Wall Street Breakfast: What Moved Markets

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Stocks posted their fourth straight daily loss Friday to end a rocky week that saw benchmark U.S. Treasury yields surging to 16-year highs and investors digesting hawkish revisions from the Federal Reserve. The central bank was the main event of the week. The Fed's monetary policy committee on Wednesday chose to keep rates steady, as widely anticipated. However, the latest dot plot - a summary of economic and rate projections - signaled one more rate hike this year along with fewer rate cuts in 2024. Moreover, Powell at the post-decision conference said that a soft landing was not a baseline expectation, which further shook investor confidence. The Fed chair also highlighted that economic activity had been stronger than all expectations. The yield on the 10-year Treasury note climbed 12 basis points on the week to 4.44%, slipping a bit on Friday after surging Thursday to its highest level since October 2007, as the Fed projected interest rates would remain higher for longer. For the week, the S&P tumbled 2.9% in its biggest loss since mid-March, when the collapse of Silicon Valley Bank sparked a sharp selloff, while the Dow Jones average slipped 1.9% and the Nasdaq Composite closed 3.6% lower.

IPO buzz

Grocery delivery firm Instacart (CART) closed up 12.3% in its market debut on Tuesday, ending the session with a valuation of about $11.5B. Instacart's rally came close on the heels of Arm's (ARM) IPO, in which its shares jumped 25% in its first day of trading. The initial enthusiasm has since faded, with Arm declining in five consecutive sessions. SA analyst The Asian Investor believes traders are overpaying for Arm's revenue potential, a concern shared by Wall Street analysts. Besides Arm's and Instacart's debut, marketing automation firm Klaviyo (KVYO) priced its IPO at the top of its marketed range, ending its first session more than 9% higher. (46 comments)

House in order?

Housing starts plunged 11.3% month-over-month in August to 1.283M, marking the lowest level since June 2020. "High mortgage rates are clearly taking a toll on builder confidence and consumer demand, as a growing number of buyers are electing to defer a home purchase until long-term rates move lower," said Robert Dietz, chief economist, National Association of Home Builders. "As long as rates remain high, homeowners will be reluctant to sell. And that will keep prices high because buyers are duking it out for a limited supply of houses," added Chen Zhao, lead of Redfin's (RDFN) economics research. The median U.S. home sale price advanced 3% Y/Y in August, the largest annual increase since October, while home purchases in August were scrapped at the highest rate in nearly a year. (79 comments)

Sit tight

Markets moved lower on Wednesday and Thursday as traders digested the Fed's latest policy move, in which it kept rates unchanged, but indicated that they will remain higher for longer. "The fact that we've come this far lets us really proceed carefully," said Chair Jerome Powell, emphasizing some recent battles won on the inflation front, but citing risks related to an overly resilient economy and labor market. The median projection for the federal funds rate at the end of the year was 5.6%, implying one more hike - the same seen in the June projection. Policymakers also forecast fewer rate cuts in 2024, prompting the two-year Treasury yield (US2Y), which reflects rate expectations, to hit 5.118% - the highest level since 2006. (85 comments)

Red ink

America's national debt this week topped $33T for the first time, according to the figures from the Treasury Department. The record-breaking red ink comes as Congress braces for another fight over federal spending. Unless lawmakers can agree on a dozen appropriations bills by Sept. 30, or ink a short-term continuing resolution to fund the government, the U.S. would face its first federal shutdown since 2019. A spike in interest rates over the past year and a half has also made the cost of servicing the national debt way more expensive, posing significant risks to the fiscal and economic outlook. "The U.S. debt situation is out of control, with no responsible body of people in the government willing to address it," SA analyst John Mason wrote in The Fiscal Mess Of U.S. Debt. (16 comments)

Game on

The biggest tech acquisition in U.S. history is finally on its way to the finish line. While Microsoft's (MSFT) $69B purchase of Activision Blizzard (ATVI) scored approval in the EU, China and other markets, it had faced a prolonged fight with the Federal Trade Commission in the U.S. and the Competition and Markets Authority in the U.K. Following several court losses, the FTC's suit was eventually dropped, while Microsoft refiled for the merger across the pond with remedies that included the divesture of cloud rights related to PC and console games. It looks like that may finally be enough as the U.K.'s CMA said the restructured proposal "opens the door" to the deal being fully cleared. SA analyst The Gaming Dividend recently wrote that ATVI was a buy whether the deal closes or not, but it looks like investors now have their answer. (15 comments)

Weekly movement

U.S. Indices
Dow -1.9% to 33,964. S&P 500 -2.9% to 4,320. Nasdaq -3.6% to 13,212. Russell 2000 -3.8% to 1,777. CBOE Volatility Index +24.7% to 17.2.

