Tag: NASDAQ Composite Index

Stocks open lower as S&P 500 pulls back from 6-week high; Dow heads for best October ever

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U.S. stocks opened lower on Monday with the S&P 500 pulling back from Friday’s six-week high as investors wait for the Federal Reserve to deliver another jumbo interest-rate hike later this week. The S&P 500
SPX,
-0.75%
fell 25 points, or 0.7%, to 3,875. The Dow Jones Industrial Average
DJIA,
-0.39%
shed 199 points, or 0.6%, to 32,662. The Nasdaq Composite
COMP,
-1.03%
fell 69 points, or 0.6%, to 11,033. All three major indexes have had a stellar October even as the Nasdaq has lagged. The Dow, which finished Friday’s session at its highest closing level in two months, leaving it on track to log its best monthly performance since the 1970s, and its best October gain since its creation.

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October 31, 2022
Why the Dow is having a killer month as it heads for best October ever

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The Dow Jones Industrial Average has been criticized by some market watchers for being a poor barometer of equity-market performance given its relatively small sample size of just 30 stocks.

But this quality, along with the paucity of megacap technology names, has helped shepherd the index toward what’s expected to be its biggest October gain in its 126-year history.

With a month-to-date gain of 14.40% through Friday, the Dow
DJIA,
+2.59%
is on track for its best monthly performance since January 1976, when it rose 14.41%, according to Dow Jones Market Data. To clinch its best October ever, it only needs to hang on to a month-to-date gain of 10.65% by the time the U.S. market closes on Monday.

The Dow is still in a bear market, but is now down less than 10% for the year to date. That compares, however, with year-to-date losses of 18.2% for the S&P 500
SPX,
+2.46%
and 29% for the Nasdaq Composite
COMP,
-8.39%.

Read: What the Dow’s stellar October and Big Tech’s ugly rout say about the stock market right now

What exactly has made the Dow’s October performance so stellar?

The blue-chip gauge is packed with energy and industrials stocks, which have been among the best performing sectors for the stock market since the start of the year, noted Art Hogan, chief market strategist at B. Riley Wealth Management.

These stocks have performed particularly well since the start of the latest quarterly earnings season, while megacap technology names like Meta Platforms Inc.
META,
+1.29%,
Amazon.com Inc.
AMZN,
-6.80%
and Alphabet Inc.
GOOG,
+4.30%
have sputtered after delivering results and guidance that disappointed Wall Street this week.

“It’s very tech-light, and it’s very heavy in energy and industrials, and those have been the winners,” Hogan said. “The Dow just has more of the winners embedded in it and that has been the secret to its success.”

See: Live markets coverage

The Dow is on track to log its highest close in at least two months on Friday as it outperforms both the S&P 500
SPX,
+2.46%
and Nasdaq Composite
COMP,
-8.39%.
Furthermore, it’s on track to climb for a sixth straight session, what would be its longest winning streak since May 27, according to DJMD.

Adding to the list of notable factoids, the average is also on track to log a fourth straight weekly gain, which would cement its longest winning streak since Nov. 5, 2021, when the index rose for five straight weeks.

Caterpillar Inc.
CAT,
+3.39%,
Chevron Corp.
CVX,
+1.17%
And Amgen Inc.
AMGN,
+2.46%
are the top-performing Dow stocks so far this month, having gained 29.3%, 21.2% and 18.3%, respectively, as of Friday.

In recent trade, the blue-chip average was up around 700 points, or 2.2%, on track for its biggest daily point and percentage gain in exactly one week.

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October 30, 2022
The Dow is soaring as Big Tech tumbles: What that says about the Fed, recession fears, and the path ahead for stocks

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The past week offered a tale of two markets, with gains for the Dow Jones Industrial Average putting the blue-chip gauge on track for its best October on record while Big Tech heavyweights suffered a shellacking that had market veterans recalling the dot-com bust in the early 2000s.

“You have a tug of war,” said Dan Suzuki, deputy chief investment officer at Richard Bernstein Advisors LLC (RBA), in a phone interview.

For the technology sector, particularly the megacap names, earnings were a major drag on performance. For everything else, the market was short-term oversold at the same time optimism was building over expectations the Federal Reserve and other major global central banks will be less aggressive in tightening monetary policy in the future, he said.

Read: Market expectations start to shift in direction of slower pace of rate hikes by Fed

What’s telling is that the interest-rate sensitive tech sector would usually be expected to benefit from a moderation of expectations for tighter monetary policy, said Suzuki, who contends that tech stocks are likely in for a long period of underperformance versus their peers after leading the market higher over the last 12 years, a performance capped by soaring gains following the onset of COVID-19 pandemic in 2020.

RBA has been arguing that there was “a major bubble within major portions of the equity market for over a year now,” Suzuki said. “We think this is the process of the bubble deflating and we think there’s probably further to go.”

The Dow
DJIA,
+2.59%
surged nearly 830 points, or 2.6%, on Friday to end at a two-month high and log a weekly gain of more than 5%. The blue-chip gauge’s October gain was 14.4% through Friday, which would mark its strongest monthly gain since January 1976 and its biggest October rise on record if it holds through Monday’s close, according to Dow Jones Market Data.

While it was a tough week for many of Big Tech’s biggest beasts, the tech-heavy Nasdaq Composite
COMP,
-8.39%
and tech-related sectors bounced sharply on Friday. The tech-heavy Nasdaq swung to a weekly gain of more than 2%, while the S&P 500
SPX,
+2.46%
rose nearly 4% for the week.

Big Tech companies lost more than $255 billion in market capitalization in the past week. Apple Inc.
AAPL,
+7.56%
escaped the carnage, rallying Friday as investors appeared okay with a mixed earnings report. A parade of disappointing earnings sank shares of Facebook parent Meta Platforms Inc.
META,
+1.29%,
Google parent Alphabet Inc.
GOOG,
+4.30%

GOOGL,
+4.41%,
Amazon.com Inc.
AMZN,
-6.80%
and Microsoft
MSFT,
+4.02%.

Mark Hulbert: Technology stocks tumble — this is how you will know when to buy them again

Together, the five companies have lost a combined $3 trillion in market capitalization this year, according to Dow Jones Market Data.

