Daily Newsletter Oct 12 '22
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Daily Recap
Look Ahead - Economic & Earnings Calendar
Key Futures Levels - S&P 500 (/ES) and NASDAQ (/NQ)
Day Trade Stock Ideas - DIS
Today's Recap
Market Snapshot
Market Heatmap
Sector Heatmap
Market Recap
Today's trade started on a downbeat note and ended on a downbeat note. There was some improvement in between, though, that ultimately got tempered as financial stability concerns came back to the forefront. Along the way, the S&P 500 set a new low for the year (3568.45). That low came shortly after the open, yet it stoked renewed buying interest that would carry the S&P 500 to 3,640.66 at its high for the day.
The opening selling interest stemmed from growth concerns and worries about financial stability. The latter resonated with the Bank of England (BoE) intervening again in the UK gilt market after a nasty selloff yesterday that completely undid the gains registered after the BoE announced its emergency gilt purchase operation on September 28. Today, the BoE said it is going to buy index-linked gilts from October 11 until October 14 to mitigate dysfunction in the market and prevent "fire-sale" dynamics.
Slowdown concerns came to light after the IMF cut its 2022 forecast to 2.7% from 2.9% and said the worst is yet to come. Also, reports indicated that China imposed new restrictions in some Chinese cities because of rising Covid cases.
Notwithstanding these issues, the major indices forged a rebound effort that saw broad based participation and most stocks recouping losses registered in the opening trade. That rebound effort, however, hit a wall in the afternoon.
The second leg lower today followed news of BoE Governor Andrew Bailey advising pension funds that they have three days left to rebalance, keeping in line with the BoE's prior indication that its emergency purchases of gilts would end October 14. The fact that the market would trade lower on this news implied that there was an expectation that the Bank of England would ultimately extend its timeline for purchasing gilts. Now, faced with the potential that this emergency support is going to be pulled soon, as indicated, market participants are fretting about the possibility of some type of market dislocation that could have reverberations elsewhere.
The Dow Jones Industrial Average (+0.1%) squeezed out a modest gain, outperforming from the start with the help of Amgen (AMGN 245.44, +13.29, +5.7%), which was upgraded by Morgan Stanley to Overweight from Equal-Weight. Small and mid cap stocks also outperformed as the Russell 2000 (+0.1%) and S&P Mid Cap 400 (+0.2%) logged modest gains.
For the S&P 500, only four of the 11 sectors closed in positive territory, led by real estate (+1.0%). Communication services (-1.6%) and information technology (-1.5%) sank to the bottom of the pack.
The 10-yr Treasury note yield rose six basis points to 3.94% (after hitting 4.00% overnight) and the 2-yr note yield was unchanged at 4.30%.
Energy complex futures settled the session in mixed fashion. WTI crude oil futures fell 1.9% to $89.18/bbl while natural gas futures rose 2.1% to $6.60/mmbtu.
Today's economic data was limited to the September NFIB Small Business Optimism Index, which rose to 92.1 from 91.8 in August.
Looking ahead to Wednesday, market participants will receive the weekly MBA Mortgage Application Index (prior -14.2%) at 7:00 a.m. ET. The September PPI (Briefing.com consensus 0.2%; prior -0.1%) and Core PPI (Briefing.com consensus 0.3%; prior 0.4%) is out at 8:30 a.m. ET. The FOMC Minutes for the September meeting are out at 2:00 p.m. ET.
Dow Jones Industrial Average: -19.5% YTD
S&P Midcap 400: -20.3% YTD
S&P 500: -24.7% YTD
Russell 2000: -24.6% YTD
Nasdaq Composite: -33.4% YTD
source: briefing.com
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