S&P 500 Sectors
Consumer Staples -1.8%. Utilities -1.7%. Financials -2.8%. Telecom -3.2%. Healthcare -1.2%. Industrials -2.7%. Information Technology -2.6%. Materials -3.7%. Energy -2.3%. Consumer Discretionary -6.4%. Real Estate -5.4%.

World Indices
London -0.4% to 7,684. France -2.6% to 7,185. Germany -2.1% to 15,557. Japan -3.4% to 32,397. China +0.5% to 3,132. Hong Kong -0.5% to 18,085. India -2.7% to 66,009.

Commodities and Bonds
Crude Oil WTI -0.5% to $90.33/bbl. Gold -0.1% to $1,944.9/oz. Natural Gas +0.2% to 2.649. Ten-Year Bond Yield -0.2 bps to 4.438.

Forex and Cryptos
EUR/USD -0.07%. USD/JPY +0.38%. GBP/USD -1.19%. Bitcoin flat. Litecoin -0.8%. Ethereum -2.6%. XRP +2.4%.

Top S&P 500 Gainers
Cboe Global Markets (CBOE) +5%. Humana (HUM) +5%. The Allstate (ALL) +5%. Assurant (AIZ) +5%. McKesson (MCK) +4%.

Top S&P 500 Losers
Caesars Entertainment (CZR) -13%. Moderna (MRNA) -13%. MGM Resorts International (MGM) -11%. Alexandria Real Estate Equities (ARE) -11%. Ceridian HCM Holding (CDAY) -11%.

Where will the markets be headed next week? Current trends and ideas? Add your thoughts to the comments section.

Comments

[ble373]

What moved the markets is money or lack there of.
All the efforts of the newly talented tea bag er is to destroy my retirement investment returns.
Chaos and anarchic market. Isn't that manipulating the market by a power broker? Isn't that a violation of the SEC regulations. Isn't that a conspiracy now with them all swallowing into it?
Are they shorting the market or what? That would mean we are subsidizing stupid out of our own pockets. Nah. Can not happen in a Free Market. That would make us all what, chumps?
Just one more Question. And where do the get their jobs?

[Phil Dumfee]

Algos moved the markets again. You can't beat AI. It's smarter than you.

[WWG1_WGA_Q]

@Phil Dumfee disagree as A.I. has faults.

Q 17

[john boy]

the slow jumpy nervious market is setting up for a bull market in a couple months

[ble373]

Weakness in market mirrors intellect of the just say no cry babies.
Swiss University study reveals that 72% of world's population lives in an autocracy. Up from 60%.

[2959]

@ble373 and the other 28% in a Plutocracy?

[ble373]

@2959
Worth a look at the list even if just for investment purposes.
They (72%) reach into Canada, US, Germany or else to eliminate dissent now with impunity.
You got dissent, a witness, reporter, blogger, novelist, teacher, librarian. pole workers or just different?
They are looking for dissenters.

[2959]

@ble373 Balance of Power; Liberal Democracies propping up and supporting closed Autocracies. Glad I’m in the USA. The Oxygen Mask analogy comes to mind; put your own oxygen mask on first, before attempting to help those around you.

[Chris Lau]

That was the worst week since March. $MPW (new low) and $WPC stood out. Move Magnificent 7 gains to Gold and Oil, especially $XOM.

Ford climbed 1.9% after reports that the auto giant was making progress in negotiations with the striking United Auto Workers union. Stellantis also traded higher, while General Motors was near flat.

Those moves came after a three-day losing streak for the major averages. The losses came as investors reacted to a signal from the Federal Reserve that it intended to keep interest rates higher for longer.

The S&P 500 slumped 2.8% and the technology-heavy NASDAQ Composite dropped 3.5% this week. It marks the third straight negative week and worst weekly performance since March for each. The blue-chip Dow slid 1.8% on the week.

Investors also became concerned about a government shutdown, which could dent consumer confidence and slow down the economy further. House Republican leaders sent the chamber into recess on Thursday.

Prices for the 10-year Treasury gained ground, lowering yields to 4.43% from Thursday's 4.49%. Treasury prices and yields move in opposite directions.

Oil prices moved back up 73 cents to $90.36 U.S. a barrel.

Gold prices jumped $5.60 to $1,945.20 U.S. an ounce.

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