Opinion: A $3 trillion loss: Big Tech’s horrible year is getting worse

Aggressive interest rate increases by the Fed and other major central banks have punished tech and other growth stocks the most this year, as their value is based on expectations for earnings and cash flow far into the future. The accompanying rise in yields on Treasurys, which are viewed as risk-free, raises the opportunity cost of holding riskier assets like stocks. And the further out those expected earnings stretch, the bigger the hit.

Excessive liquidity — a key ingredient in any bubble — has also contributed to tech weakness, said RBA’s Suzuki.

And now investors see an emerging risk to Big Tech earnings from an overall slowdown in economic growth, Suzuki said.

“A lot of people have the notion that these are secular growth stocks and therefore immune to the ups and downs of the overall economy — that’s not empirically true at all if you look at the history of profits for these stocks,” he said.

Tech’s outperformance during the COVID-inspired recession may have given investors a false impression, with the sector benefiting from unique circumstances that saw households and businesses become more reliant on technology at a time when incomes were surging due to fiscal stimulus from the government. In a typical slowdown, tech profits tend to be very economically sensitive, he said.

The Fed’s policy meeting will be the main event in the week ahead. While investors and economists overwhelmingly expect policy makers to deliver another supersize 75 basis point, or 0.75 percentage point, rate increase when the two-day gathering ends on Wednesday, expectations are mounting for Chairman Jerome Powell to indicate a smaller December may be on the table.

However, all three major indexes remain in bear markets, so the question for investors is whether the bounce this week will survive if Powell fails to signal a downshift in expectations for rate rises next week.

See: Another Fed jumbo rate hike is expected next week and then life gets difficult for Powell

Those expectations helped power the Dow’s big gains over the past week, alongside solid earnings from a number of components, including global economic bellwether Caterpillar Inc.
CAT,
+3.39%.

Overall, the Dow benefited because it’s “very tech-light, and it’s very heavy in energy and industrials, and those have been the winners,” Art Hogan, chief market strategist at B. Riley Wealth Management told MarketWatch’s Joseph Adinolfi on Friday. “The Dow just has more of the winners embedded in it and that has been the secret to its success.”

Meanwhile, the outperformance of the Invesco S&P 500 Equal Weight ETF
RSP,
+2.08%,
up 5.5% over the week, versus the market-cap-weighted SPDR S&P 500 ETF Trust
SPY,
+2.38%,
underscored that while tech may be vulnerable to more declines, “traditional parts of the economy, including sectors that trade at a lower valuation, are proving resilient since the broad markets bounced nearly two weeks ago,” said Tom Essaye, founder of Sevens Report Research, in a Friday note.

“Stepping back, this market and the economy more broadly are starting to remind me of the 2000-2002 setup, where extreme tech weakness weighed on the major indices, but more traditional parts of the market and the economy performed better,” he wrote.

Suzuki said investors should remember that “bear markets always signal a change of leadership” and that means tech won’t be taking the reins when the next bull market begins.

“You can’t debate that we’ve already got a signal and the signal is telling up that next cycle not going to look anything like the last 12 years,” he said.

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October 29, 2022
Why the Dow is having a killer month as it heads for best October ever

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The Dow Jones Industrial Average has been criticized by some market watchers for being a poor barometer of equity-market performance given its relatively small sample size of just 30 stocks.

But this quality, along with the paucity of megacap technology names, has helped shepherd the index toward what’s expected to be its biggest October gain in its 126-year history.

With a month-to-date gain of 14%, the Dow
DJIA,
+2.57%
is on track for its best monthly performance since January 1976, when it rose 14.4%, according to Dow Jones Market Data. To clinch its best October ever, it only needs to hang on to a month-to-date gain of 10.65% by the time the U.S. market closes on Monday.

The Dow is still in a bear market and remains down more than 10% for the year to date. That compares, however, with year-to-date losses of 18.6% for the S&P 500
SPX,
+2.40%
and 29.6% for the Nasdaq Composite
COMP,
+2.74%.

What exactly has made the Dow’s October performance so stellar?

The blue-chip gauge is packed with energy and industrials stocks, which have been among the best performing sectors for the stock market since the start of the year, noted Art Hogan, chief market strategist at B. Riley Wealth Management.

These stocks have performed particularly well since the start of the latest quarterly earnings season, while megacap technology names like Meta Platforms Inc.
META,
+1.14%,
Amazon.com Inc.
AMZN,
-7.41%
and Alphabet Inc.
GOOG,
+4.28%
have sputtered after delivering results and guidance that disappointed Wall Street this week.

“It’s very tech-light, and it’s very heavy in energy and industrials, and those have been the winners,” Hogan said. “The Dow just has more of the winners embedded in it and that has been the secret to its success.”

See: Live markets coverage

The Dow is on track to log its highest close in at least two months on Friday as it outperforms both the S&P 500
SPX,
+2.40%
and Nasdaq Composite
COMP,
+2.74%.
Furthermore, it’s on track to climb for a sixth straight session, what would be its longest winning streak since May 27, according to DJMD.

Adding to the list of notable factoids, the average is also on track to log a fourth straight weekly gain, which would cement its longest winning streak since Nov. 5, 2021, when the index rose for five straight weeks.

Caterpillar Inc.
CAT,
+3.22%,
Chevron Corp.
CVX,
+0.75%
And Amgen Inc.
AMGN,
+2.21%
are the top-performing Dow stocks so far this month, having gained 29.3%, 21.2% and 18.3%, respectively, as of Friday.

In recent trade, the blue-chip average was up around 700 points, or 2.2%, on track for its biggest daily point and percentage gain in exactly one week.

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October 28, 2022
Dow hits 2-month high as blue-chip gauge heads for longest winning streak since May
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The Dow Jones Industrial Average rose nearly 600 points on Friday to its highest level in two months as the blue-chip gauge remained on track for a sixth straight session in the green in what would be its longest winning streak since May 27, according to Dow Jones Market Data.

All three major indexes were trading higher as expectations that the Federal Reserve will shift toward smaller interest-rate hikes after its November meeting have offset weak earnings this week from some of the market’s biggest megacap technology names.
How are stocks trading?
- The S&P 500
  SPX,
  +1.67%
  gained 59 points, or 1.6%, to 3,866.
- The Dow Jones Industrial Average
  DJIA,
  +1.98%
  rose 589 points, or 1.8%, to 32,623.
- The Nasdaq Composite
  COMP,
  +1.80%
  advanced 181 points, or 1.7%, to 10,974.
Both the S&P 500 and Nasdaq were on track to cement their second weekly gain in a row on Friday, although the tech-heavy Nasdaq has substantially lagged after Thursday’s performance, where it was the only one of the major indexes to finish in the red following abysmal earnings from Meta Platforms Inc.

