Stock Market Update

[BRIEFING.COM] The stock market shows losses across the major indices ranging from 0.7% to 2.2%. The Nasdaq Composite has underperformed its peers, clipped by weakness in its mega cap and semiconductor-related names. 

The PHLX Semiconductor (SOX) trades 3.0% lower with nearly every component showing a loss. This price action follows fiscal Q1 guidance that failed to live up to more bullish expectations from leading chip equipment maker Applied Materials (AMAT 169.63, -16.37, -8.8%).

Many other stocks are participating in downside moves, reflecting broad selling interest related to some interest rate worries and the prospect of the Fed cutting rates less than previously thought. The 10-yr yield jumped to 4.50% earlier in response to a solid Retail Sales report for October that was accompanied by upward revisions to the September numbers, making the October results stronger than they appear since the growth was on top of a higher base.

Also, the NY Fed Empire State Manufacturing survey surged to 31.2 in November, its higher reading in nearly three years. The data corroborated Fed Chair Powell's comments yesterday indicating that the economy isn't sending any signals that the Fed needs to rush to cut rates. 

The fed funds futures market is pricing in a 61.9% probability of a 25-basis points rate cut at the December FOMC meeting versus 72.2% yesterday and 85.5% a month ago, according to the CME FedWatch Tool.

Treasury yields have moved lower following the post-data spike, but that hasn't translated into support for equities. The 10-yr yield is up one basis point from yesterday at 4.43% and the 2-yr yield is unchanged from yesterday at 4.29% after hitting 4.37% earlier. 

Broad selling activity has four S&P 500 sectors down more than 1.5% from yesterday. The information technology sector is the worst performer, down 2.6% due to its chipmaker components. The communication services sector is the next worst performer, down 2.1%, followed by health care (-1.7%).

Reviewing today's economic data:

• The New York Fed Empire State Manufacturing Survey for November checked in at 31.2 (Briefing.com consensus 3.3) following a -11.9 reading for October. A number above 0.0 is indicative of expansion. The New Orders Index surged to 28.0 from -10.2.
  • The key takeaway from the report is that the November reading is the highest reading in nearly three years; moreover, firms remained optimistic that conditions would continue to improve in the months ahead.
• Total retail sales increased 0.4% month-over-month in October (Briefing.com consensus 0.3%) following an upwardly revised 0.8% increase (from 0.4%) in September. Excluding autos, retail sales increased 0.1% month-over-month (Briefing.com consensus 0.2%) following an upwardly revised 1.0% increase (from 0.5%) in September.
  • The key takeaway from the report is that the upward revisions for September make the October results better than they appear since the growth is coming on top of a higher base. With month-over-month increases for nonstore retailers (+0.3%), food services and drinking places (+0.7%), electronics and appliance stores (+2.3%), and building materials and garden equipment and supplies dealers (+0.5%), it is clear that the consumer continues to embrace discretionary spending activity.
• Import prices increased 0.3% month-over-month in October and were up 0.8% year-over-year. Excluding fuel, import prices were up 0.2% month-over-month and up 2.3% year-over-year. Export prices increased 0.8% month-over-month and were down 0.1% year-over-year. Excluding agricultural products, export prices jumped 0.6% month-over-month and were flat year-over-year.
  • The key takeaway from the report is that prices picked up on a monthly basis following declines in August and September.
• Total industrial production decreased 0.3% month-over-month in October (Briefing.com consensus -0.3%) following a downwardly revised 0.5% decline (from -0.3%) in September. The capacity utilization rate fell to 77.1% (Briefing.com consensus 77.3%) from a downwardly revised 77.4% (from 77.5%) in September. Total industrial production declined 0.3% yr/yr while the capacity utilization rate was 2.6 percentage points below its long-run average.
  • The key takeaway from the report is that industrial production in October was pressured by two extraordinary factors, but even excluding those factors, it was still relatively weak in October. The Boeing strike held down total industrial production growth by an estimated 0.2 percentage point in October while Hurricane Milton and the lingering effects of Hurricane Helene reduced industrial production growth by 0.1 percentage point.
• September Business Inventories increased 0.1% month-over-month (Briefing.com consensus 0.2%) following a 0.3% increase in August.