US stocks retreated from near-record highs on Monday, with all three major moving averages declining by approximately 1%. Various risk factors contributed to the decline, including rising interest rates, escalating oil prices, the intensifying Hurricane Milton, and negative news regarding some major technology stocks.
Rising Treasury Yields Trigger Market Concerns
The 10-year US Treasury yield climbed back above 4% on Monday, reaching its highest level in about two months. This increase followed Friday’s release of the September jobs report, which significantly impacted market sentiment. The stronger-than-expected nonfarm payroll report revealed that employers added 254,000 jobs last month, far surpassing estimates of around 150,000. Additionally, the unemployment rate declined slightly to 4.1%.
Surge in Oil Prices Amid Middle East Tensions
Oil prices continued their upward trajectory on Monday, increasing by about 4% as tensions in the Middle East escalated, coinciding with the first anniversary of the Hamas-led attack against Israel. The rise in oil prices, coupled with the robust jobs report, has heightened fears of a potential rebound in inflation, which could limit the likelihood of future rate cuts by the Federal Reserve.
Shift in Federal Reserve Expectations
Following Friday’s strong employment report, analysts suggest that the consensus might shift toward “no rush to ease further” during the fall. Yardeni Research noted that it cannot be ruled out that a “higher for longer” interest rate environment could make a comeback this winter, leading them to adopt a “none-and-done” stance for the remainder of the year.
Technology Stocks Under Pressure
Negative news regarding major tech companies further contributed to the market’s decline. A downgrade of Amazon by a Wells Fargo analyst resulted in a nearly 3% drop in the stock, while shares of Alphabet fell by 2% after a judge ordered the company to open its app store to increased competition, benefiting Epic Games.
Anticipation for Upcoming Earnings Season
Investors are now turning their attention to the upcoming earnings season, which kicks off this week with PepsiCo reporting results on Tuesday, followed by major banks on Friday. Furthermore, the September Consumer Price Index (CPI) report is expected to be released on Thursday, with economists predicting a year-over-year increase of 2.3% in September, down from 2.5% in August. Analysts at Bank of America warn that an upside surprise in last month’s inflation reading could cause significant volatility in the stock market this week.
Market Close Summary
At the close of trading on Monday, here’s how US indexes performed:
S&P 500: 5,695.94, down 0.96%
Dow Jones Industrial Average: 41,954.24, down 0.94% (-398.51 points)
Nasdaq Composite: 17,923.90, down 1.18%
Additional Market Highlights
Nvidia stock surged by 4% on Monday after Super Micro Computer announced the shipment of over 100,000 GPUs per quarter.
JPMorgan’s chief strategist expressed growing concerns about the market during an interview with Business Insider.
A Tesla trader reportedly turned $65,000 into $306 million before losing it all, according to a lawsuit.
The Texas housing market shows signs of slowing down due to falling home prices and dissatisfied residents.
Despite the Fed’s recent focus on the labor market, consumer prices remain a significant concern for investors.
Goldman Sachs raised its year-end S&P 500 price target for the third time this year to 6,000.
Commodities, Bonds, and Crypto Performance
In commodity markets, West Texas Intermediate crude rose 3.93% to $77.30 a barrel, while Brent crude, the international benchmark, increased by 3.89% to $81.09 a barrel. Gold prices dipped by 0.18% to $2,663.00 an ounce. The 10-year Treasury yield rose by 7 basis points to 4.032%. Bitcoin saw a 0.82% increase, reaching $63,335.
Conclusion
The current market environment reflects a complex interplay of rising interest rates, oil prices, and macroeconomic indicators. As investors brace for earnings reports and inflation data, the focus will be on how these factors shape market sentiment and expectations for Federal Reserve policy in the coming months.
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