Barring an intraday turnaround, the Dow is on track to log its fourth straight weekly advance. It remains down just 10.2% so far this year.

The blue-chip gauge has risen 5% so far this week, while the S&P 500 is up 3.1% and the Nasdaq has risen 1.1%.

What’s driving markets?

All eyes were on the Dow Friday as the blue-chip gauge was the only major index to reach new notable highs late this week as its advance during the month of October has somewhat ameliorated its losses for the year so far.

The Dow has risen 13.5% since the start of the month, leaving it on track for its best October performance since it was created in the late 19th century.

Perhaps the biggest reason for the Dow’s rise this month is tied to its composition. The average is generally light on technology stocks, while including more of the energy and industrial stocks that have outperformed this year.

“The Dow just has more of the winners embedded in it and that has been the secret to its success,” said Art Hogan, chief market strategist at B.Reily Wealth.

Despite some volatility in the premarket session, all three major indexes turned higher after the open as investors remained fixated on expectations for the Fed to down shift to smaller interest rate hikes after next week’s policy meeting — an expectation that endured after the latest reports on inflation and wage growth released Friday.

See:Market expectations start to shift in direction of slower pace of rate hikes by Fed

Brad Conger, deputy chief investment officer at Hirtle, Callaghan & Co., said Friday’s data didn’t interfere with mounting expectations that the Fed might soon pause its campaign of aggressive rate hikes.

“Basically, the market is starting to price in a pause, not a pivot, but maybe a pause. The end is in sight,” Conger said.

The September core personal consumption expenditures price index — the Fed’s preferred gauge of inflation pressures — came in roughly in line with economists expectations, while a more modest 1.2% gain in private wages and salaries in the third quarter was interpreted as a sign that wage growth may have finally peaked, according to Andrew Hunter, senior U.S. economist at Capital Economics.

“The Federal Reserve has not yet broken the persistent trend in core inflation and so will likely stay aggressive at next week’s meeting. However, some areas of the economy show significant weakness and could build the case that the Fed downshifts to smaller rate hikes in 2023,” Jeffrey Roach, Chief Economist for LPL Financial in Charlotte, NC, said.

The final reading of the University of Michigan consumer sentiment index for October added 1.3 index points from 58.6 in September, and was up slightly from an initial reading of 59.8 earlier in the month.

See: GDP looked great for the U.S. economy, but it really wasn’t

Since the start of the week, investors have digested a batch of disappointing numbers from some of America’s largest tech companies, which helped to sully the overall quality of S&P 500 earnings this quarter.

On Thursday night, Amazon.com
AMZN,
-9.29%
joined Microsoft Corp.
MSFT,
+2.75%,
Alphabet Inc.
GOOGL,
+2.76%
and Meta
META,
+0.34%
by publishing disappointing earnings for the quarter that ended Sept. 30.

But despite the disappointing results reported this week, in aggregate, S&P 500 firms are beating earnings expectations by 3.8%, according to Refinitiv data. That’s compared to a long-term average of 4.1% since 1994. However, if energy firms are excluded, the picture darkens substantially.

Opinion: The cloud boom has hit its stormiest moment yet, and it is costing investors billions

Shares of Amazon were off 10% after the e-commerce giant, which dominates the consumer-discretionary sector, predicted slower holiday sales and profit while also reporting slower-than-expected growth in its key cloud-computing business.

Peter Garnry, head of equity strategy at Saxo Bank, said investors were unnerved by Amazon’s guidance cut.

“The outlook for Q4 was what terrified investors with the retailer guidance operating income in the range $0-4 billion vs est. $4.7 billion and revenue of $140-148 billion vs est. $155.5 billion,” he said in a note.

One notable exception to the downbeat earnings news this week was Apple Inc.
AAPL,
+7.21%,
which proved a bright spot after the iPhone maker’s revenue and earnings topped forecasts, helped by record back-to-school sales of Macs. Shares were up nearly 0.9% in premarket trading.

Companies in focus
- Oil giants Chevron Corp. CVX and Exxon Mobil Corp. XOM were climbing on Friday after reporting strong results. Chevron is a Dow component.
- Pinterest Inc. PINS also saw strong sales and profit in the third quarter, beating Wall Street expectations. Its shares were up more than 14%.
- Intel Corp. INTC shares advanced more than 8% after reporting an earnings beat. The chip maker said it would cut costs by $3 billion next year, and lay off employees, as it trimmed its outlook again.
See also: Live Markets coverage:
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October 28, 2022
Stocks are having a stellar October. Why the bear-market rally may have more room to run.

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An earlier version of this story misstated the date of the U.S. midterm elections. They will be held Nov. 8, not Nov. 9.

Despite a raft of risky events that investors must face down over the coming weeks, some on Wall Street believe that the latest bear-market rally in stocks has more room to run.

Although the S&P 500
SPX,
+1.50%,
Dow Jones Industrial Average
DJIA,
+0.97%
and Nasdaq Composite
COMP,
+16.23%
remain mired in bear markets, stocks have been bouncing back from the “oversold” levels when the major indexes fell to their lowest levels in two years. Bear markets are known for sharp bounces, such as the rebound that took the S&P 500 up more than 17% from its mid-June low before sliding back down to set a new 2022 low on Oct. 12.

With that said, here are a few things for investors to keep in mind.

There’s plenty of event risk facing markets

On top of a deluge of corporate earnings this week, including some of the biggest megacap tech stocks like Microsoft Corp.
MSFT,
+1.07%
and Amazom.com Inc.
AMZN,
+0.64%,
investors will also receive some key economic data reports over the next couple of weeks — including a reading from the Fed’s preferred inflation gauge on Friday, and the October jobs numbers, set to be released on Nov. 4.

Beyond that, there’s also the Fed’s next policy meeting that concludes on Nov. 2. The Fed is widely expected to hike interest rates by another 75 basis points, the fourth “jumbo” hike this year.

Midterm U.S. elections, which will determine which party controls the House and Senate in the U.S. are slated to take place Nov. 8.

Investors are still trying to parse the Fed’s latest messaging shift

Investors cheered what some market watchers described as a coordinated shift in messaging from the Fed last week, conveyed via an Oct. 21 report from The Wall Street Journal that indicated the size of a December Fed rate increase would be up for debate, along with comments from San Francisco Fed President Mary Daly.

