between S&P 500 earnings yield and 10-year Treasury yield is currently hovering close to zero. It has increased from recent lows but remains low when compared to the average over the last ten years.
— Liz Ann Sonders (@LizAnnSonders) October 3, 2024
The stock market rally lost momentum on Wednesday, as the S&P 500 and Dow fell from their all-time highs. The Dow Jones Industrial Average saw an earlier gain reverse, ultimately closing down about 0.7%. The S&P 500 also dipped into negative territory, falling around 0.2%.
The technology-focused Nasdaq Composite ended the day slightly above neutral.
Historically, the average volatility for U.S. stocks in October is 34% higher than the average of the other eleven months, according to CFRA
— Liz Ann Sonders (@LizAnnSonders) October 3, 2024
Market participants are now engaged in discussions regarding the state of the US economy and the likelihood of another significant interest rate cut by the Federal Reserve. The conversation revolves around whether the Fed opted for an unconventional rate reduction of 0.5% in reaction to a sluggish economy and how future economic softening might impact expectations for another substantial cut.
B of A’s Hartnett, one year ago: (9/29/23)
Central banks “might still have more disruptions ahead … maintain a bearish/defensive stance & consider selling the final hike.”
[S&P 500 has risen 33.1% since.]
— Carl Quintanilla (@carlquintanilla) October 3, 2024
After a steep increase the previous month, new home sales experienced a decline as extremely high mortgage rates and elevated prices kept buyers primarily off the market. According to MBA data, mortgage applications have stabilized since 2022, with the uptick in growth driven primarily by homeowners wishing to refinance as rates decline.
All eyes are on the second quarter GDP report set for Thursday and the important PCE index reading on Friday, which is the inflation measure preferred by the Fed. In after-hours trading, Micron’s stock jumped by around 10% following the memory chip manufacturer’s impressive earnings report that exceeded expectations. Earnings per share exceeded estimates by $0.06, hitting $1.18, with adjusted gross margins also surpassing forecasts at 36.5%.
Stocks retreat amid economic uncertainties
KB Home shares fell nearly 5% after the homebuilder reported third-quarter earnings per share and new orders that did not meet analyst projections. CEO Jeffrey Mezger indicated that demand weakened from late June to July due to persistent high interest rates and rising concerns about an economic slowdown.
Flutter’s stock saw a substantial rise of up to 8% to reach an all-time peak after the company unveiled a $5 billion share buyback program and anticipated robust growth in the US online gaming landscape. The firm, which owns FanDuel, forecasts that the total addressable market will hit $368 billion by 2030. Meanwhile, Disney+ has officially initiated its campaign against password sharing in the US and other areas.
The company now provides an “Extra Member” add-on for $6.99 to $9.99 per month for users sharing accounts outside their households. Additionally, Warren Buffett’s Berkshire Hathaway further reduced its shareholding in Bank of America by offloading 21.6 million shares, making approximately $862.7 million in profits from those sales. Berkshire has sold BofA stock in 10 of the past 11 weeks since mid-July.
In sector movements, Utilities led the market, rising about 0.7%, while Energy was the day’s biggest loser, dropping around 1.6%. Crude oil prices fell more than 2% to trade near $70 a barrel, and Nvidia shares increased after a Mizuho analyst referenced a report predicting substantial market growth for artificial intelligence hardware and software.
The stock of the AI powerhouse also climbed following reports of CEO Jensen Huang’s intense involvement in the company’s operations.
