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Stock Market Up As Treasury Yields Ease; Inflation Report Next

by Stella Morgan

The stock market indexes showed strength on Thursday afternoon as the benchmark Treasury yield reversed lower. Investors are bracing themselves for an upcoming inflation report on Friday and the possibility of a government shutdown over the weekend.

The Nasdaq composite was up 1% at 1:20 p.m. ET, holding steady above the 13,000 level. This is seen as a positive sign for the overall stock market, although the indexes still remain in correction territory. However, it seems that the indexes are bouncing off oversold levels, which could indicate a potential market rebound.

Two days ago, the Cboe Market Volatility index rose more than 20% above its 10-day moving average. This signal has historically marked market lows, suggesting that the recent market downturn may be coming to an end.

The S&P 500 rose 0.7% on Thursday, while the Dow Jones Industrial Average rose 0.3%. Both indexes are still trading below their 200-day moving averages, indicating some lingering weakness. Meanwhile, the Russell 2000 climbed 1%.

Volume on the Nasdaq and the NYSE increased compared to the same time on Wednesday. Advancers outnumbered decliners by nearly 2-to-1 on the Nasdaq and by 12-to-5 on the NYSE. These figures suggest a positive sentiment among investors.

The Innovator IBD 50 ETF (FFTY) outperformed on Thursday with a 1.2% increase in the afternoon. Fabrinet (FN) led the IBD 50 with a 5% gain, clearing a short consolidation.

Despite the positive performance of the stock market, Thursday’s economic data had little impact. Jobless claims increased slightly to 204,000 last week, still below economists’ expectations. Pending home sales fell 7.1% in August, well below the previous month’s increase. The final second-quarter GDP estimate remained unchanged at 2.1% growth.

Jeffrey Roach, chief economist for LPL Financial, noted that the GDP report’s consumer spending was revised down to a 0.8% annualized growth rate. This is the slowest pace since the peak of the pandemic, indicating that consumers are beginning to taper off their spending.

The yield on the 10-year Treasury note initially rose to 4.65% but reversed lower to 4.60%. It is still near its highest level since 2007. Investors will closely watch the U.S. personal income and spending report for August, as it will include the personal consumption expenditures index, which is considered a crucial inflation gauge by the Federal Reserve.

In terms of potential government shutdown, House Speaker Kevin McCarthy has said that funding for border security is being discussed as a way to break the budget impasse. McCarthy expressed confidence that a deal will be reached on time, preventing a shutdown. Past shutdowns have not had a significant impact on the stock market.

Among major stocks, Alphabet (GOOGL) and Meta Platforms (META) are rising back above their 50-day moving averages, indicating positive momentum.

In terms of stock earnings, Workday (WDAY) saw a sharp decline of 9% but bounced off its 200-day moving average. The company cut its outlook for subscription revenue growth, causing its worst day since November 2020. Accenture (ACN) also tumbled 4.5% in heavy volume due to weak bookings.

On the other hand, Jabil (JBL) rose 17% and gapped above its 50-day moving average to a new high. The company posted mixed results for the August quarter, with better-than-expected earnings but lagging sales and revenue guidance.

In the retail sector, CarMax (KMX) saw a nearly 10% decline in earnings for the August quarter amid a sluggish used-car market. GameStop (GME) named its Chairman Ryan Cohen as the new CEO, causing shares to reverse lower.

Costco (COST) continued to rise following its earnings report and is attempting to surpass the 571.16 buy point of a flat base. Micron Technology (MU) trimmed losses but remained down nearly 3%. The company beat profit and revenue expectations but had a mixed outlook.

Peloton Interactive (PTON) experienced a 6% jump after announcing a partnership with Lululemon Athletica (LULU) to develop digital fitness content. Lululemon remained nearly flat.

In summary, the stock market showed resilience on Thursday with the benchmark Treasury yield reversing lower. Investors are eagerly awaiting the upcoming inflation report and monitoring the possibility of a government shutdown. The market remains in correction territory, but there are signs of potential market lows and opportunities for a rebound.

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