Still, the Fed isn’t expected to materially pivot any time soon.

Because the fact remains: there’s plenty of froth that needs to be squeezed out of markets after nearly two years of extraordinary monetary and fiscal stimulus unleashed in the wake of the COVID-19 pandemic, according to Steve Sosnick, chief strategist at Interactive Brokers.

“It’s easier to inflate a bubble than to pop it, and I’m not using the term ‘bubble’ facetiously,” he said during a phone interview with MarketWatch.

Richard Farr, chief market strategist at Merion Capital Group, played down the impact of the Fed’s latest “coordinated” shift in guidance during an interview with MarketWatch, saying the impact on the terminal fed-funds rate is relatively immaterial.

Fed-funds futures traders anticipate the upper end of the central bank’s key target rate will rise to 5% before the end of the first quarter of next year, and remain there potentially into the fourth quarter, although an earlier cut wouldn’t be a complete surprise, according to the CME’s FedWatch tool.

Market technicians believe stocks might move a little higher

So far, October isn’t shaping up to be anything like September, when stocks fell 9.3% to polish off the worst first nine months of a calendar year in two decades.

Instead, the S&P 500 has already risen more than 5.5% since the start of October despite briefly crashing to its lowest intraday level in more than two years following the release of the September consumer-price index report earlier this month.

Read: ‘Bear killers’ and crashes: What investors need to know about October’s complicated stock-market history

Technical indicators suggest the S&P 500 can continue to build on last week’s gain, said Katie Stockton, a market strategist at Fairlead Strategies, in a note she shared with clients and MarketWatch.

According to her, the next key level to watch out for on the S&P 500 is north of 3,900, more than 100 points above where the index closed on Monday.

“Short-term momentum remains to the upside within the context of the year-to-date downtrend. Support near 3,505 was a natural staging ground for a relief rally, and initial resistance is near 3,914,” she said.

A key bear sees a tradeable opportunity

Mike Wilson, Morgan Stanley’s chief U.S. equity strategist and chief investment officer, has been one of Wall Street’s most outspoken bears for more than a year now.

But in a note to clients early this week, he reiterated that stocks were looking ripe for a bounce.

“Last week’s tactical bullish call was met with doubt from clients, which means there is still upside as we transition from Fire to Ice — falling inflation expectations can lead to lower rates and higher stock prices in the absence of capitulation from companies on 2023 EPS guidance,” Wilson said.

This earnings season is off to an good start

At this point, it’s safe to say that the third-quarter earnings season has vanquished fears that the Fed’s interest-rate hikes and gnawing inflation had already dramatically eroded profit margins, market strategists said.

The quality of earnings reported already has surpassed some of the early “whisper numbers” bandied about by traders and strategists, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.

In aggregate, companies are reporting earnings 5.4% above expectations, according to data from Refinitiv shared with the media on Monday. This compares to a long-term average — since 1994 — of 4.1%.

However, when the energy sector is removed from the equation, expectations seem much more grim. The blended year-to-year earnings estimate for the third quarter is -3.6%, according to the Refinitiv data.

While investors are still waiting on earnings from roughly three-quarters of S&P 500 firms, according to FactSet data, some — like Morgan Stanley’s Wilson — are already looking toward next year as they expect the outlook for profits will darken substantially, possibly leading to an earnings recession — when corporate earnings shrink for two quarters in a row.

The outlook for the global economy remains dim

Speaking of energy, crude oil prices are flashing an ominous warning about expectations for the global economy.

“A lot of the weak oil reflects expectations that the global economy will be in recession and near recession,” said Steve Englander, global head of G-10 currency strategy at Standard Chartered.

West Texas Intermediate crude-oil futures
CLZ22,
+0.48%
settled lower on Monday, as lackluster import data from China and the end of the Communist Party’s leadership conference hinted at softening demand in the world’s second-largest oil consumer. Prices continued to decline early Tuesday.

Be wary of ‘fighting the Fed’

Investors remain worried that “something else might break” in markets, as MarketWatch reported over the weekend.

It’s possible that such fears inspired the Fed’s apparent guidance shift, Sosnick said. But the fact remains: anybody buying stocks while the Fed is aggressively tightening monetary policy should be prepared to tolerate losses, at least in the near term, he said.

“Simplest thing of all is: ‘don’t fight the Fed.’ If you’re trying to buy stocks now, what are you doing? It doesn’t mean you can’t buy stocks overall. But it means you’re fighting an uphill battle,” he said.

The VIX is signaling that investors expect a wild ride

Even as stocks extended their October rebound for another session on Monday, the Cboe Volatility Index
VIX,
-4.49%
remained conspicuously elevated, reflecting the notion that investors don’t anticipate the market’s wild ride will end any time soon.

The Wall Street “fear gauge” finished Monday’s session up 0.5% at 29.85 and it was trading just shy of the 30 level early Tuesday.

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October 25, 2022
Dow rises more than 400 points as stocks extend rally after best week since June

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U.S. stocks advanced on Monday, adding to their gains after the best week for at least two of the three major indexes — the S&P 500 and the Dow — since June. The S&P 500
SPX,
+1.19%
finished 44.59 points, or 1.2%, higher at 3,797.34. The Dow Jones Industrial Average
DJIA,
+0.54%
rose 417.06 points, or 1.3%, to climb to 31,499.62. The Nasdaq Composite
COMP,
+0.86%
advanced 92.90 points, or 0.9%, to close at 10,952.61. The rally comes as investors cling to hopes that the Federal Reserve will slow the pace of its interest rate hikes after November, market strategists said.

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October 24, 2022
S&P 500, Dow open higher, adding to gains after best week since June; Nasdaq declines

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U.S. stocks opened higher on Monday after a volatile night of trading for futures as investors continued to react to shifting expectations about the future pace of Federal Reserve rate hikes. The S&P 500
SPX,
+1.19%
rose 12 points, or 0.3%, to 3,763. The Dow Jones Industrial Average
DJIA,
+1.34%
gained 184 points, or 0.6%, to 31,277. The Nasdaq Composite
COMP,
+0.86%
fell 44 points, or 0.4%, to 10,812.

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October 24, 2022
U.S. stocks finish lower as Treasury yields climb to highest level in more than 14 years.

