Stock Market News for Oct 20, 2023
U.S. stock markets closed sharply lower following Fed Chairman Jerome Powell’s speech. Yields on U.S. government bonds continue to surge as market participants remained concerned that the Fed will continue to pursue tight monetary control for a long period. All three major stock indexes ended in negative territory.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) fell 0.8% or 250.91 points to close at 33,414.17. Notably, 23 components of the 30-stock index ended in negative territory, while 7 ended in positive territory. The tech-heavy Nasdaq Composite finished at 13,186.18, tumbling 1% or 128.13 points due to weak performance of large-cap technology stocks.
The major loser of the tech-laden index was Tesla Inc. TSLA, shares of which plunged 9.3%. Tesla currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The S&P 500 slid 0.9% to finish at 4,278.00. All 11 broad sectors of the benchmark ended in negative zone. The Consumer Discretionary Select Sector SPDR (XLY), the Financials Select Sector SPDR (XLF), the Real estate Select Sector SPDR (XLRE) and the Materials Select Sector SPDR (XLB) tumbled 2.7%, 1.3%, 2.5% and 1.2%, respectively.
The fear-gauge CBOE Volatility Index (VIX) was up 11.3% to 21.40, marking its highest level since March. A total of 11.82 billion shares were traded on Thursday, higher than the last 20-session average of 10.50 billion. Decliners outnumbered advancers on the NYSE by a 3.96-to-1 ratio. On Nasdaq, a 2.96-to-1 ratio favored declining issues.
Powell Warns of Tight Monetary Control
Fed Chairman Jerome Powell has hinted that the central bank may keep the benchmark interest rate unchanged at the existing level of 5.25-5.5% in November FOMC meeting. However, he warned the inflation rate remained elevated enabling the Fed for more rate hike in future.
In a speech delivered to the Economic Club of New York, Powell said, "Additional evidence of persistently above-trend growth, or that tightness in the labor market is no longer easing, could put further progress on inflation at risk and could warrant further tightening of monetary policy."
He also said, "Doing too little could allow above-target inflation to become entrenched and ultimately require monetary policy to wring more persistent inflation from the economy at a high cost to employment. Doing too much could also do unnecessary harm to the economy."
Surge in Government Bond Yields
On Oct 18, the yield on the benchmark U.S. 10-Year Treasury Note touched 4.997%. This yield hit above 4.9% for the first time since 2007. As a result, the 30-year fixed mortgage rate hit 8%, for the first time since mid-2000. The 10-Year yield is crucial as it reflects investors sentiment on the economy and financial markets.
Economic Data
The Department of Labor reported that weekly jobless claims decreased by 13,000 to 198,000 for the week ended Oct 14, lower-than the consensus estimate of 210,000. Previous week’s data was revised upward to 211,000 from 209,000 reported earlier. Continuing claims — people who already received government unemployment benefit and run a week behind the headline number — came in at 1.734 million for the week ended Oct 7, an increase of 29,000 from the previous week.
The Conference Board reported that U.S. leading Indicator declined 0.7% month-over-month in September to an Index value of 104.6. The consensus estimate was for a decline of 0.4%. In August, the indicator fell 0.5% month-over-month compared with a drop of 0.4% reported earlier.
The Philadelphia Fed manufacturing Index for October came in at -9.0, worse-than the consensus estimates of -6.8. However, the metric for September was -13.5.
The National Association of REALTORS reported that the existing home sales in September came in at 3.96 million units, marginally ahead of the consensus estimate of 3.93 million units. The metric for August was 4.04 million units.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Tesla, Inc. (TSLA) : Free Stock Analysis Report
