generic Stock Market News for Oct 7, 2022
Wall Street closed lower on Thursday for a second straight session. Market participants are apprehensive that the Fed would stay on course with its aggressive rate hikes, thereby slowing down the economy to the brink of a recession. Hawkish comments from yet another Fed official projected a grim outlook for 2023. All three major stock indexes ended in the red.
How Did the Benchmarks Perform?
The Dow Jones Industrial Average (DJI) fell 1.2% or 346.93 points to close at 29,926.94. Notably, 25 components of the 30-stock index ended in the red, while four ended in the green and one remained unchanged.
The tech-heavy Nasdaq Composite finished at 11,073.31, declining 0.7% or 75.33 points.
The S&P 500 lost 1%, or 38.76 points to end at 3,744.52. Ten of the 11 broad sectors of the benchmark index closed in the red. The Utilities Select Sector SPDR (XLU), the Real Estate Select Sector SPDR (XLRE) and the Consumer Staples Select Sector SPDR (XLP) fell 3.3%, 3.3% and 1.5%, respectively, while the Energy Select Sector SPDR (XLE) advanced 1.8%.
The fear-gauge CBOE Volatility Index (VIX) was up 6.9% to 30.52. A total of 10.6 billion shares were traded on Thursday, lower than the last 20-session average of 11.7 billion. Decliners outnumbered advancers on the NYSE by a 2.32-to-1 ratio. On Nasdaq, a 1.42-to-1 ratio favored declining issues.
Fed Officials Continue to Signal Further Policy Tightening
Comments from Fed officials continue to project further stringent policy tightening moving into 2023. On Thursday, Chicago Fed President Charles Evans said that it would be safe to assume the Fed's policy rate going up to 4.5%-4.75% by the spring of 2023 as it bores down on purchasing power to bring down inflation. "We have further to go", Evans said at a meeting in Illinois. "Inflation is high right now and we need a more restrictive setting of monetary policy."
Having started late, the Fed has aggressively hiked interest rates to 3%-3.25% in a seven-month period. And yet, the current level is at more than triple its target of 2%. Evans, however, believes that these rate hikes will be slowing down the still strong labor market and push up the unemployment numbers.
On the question of whether the Fed will deliver a fourth consecutive 75 bps rate hike next month, Evans said policymakers will have a discussion on it. However, according to him, policymakers expect to raise the rate another 1.25 percentage points over the next two meetings, based on the median of projections published last month, as the inflation readings have been disappointing.
With jobless claims coming in unexpectedly high, the market had expected a bit more relief from the Fed in terms of direction. But dovish indications are simply not coming in, and any chance of going slow on policy tightening looks unlikely in the near term. Investors, thus, remain apprehensive about the Fed’s claim of a planned soft landing of the economy, and the sessions continue to be choppy. Utilities and real estate declined even further than the last session, as energy remained strong as oil prices rose on the OPEC reducing production.
Consequently, shares of American Tower Corporation AMT and DTE Energy Company DTE declined 5.2% and 4.7%, respectively, and that of APA Corporation APA advanced 4.2%. All three carry a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Economic Data
The Labor Department said on Thursday that initial jobless claims rose to 219,000, increasing 29,000 for the week ending Oct 1. The previous week's level was revised down by 3,000 from 193,000 to 190,000. The four-week moving average increased to 206,500, a rise of 250 from the previous week’s revised average of 206,250.
Continuing claims came in at 1,361,000 for the week ending Sep 24, increasing 15,000 from the previous week’s revised level. The previous week's numbers were revised down by 1,000 from 1,347,000 to 1,346,000. The 4-week moving average came in at 1,370,750, a decrease of 10,250 from the previous week's revised average. The previous week's average was revised down by 250 from 1,381,250 to 1,381,000.
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