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U.S. stocks finished lower on Thursday for the second day in a row as yields on the 10-year and 2-year Treasury notes advanced to their highest levels in more than 14 years, causing early earnings-inspired gains in equities to evaporate. The S&P 500
SPX,
-0.80%
finished off 29.38 points, or 0.8%, at 3,665.78. The Dow Jones Industrial Average
DJIA,
-0.30%
dropped 90.22 points, or 0.3%, to close at 30,333.59. The Nasdaq Composite
COMP,
-0.61%
shed 65.66 points, or 0.6%, to close at 10,614.84. The yield on the 2-year Treasury note rose to 4.608%, its highest level since Aug. 8, 2007, based on 3 p.m. figures from Dow Jones Market Data. The yield on the 10-year Treasury advanced 9.8 basis points to 4.225%, the highest since June 17, 2008.

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October 20, 2022
U.S. stocks finish lower for first time in three sessions as dollar, bond yields rise

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U.S. stocks finished lower on Wednesday, with the major indexes logging their first loss in three days, as Treasury yields and the dollar continued to climb, outweighing more strong earnings reports from American firms. The S&P 500
SPX,
-0.67%
finished down 24.82 points, or 0.7%, at 3,695.16. The Dow Jones Industrial Average
DJIA,
-0.33%
closed off 99.99 points, or 0.3%, at 30,423.81. The Nasdaq Composite
COMP,
-0.85%
shed 91.89 points, or 0.9%, at 10,680.51. The ICE U.S. Dollar Index, a gauge of the dollar’s strength against a basket of rivals, was up 0.7% at 112.96. Treasury yields continued to advance past 4% across the curve.

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October 19, 2022
It’s the 35th anniversary of the 1987 stock-market crash: What investors need to know

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Investors suffering motion sickness from the stock market’s wild October swings probably don’t want to hear about it, but Wednesday marks the 35th anniversary of the single ugliest day in stock-market history.

On Oct. 19, 1987, the Dow Jones Industrial Average
DJIA,
+0.01%
plunged 508 points, a decline of almost 23%, in a daylong selling frenzy that ricocheted around the world and tested the limits of the financial system. The S&P 500
SPX,
-0.37%
dropped more than 20%. At current levels, an equivalent percentage drop would translate into a one-day loss of over 7,000 points for the Dow.

Read: Wall Street pros recall ‘sheer panic’ of October 1987 stock-market crash

Could it happen again? There are some important differences between the 1987 and 2022 market environment.

Marketwide circuit breakers put in place following the crash force 15-minute trading halts after declines of 7% and 13% and then close the market for the day after a drop of 20%.

“Is it possible to be down 20% in a day? Sure, but not before we have to check our wits a couple of times first,” Liz Young, head of investment strategy at SoFi, told MarketWatch in a phone interview.

Those circuit breakers were last triggered in March 2020, when stocks plunged sharply at the onset of the COVID-19 pandemic.

See: Here’s one key factor that amplified the 1987 stock-market crash

“The other big difference is that we’ve already gone down 20% this year,” Young said. While there may be more downside, it’s difficult to see what could trigger a comparable one-day downdraft.

Black Monday didn’t come out of the blue. The S&P 500 fell 3% on Oct. 14, 2.3% on Oct. 15, and 5.2% on Oct. 16, the Wednesday-Friday stretch before the fateful day, recalled Nicholas Colas, co-founder of DataTrek Research, in a note earlier this week.

But the S&P 500 had gained 32.9% from January through September 1987, while it’s been downhill for stocks this year since the large-cap benchmark scored a record finish on Jan. 3.

It’s also a reminder that stock-market drops don’t have to happen all at once. 2008 was a “longer slog lower with bouts of deep selling,” noted Ross Mayfield, investment strategy analyst at Baird, in a phone interview.

And while risk versus return dynamics are starting to look more attractive for long-term investors, the market can still go lower from here, he said.

The Dow and S&P 500 ended Friday at their lowest levels since 2020. They’ve bounced back over the first two trading sessions of this week, leaving the S&P 500 down 22% year to date through Tuesday’s close, the Dow down 16% and the tech-heavy Nasdaq Composite
COMP,
-0.60%
off more than 30%. All three major indexes are mired in bear markets.

Stock-index futures pointed to moderate losses for major indexes Wednesday morning.

Aggressive tightening of monetary policy by the Federal Reserve in an effort to rein in persistently hot inflation has sparked a sharp rise in Treasury yields, unsettling stocks as investors fear the effort will push the economy into recession.

Read: Why stock market investors should wait for the 10-year Treasury to ‘blink’

This October, however, has certainly been volatile. The S&P 500 has finished with a gain or loss of more than 1% in 8 of the 12 trading days seen so far this month. The Cboe Volatility Index
VIX,
+3.25%,
an options-based measure of expected volatility over the next 30 days, remains elevated above 30, signaling investors expect choppy trading to continue.

The 1987 crash remains a “relevant case study in extreme volatility,” Colas wrote.

The S&P 500 bounced back the next two days following the Oct. 19 crash by 5.3% and 9.1%, but stumbled 8.3% the following Monday, leaving it essentially unchanged from its Black Monday close to its closing level a week later, he observed. The S&P 500 didn’t bottom until Dec. 4, then went on to rally 10.3% into year-end.

That shows that buying the close of an outsize “dip” may yield good short-term trading returns, but the market might still need to retest the lows before moving sustainably higher, Colas said.

It’s also worth noting that the 1987 crash is often described as the origin of the so-called Fed “put,” he said. That’s the idea that the Fed will respond to plunging asset prices with extraordinary measures.

With inflation soaring, the Fed is widely seen as unable or unwilling to ride to the market’s rescue, with some arguing that the central bank may actually be cheering for market-based pain to tighten financial conditions and help get inflation under control. The analyst noted that year-over-year inflation as measured by the consumer-price index was 4.4% in October 1987, around half its September 2022 level of 8.2%.

“Just to be clear, we don’t think there is a another 1987-style crash in the offing, but the current economic environment certainly leaves the Fed with fewer options and less desire to support equity prices than 35 years ago,” Colas said.

