Stock Market Update

[BRIEFING.COM] Today's session was disappointing for stocks. The S&P 500 slid 178 points, the Nasdaq Composite was 3.5% lower, and the Dow Jones Industrial Average closed more than 1,100 points lower, logging its tenth consecutive decline.

The major indices traded slightly higher until selling picked up at 2:00 ET as investors grappled with the likelihood that the Fed will be pausing its rate-cut campaign and that rates are going to remain higher for longer. This understanding followed the FOMC's decision to cut rates 25 basis points to 4.25-4.50%, as expected. It was not a unanimous vote. Cleveland Fed President Hammack dissented in favor of leaving the target range for the fed funds rate unchanged at 4.50-4.75%.

The Summary of Economic Projections showed that the median estimate for PCE inflation and core PCE inflation was increased for 2024 and 2025, but the estimate for unemployment was decreased for 2024 and 2025.

Additionally, the median estimate for the 2025 fed funds rate was bumped up to 3.9% from 3.4%, signaling an outlook for only 50-basis points of easing in 2025 versus 100-basis points when the September projection was released.

The bond market also reacted strongly to the notion that rates may remain elevated if inflation remains sticky above the Fed's 2.0% target while the labor market remains strong. The 10-yr yield, which is most sensitive to changes in inflation, jumped 11 basis points to 4.49%. The 2-yr yield, which is most sensitive to changes in the fed funds rate, surged 11 basis points to 4.35%. 

Just about everything participated in today's retreat. All 11 S&P 500 sectors registered declines ranging from 1.4% (health care) to 4.7% (consumer discretionary). The equal-weighted S&P 500 fell 3.0%.

• Nasdaq Composite: +29.2% YTD
• S&P 500: +23.1% YTD
• S&P Midcap 400: +11.9% YTD
• Russell 2000: +10.1% YTD
• Dow Jones Industrial Average: +12.3% YTD

Reviewing today's economic data:

• Weekly MBA Mortgage Applications Index -0.7%; Prior 5.4%
• November Housing Starts 1.289 mln (Briefing.com consensus 1.347 mln); Prior was revised to 1.312 mln from 1.311 mln, November Building Permits 1.505 mln (Briefing.com consensus 1.430 mln); Prior was revised to 1.419 mln from 1.416 mln
  • The key takeaway from the report is that single-unit starts were up 6.4%, led by a bounce back in the South (+18.3%) following the hurricanes; however, single-unit permits, a leading indicator, were up just 0.1%.
• Q3 Current Account Balance -$310.9 bln (Briefing.com consensus -$283.0 bln); Prior was revised to -$275.0 bln from -$266.8 bln

Thursday's economic data includes:

• 08:30 ET: Weekly Initial Jobless Claims (Briefing.com consensus 237K; prior 242K) and Continuing Jobless Claims (prior 1886K)
• 08:30 ET: Q3 GDP - Third Estimate (Briefing.com consensus 2.8%; prior 2.8%) and GDP Deflator - Third Estimate (Briefing.com consensus 1.9%; prior 1.9%)
• 10:00 ET: November Existing Home Sales (Briefing.com consensus 4.10M; prior 3.96M)
• 10:00 ET: November Leading Indicators (Briefing.com consensus -0.1%; prior -0.4%)
• 10:30 ET: EIA Natural Gas Inventories (prior -190 bcf)
• 16:00 ET: October Net Long-Term TIC Flows (prior $216.B)