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Stocks Are Low as Treasury Yields Slip and the Fed Meets

October 31, 2023
minute read

On Tuesday morning, U.S. stocks are in decline, retracing some of the gains from the previous day's rally. This comes as Treasury yields pull back, corporate earnings reports come in, and another Federal Reserve interest rate meeting commences.

Here's how the stock market is performing:

  • The S&P 500 has decreased by 8 points, or 0.2%, to reach 4,158.
  • The Dow Jones Industrial Average is down 77 points, equivalent to 0.2%, at 32,851.
  • The Nasdaq Composite has dropped 73 points, or 0.5%, to 12,716.

On the preceding day, the Dow Jones Industrial Average climbed by 511 points, or 1.58%, to reach 32,929. The S&P 500 saw a 49-point increase, equivalent to 1.2%, reaching 4,167, while the Nasdaq Composite gained 146 points, or 1.16%, to reach 12,789.

Several factors are influencing the market:

The third-quarter earnings reporting season is in full swing, and it has been a challenging start for some companies on Tuesday morning. Companies like Pfizer, Caterpillar, and Amgen reported results before the opening of the Wall Street trading session. Caterpillar, despite beating third-quarter profit expectations, offered a cautious outlook for the fourth quarter. Pfizer also reported a larger-than-expected loss, though it maintained its full-year outlook. Other companies, including Advanced Micro Devices, Paycom Software, and Caesars Entertainment, are scheduled to report earnings later in the day.

Treasury market dynamics are a key focus. The 10-year Treasury yield is around 4.85%, near the lower end of a two-week range. This follows a minor adjustment to monetary policy by the Bank of Japan, which reduced the attractiveness of Japanese government bonds, leading to increased demand for U.S. debt. The U.S. dollar also strengthened against the Japanese yen.

News that the U.S. Treasury plans to borrow less than previously anticipated this quarter, thus issuing less paper, is supporting bond prices. The Treasury will announce its third-quarter refunding program on Wednesday.

Additionally, manufacturing in China unexpectedly contracted in October, signaling economic challenges. This data may influence the Federal Reserve's decisions as it begins its two-day policy meeting. The Fed is expected to maintain its policy interest rates within a range of 5.25% to 5.5%. The U.S. debt situation and the Treasury Department's upcoming announcement regarding the size and maturity of bonds to be issued will be of significant importance.

Central bankers and investors have received new information about labor costs for employers. Worker compensation increased by 1.1% in the third quarter, exceeding expectations. Labor costs have risen by at least 1% for nine consecutive quarters. However, there are signs of slowing wage growth, particularly when workers with more variable compensation structures are excluded.

Furthermore, data indicates that home prices have continued to rise for the sixth consecutive month in the 20 largest metropolitan housing markets in the United States. The S&P CoreLogic Case-Shiller 20-city house-price index shows a 1% increase in August compared to July, with an annualized price increase of 2.2% in major markets.

Eric Ng
Eric Ng
John Liu
Editorial Board
Bryan Curtis
Adan Harris
Managing Editor
Cathy Hills
Associate Editor

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