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October 19, 2022
Dow climbs nearly 600 points as stocks open sharply higher after Friday’s punishing selloff

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U.S. stocks opened sharply higher on Monday, with the Dow Jones Industrial Average advancing nearly 600 points, as stocks rebounded following Friday’s punishing selloff. The S&P 500
SPX,
+2.73%
climbed 80 points, or 2.3%, to 3,663. The Dow
DJIA,
+1.93%
gained 568 points, or 1.9%, to 30,203. The Nasdaq Composite
COMP,
+3.27%
advanced 276 points, or 2.7%, to 10,598. Analysts attributed the risk-friendly mood in U.S. markets to the latest news out of the U.K., where the newly installed Chancellor of the Exchequer Jeremy Hunt abandoned the majority of the £45 billion ($50.9 billion) in previously announced unfunded tax cuts, sparking a sharp rally in U.K. government bonds, known as gilts.

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October 17, 2022
U.S. stocks surrender early gains to close lower after Fed minutes hint at more aggressive hikes

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U.S. stocks finished lower on Wednesday after the release of minutes from the Federal Reserve’s September policy meeting, wherein policy makers noted that inflation remained “unacceptably high.” The S&P 500
SPX,
-0.33%
closed 11.81 points, or 0.3%, lower at 3,577.03. The Dow Jones Industrial Average
DJIA,
-0.10%
finished off 28.34 points, or 0.1%, at 29,210.85. The Nasdaq Composite
COMP,
-0.09%
closed 9.09 points, or 0.1%, lower at 10,417.10. All three major indexes finished lower for a sixth straight day.

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October 12, 2022
U.S. stocks edge up despite higher-than-expected inflation data
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U.S. stock indexes edged higher on Wednesday, while hotter-than-expected producer price inflation data deepened concerns that the Federal Reserve may continue its aggressive interest rate hikes.

How are stock-index futures trading
- The Dow Jones Industrial Average
  DJIA,
  +0.50%
  was up 120 points, or 0.4% to around 29,355
- The S&P 500
  SPX,
  +0.35%
  gained 5.3 points, or 0.2% to about 3,594
- The Nasdaq Composite
  COMP,
  -6.31%
  traded 5.1 points, or 0.1% higher to 10,430
On Tuesday, the Dow Jones Industrial Average rose 36 points, or 0.12%, to 29239, the S&P 500 declined 24 points, or 0.65%, to 3589, and the Nasdaq Composite dropped 116 points, or 1.1%, to 10426. The S&P 500 closed down 1,177 points, or 24.7% for the year to date.
What’s driving markets

The 12-month rate of producer price inflation slowed to to 8.5% from 8.7% while the annual core rate, excluding food and energy, was unchanged at 5.6%, but the monthly rate rose 0.4% in September, above forecast, and the monthly core PPI was also up 0.4% in September.

Such data has worsened fears that to curb inflation, the Fed will continue its aggressive rate hikes, which may steer the U.S. economy into a recession.

“We believe the odds of a recession in 2023 are now better than 50%,” Greg Bassuk, chief executive at AXS Investments, wrote in a Wednesday note. “Last week’s market turbulence saw volatility at levels we have not seen since July, and we believe investors should brace for ongoing market volatility and uncertainty throughout Q4, in concert with another likely Fed interest rate hike to the tune of 0.75% in November,” according to Bassuk.

The 10-year Treasury yield BX:TMUBMUSD10Y, which started the year around 1.65% was trading at 3.931% on Wednesday, off 1.3 basis points, after the producer price inflation data.

Traders are also awaiting U.S. September consumer prices data on Thursday due at 8:30 am Eastern Time.

“Inflation has proven to be difficult to forecast and given the negative ‘shock’ from the August CPI, it would be difficult for any investor to have conviction going into this report,” according to Tom Lee, head of research at Fundstrat.

“For us, analyzing the month over month numbers is much more important than looking at the headline,” Zachary Hill, head of portfolio management at Horizon Investments, said in an interview.

“The way we’ve been thinking about it, the last three months annualized [inflation] gives you a kind of a decent idea of where the shorter term trends are around inflation,” Hill said. “We think that’s what the Fed is going to be looking at to see progress towards their 2% goal. And unfortunately, based on various measures, we’re nowhere near that today.”

Adding to the market anxiety, and keeping any Wednesday rally in check, is the continuing volatility in U.K. government bonds after the Bank of England reiterated it would stop supporting the market after Friday.

Investors have become increasingly concerned of late that severe stresses in the financial system may emerge as central banks switch from the era of zero or negative interest rates to sharply higher borrowing costs as they try to tackle inflation at multi-decade highs.

“[G]lobal financial conditions have tightened as central banks continue to raise interest rates. Our latest Global Financial Stability Report shows that financial stability risks have increased since our last report, with the balance of risks tilted to the downside,” said the International Monetary Fund in a report released on Tuesday.

“The mood of global investors was gloomy enough and hardly needed yesterday’s reminder from the IMF that the risks to financial stability have increased,” Ian Williams, strategist at Peel Hunt, noted. “Its report highlighted specifically (if obviously) the threats from persistent inflation, China’s slowdown and the war in Ukraine. The highlighted ‘disorderly repricing of risk’ is arguably already underway.”

The Fed may offer its view on the topic as a number of officials are due to give comments on Wednesday. Minneapolis Fed President Neel Kashkari said the Fed is “dead serious” about getting inflation down. Fed vice chair Michael Barr will speak at 1:45 p.m. The minutes of the Fed’s previous monetary policy setting meeting will be released at 2 p.m. ET and Fed governor Michelle Bowman will deliver comments at 6.30 pm.

Companies in focus

Shares of Philips
PHIA,
-12.27%

PHG,
-11.33%
plunged 12% after the Dutch tech company issued its second profit warning this year, forewarning that supply chain problems will impact sales and third-quarter profits.

Intel Corp.
INTC,
+1.50%
may fire thousands of workers by the end of the month, around the same time the chip manufacturer reports quarterly results amid a tough year for semiconductor makers, Bloomberg reported late Tuesday. The company’s shares rose 1% Wednesday.

Shares of PepsiCo Inc. climbed 4.6% Wednesday, after the beverage and snack giant reported third-quarter profit and revenue that rose above expectations and raised its full-year outlook, as higher prices helped offset some volume weakness.
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October 12, 2022
Wall Street’s ‘fear gauge’ is flashing a warning that stocks could be about to fall off a cliff

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The CBOE Volatility Index has captured the attention of market analysts this year as a key relationship between Wall Street’s “fear gauge” and the S&P 500 index appears to have broken down.

