Stock Market Update

[BRIEFING.COM] The stock market started the fourth quarter on a sour note amid increased geopolitical tension in the Middle East. This follows Israel's ground invasion of Lebanon and an announcement that rockets have been fired from Iran at Tel Aviv. 

The major indices show losses ranging from 0.5% to 1.8%, yields are lower in a safe-haven trade, oil prices are surging ($71.57/bbl, +3.39, +5.0%), and the CBOE Volatility Index (VIX) climbed above 20.00. The 10-yr yield is down nine basis points to 3.71% and the 2-yr yield is down six basis points to 3.59%.

Additionally, defense stocks are surging due to the notion that these names may benefit from the escalating conflict. Lockheed Martin (LMT 606.65, +21.95, +3.8%), RTX (RTX 124.41, +3.24, +2.7%), Northrop Grumman (NOC 550.37, +22.30, +4.2%), and L3Harris (LHX 246.78, +8.91, +3.8%) all reached new 52-week highs today.

The iShares US Aerospace & Defense ETF (ITA) sports a 1.3% gain.

The price action in oil has boosted the S&P 500 energy sector (+2.4%) in an otherwise down day. The information technology sector sports the largest decline, down 3.0%, due in part to weakness in Apple (AAPL 224.32, -8.68, -3.7%) after Barclays suggested iPhone 16 demand is sluggish.

News that East Coast and Gulf Coast dockworkers have gone on strike has also contributed to today's downbeat action, along with expectations for consolidation after a solid run in the third quarter.

Reviewing today's economic data:

• The S&P Global US Manufacturing PMI fell to 47.3 in the final September reading from 47.9 in the preliminary reading.
• JOLTS - Job Openings totaled 8.04 million in August, up from 7.711 million in July (revised from 7.673 million).
• The September ISM Manufacturing Index checked in at 47.2% (Briefing.com consensus 47.7%), unchanged from August. The dividing line between expansion and contraction is 50.0%, so the September reading suggests the pace of contraction in the manufacturing sector was the same as the prior month. This was the sixth straight month (and 22nd out of 23) that economic activity in the manufacturing sector contracted.
  • The key takeaway from the report is that it has reinforced the understanding that conditions in the U.S. manufacturing sector are weak, reflected further in the weakening employment index.
• Total construction spending declined 0.1% month-over-month in August (Briefing.com consensus 0.1%) following a downwardly revised 0.5% decline (from -0.3%) in July. Total private construction was down 0.2% month-over-month while total public construction was up 0.3% month-over-month. On a year-over-year basis, total construction spending was up 4.1%.
  • The key takeaway from the report is that new single-family construction weakened further despite sliding interest rates.