Stock Market Update

[BRIEFING.COM] The stock market opened to solid losses and declined through the session so far. Losses in Microsoft (MSFT 409.51, -23.05, -5.3%) and Meta Platforms (META 567.77, -24.03, -4.1%) have weighed down the equity market after their earnings reports. Weakness in other mega caps, along with growth stocks, has influenced the price action in the major indices. 

The market-cap weighted S&P 500 shows a 1.4% decline versus a 0.6% decline in the Invesco S&P 500 Equal Weight ETF (RSP).

Ongoing volatility in the Treasury market has also kept buying in check in the equity market. The 10-yr yield, which was as low as 4.27% earlier, hit 4.33% in response to this morning's economic data before moving to 4.28%. The 2-yr yield moved from 4.16% to 4.21% in response to the data before declining to 4.16% again. 

The data included initial jobless claims, which were a low 216,000 and the Q3 Employment Cost Index, which was up 0.8%. Also, the fed's preferred gauge on inflation, the core-PCE Price Index, stuck at 2.7% year-over-year for the third straight month. Personal income was up 0.3% month-over-month in September and personal spending increased 0.5%.

Rate cut expectations haven't changed much following the aforementioned reports, which were supportive of a soft landing scenario for the economy. The fed funds futures market sees a 94.6% probability of a 25 basis points rate cut at the November FOMC meeting next week and a 71.9% probability of an additional 25 basis points rate cut at the December 17-18 meeting, according to the CME FedWatch Tool.

Reviewing today's economic data:

• Initial jobless claims for the week ending October 26 decreased by 12,000 to 216,000 (Briefing.com consensus 229,000). On an unadjusted basis, they totaled 200,132, a decrease of 3,349 from the prior week when seasonal factors expected an increase of 7,292. Continuing jobless claims for the week ending October 19 decreased by 26,000 to 1.862 million; however, the four-week moving average of 1,869,250 is the highest since November 27, 2021.
  • The key takeaway from the report is that layoff activity remains fairly subdued, yet it has been more challenging for laid-off workers to find new employment.
• The Q3 Employment Cost Index increased 0.8% (Briefing.com consensus 1.0%), seasonally adjusted, for the 3-month period ending in September 2024. Wages and salaries increased 0.8% and benefit costs increased 0.8% from June 2024.
  • The key takeaway from the report is that compensation costs for civilian, private, and state and local government workers decelerated versus the 12-month period ending in September 2023, reflecting a moderation in wage inflation.
• Personal income increased 0.3% month-over-month in September (Briefing.com consensus 0.4%) following a 0.2% increase in August. Personal spending increased 0.5% (Briefing.com consensus 0.4%) following an upwardly revised 0.4% increase (from 0.3%) in August. The PCE Price Index was up 0.2%, as expected, and up 2.1% year-over-year versus 2.3% in August. The core PCE Price Index, which excludes food and energy, was up 0.3% (Briefing.com consensus 0.2%) and up 2.7% year-over-year for the third straight month.
  • The key takeaway from the report is the stickiness in core PCE inflation, which is running comfortably above the Fed's 2% target. That will wash out any expectation for another aggressive rate cut by the Fed anytime soon and it will keep the debate alive as to whether the Fed should keep cutting rates.
• October Chicago PMI dropped to 41.6 (Briefing.com consensus 47.5) from 46.6
• Weekly EIA Natural Gas Inventories showed a build of 78 bcf after last week's build of 80 bcf