Typically, the VIX
VIX,
-0.27%,
a popular measure of the stock market’s expectation of volatility based on S&P 500 index options, and S&P 500 index itself
SPX,
-0.01%
share an inverse correlation. When the S&P 500 falls to new multiyear lows, like it did early this week, the VIX climbs to new highs. However, this relationship has broken down this year. Most recently, the VIX failed to take out its highs from June as the S&P 500 logged its lowest closing low since September 2020 this week.

A similar pattern emerged as stocks fell to what were then their lowest levels of the year in June.

The dynamic can be seen in a chart produced by Katie Stockton, a market strategist at Fairlead Strategies, which can be found below.

FAIRLEAD STRATEGIES

But this trend of lower highs for the VIX isn’t the only technical indicator that has caught market strategists’ attention.

The VIX is on the cusp of achieving a “golden cross” — a term used by market technicians to denote when the 50-day moving average of a given asset, exchange rate or index climbs above the 200-day moving average.

In the past, these “golden crosses” have preceded sharp downturns in stocks. One occurred in September 2008, just before stock-market volatility exploded in response to Lehman Brothers’ bankruptcy, according to Tyler Richey, co-editor of the Sevens Report and a stock-market strategist who closely follows the Vix.

“Using history as a guide, this is the kind of tipping point where things could get ugly,” Richey said.

The previous VIX “golden cross” occurred nearly one year ago in December 2021. The S&P 500, Dow Jones Industrial Average
DJIA,
+0.19%
and Nasdaq Composite
COMP,
-0.08%
reached their cycle peaks little more than one month later.

As of the close of trading on Tuesday, the 50-day moving average for the VIX stood at 25.76, while the 200-day moving average stood at 25.86.

While they’re not as closely followed as the VIX, the CBOE Nasdaq Volatility Index and the CBOE Dow Jones Industrial Average Volatility Index are also on the cusp of reaching the “golden cross” milestone.

Stockton said investors “shouldn’t find any solace” in the latest technical signals emanating from the VIX. However, she told MarketWatch that she doesn’t typically follow the golden cross indicator since the VIX is an “oscillating” gauge not a “trending” one.

As for what might be driving the pattern of lower highs in the VIX, Richey said it could be a result of “real money” investors like mutual funds and pension funds liquidating their holdings, instead of using options-based hedging strategies to protect their downside risk.

As of Wednesday morning, the Vix and other stock-market volatility gauges were mixed as the S&P 500 and the Dow
DJIA,
+0.19%
shook off early losses, while the Nasdaq
COMP,
-0.08%
remained mired in the red.

Looking ahead, Stockton said she believes 35 is the next key “resistance” level for the VIX, which is just below the index’s highs from June.

Should the volatility gauge surmount that level, Stockton said she wouldn’t expect the selling in stocks to stop until the VIX hits 50.

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October 12, 2022
What stock-market investors will be watching in Thursday’s inflation report

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Hotter-than-expected consumer-price index readings have triggered some of the stock market’s biggest one-day selloffs in 2022, serving to focus investor attention ahead of the latest measure of retail inflation on Thursday.

The September CPI reading from the Bureau of Labor Statistics, which tracks changes in the prices paid by consumers for goods and services, is expected to show an 8.1% rise from a year earlier, slowing from an 8.3% year-over-year rise seen in August, according to a survey of economists by Dow Jones.

The S&P 500
SPX,
+0.23%
is down 24.7% year to date through Tuesday, according to Dow Jones Market Data. Most of the single days that are responsible for the decline occurred on or around CPI reports or Fed-related events, said Nicholas Colas, co-founder of DataTrek Research, in a note on Monday. Two of the S&P 500’s nine largest down days this year have come on days when CPI data was released, he noted.

Without those nine down days, the S&P 500 would have been up 8.6% year-to-date through the end of last week, Colas wrote.

For example, the S&P 500 recorded its biggest daily percentage fall since June 2020 last month on CPI reporting day, when the large-cap index shed 177.7 points, or 4.3%. On June 13, the S&P slid 3.9% and ended in a bear market after the May inflation report came in hotter than expected, with CPI hitting a 40-year high. Three days later, the index dropped 3.3% following what was then the Federal Reserve’s largest rate hike since 1994.

“Every time we see large selloffs it means investor confidence has collided with macro uncertainty,” warned Colas. “History shows that valuations suffer when this happens repeatedly. As we see further equity market volatility, keep your expectations for valuations modest. They will bottom when macro news is greeted with a rally that sticks, not one that fades away a few days later.”

See: It’s time to pivot from the idea of a Federal Reserve rate-hike pivot, Goldman Sachs strategists say

Bloomberg reported that JPMorgan’s analysts led by Andrew Tyler expect the stock market to tumble by 5% on Thursday if the inflation gauge comes in above August’s 8.3%. If the result is in line with the consensus, the S&P 500 would fall about 2%. On the flip side, the team forecast any softening inflation below 7.9% will spark an equity rally where the index may jump at least 2%.

However, Aoifinn Devitt, chief investment officer at Moneta, said the market would take the top-line number and react to it.

“I would expect to see a similar reaction to what we saw from Friday’s jobs report, which was a positive number that translates into a negative stock-market reaction,” Devitt told MarketWatch via phone. “Stock prices have adjusted. Earnings have adjusted, so there’s already been this kind of managing of expectations (which) leads me to take up some of this and try to be on the upside for some of these stocks, just because so much of the bad news is already there.”

See: Stocks could fall ‘another easy 20%’ and next drop will be ‘much more painful than the first’, Jamie Dimon says

The September inflation report is expected to show the headline CPI continued moderating as gasoline and commodity prices fell to the February level. But future expectations may have changed after OPEC+ announced last week its decision to cut production by 2 million barrels a day, which may have “lagging effect (on inflation data)“, according to Devitt.

Meanwhile, shelter costs and medical care services, which have been at the core of inflationary pressures and are sticky, are expected to increase by 0.7% on a monthly basis. The core CPI is expected to be running at a year-over-year pace of 6.5%, up from 6.3% in August.

“The bulls are desperate for signs that inflation is set to roll back to the Fed’s target — they may be mistaken, and while headline inflation is expected to fall thanks to a decline in energy, the Fed’s focus has shifted towards core CPI,” said Chris Weston, head of research of Pepperstone, in a Tuesday note.

“This is why core CPI will unlikely roll over anytime soon and why the Fed has made it clear they will hike further and leave the fed fund rate in restrictive territory for an extended period,” he wrote.

U.S. stocks finished mostly lower on Tuesday with the Nasdaq Composite dropping 1.1%, while the S&P 500 shed 0.6% and the Dow Jones Industrial Average
DJIA,
+0.38%
edged up 0.1%. Stock-index futures pointed to a higher start Wednesday.

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October 12, 2022
S&P 500, Nasdaq log lowest close in more than 2 years as stocks fall for 5th day

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U.S. stocks finished mostly lower on Wednesday with the S&P 500 logging its lowest end-of-date level since September, while the Nasdaq Composite logged its lowest such level since July. Only the Dow Jones Industrial Average managed to evade a loss for the day; the other two indexes recorded their fifth straight session in the red. The S&P 500
SPX,
-0.65%
finished down 23.55 points, or 0.7%, to 3,588.84. The Nasdaq
COMP,
-1.10%
fell 115.91 points, or 1.1%, to close at 10,426.19. The Dow
DJIA,
+0.12%
advanced 36.31 points, or 0.1%, to finish at 29,239.19

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October 11, 2022
Nasdaq logs lowest close in over 2 years as stocks end lower for 4th straight session

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U.S. stocks finished lower on Monday as all three major indexes fell for the fourth straight session and the Nasdaq Composite saw its lowest close in more than two years. The S&P 500
SPX,
-0.75%
closed 27.27 points, or 0.8%, lower at 3,612.39. The Dow Jones Industrial Average
DJIA,
-0.32%
finished 93.91 points, or 0.3%, lower at 29,202.88. The Nasdaq Composite
COMP,
-1.04%
closed 110.30 points, or 1%, lower at 10,542.10, its lowest closing level since July 28, 2020, according to Dow Jones Market Data.

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October 10, 2022
Stocks could fall ‘another easy 20%’ and next drop will be ‘much more painful than the first’, Jamie Dimon says

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JPMorgan Chase & Co.
JPM,
-0.93%
CEO Jamie Dimon warned investors on Monday that he expects markets to remain volatile for the foreseeable future, and that the S&P 500 could easily fall another 20% as the Federal Reserve continues to raise interest rates.

Asked by CNBC about where he expects stocks to bottom, Dimon said he couldn’t say for sure, but that it’s easy to imagine the S&P 500 falling by another 20% as volatile markets become even more “disorderly” as rates continue to climb.

“It may have a ways to go. It really depends on that soft-landing, hard-landing thing and since I don’t know the answer to that it’s hard to answer…it could be another easy 20%,” Dimon said.

“The next 20% could be much more painful than the first. Rates going up another 100 basis points will be a lot more painful than the first 100 because people aren’t used to it, and I think negative rates, when all is said and done, will have been a complete failure.”

Europe is already in a recession, Dimon said, and he expects a recession in the U.S. will arrive within “six to nine months.”

An eventual economic downturn in the U.S. could range from “very mild to quite hard.” Ultimately, it will depend on the outcome of the war in Ukraine, Dimon added.

Since it’s impossible to “guess” exactly how bad things might get for both the economy and markets, investors and companies should “be prepared” for the worst-case scenario, Dimon said.

Companies should start shoring up their balance sheets now, Dimon said, adding that “if you need money, go raise it.”

He also warned that cracks are starting to appear in credit markets, and that a full-blown panic could emerge somewhere in the universe of global debt.

“The likely place you might see more of a crack or a little bit more of a panic is in credit markets. And it might be ETFs, it might be a country, it might be something you don’t suspect. If you make a list of all the credit crises…you cannot predict where they came from, although I think you can predict that this time it will happen,” he said.

After assuring the public that the Fed would do its best to minimize the fallout for the U.S. economy, Federal Reserve Chairman Jerome Powell has recently adjusted his rhetoric to suggest that Americans likely won’t be spared from another recession as the Fed’s hopes for a “soft landing” dim.

In September, the central bank cut its projections for U.S. economic growth to just 0.2% for 2022 and 1.2% in 2023.

JPMorgan is already becoming “very conservative” with its lending standards, Dimon added. The New York-based megabank is expected to report third-quarter earnings on Friday.

Dimon’s comments helped to drive U.S. stocks to their lows of the session on Monday as the main indexes were on track for a fourth day of losses. In recent trade, the S&P 500
SPX,
-0.75%
was down 0.3%, the Dow Jones Industrial Average
DJIA,
-0.32%
flat, and the Nasdaq Composite
COMP,
-1.04%
off 0.5% as major indexes bounced off session lows.

The longtime bank chief warned earlier this year that he saw an “economic hurricane” headed for the U.S. In August, he warned that chances of a “harder recession” were on the rise.

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October 10, 2022
Nasdaq closes at 2-year low after stocks fail to shake off Fed rate-hike gloom
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AP

U.S. stocks finished with losses on Monday, sending the Nasdaq Composite to its lowest close in more than two years, after investors failed to shake off worries about further Federal Reserve rate hikes and JPMorgan Chase & Co.’s Jamie Dimon warned of a potential 20% decline in the S&P 500.
How stocks traded

The Dow
DJIA,
-0.32%
closed down by 93.91 points, or 0.3% at 29,202.88.

The S&P 500
SPX,
-0.75%
finished down by 27.27 points, or 0.8%, at 3,612.39.

The Nasdaq Composite gave up 110.30 points, or 1%, to end at 10,542.10 — the lowest close since July 28, 2020.

Monday’s declines exacerbated losses which occurred at the end of last week. On Friday, the Dow fell 630 points, or 2.1%, the S&P 500 declined 2.8%, and the Nasdaq Composite dropped 3.8%. The Nasdaq Composite was down 31.9% for the year to date through Friday.

What drove markets

Major indexes finished lower for a fourth consecutive session on Monday as concerns about additional rate hikes by the Fed continued to damp sentiment. Dow industrials, the S&P 500 and the Nasdaq all fell to session lows after a CNBC interview with Dimon, chief executive of JPMorgan
JPM,
-0.93%,
who said the S&P 500 could fall by “another easy 20%” from current levels.

Read: Here are the 5 times traders and stock-market investors got fooled by Fed ‘pivot’ hopes in past year

Soft data a week ago had raised hopes that the Fed would soon pause its monetary tightening cycle in its battle to suppress multidecade high inflation, and the market subsequently rebounded off its near two-year lows. But a strong jobs report on Friday crushed that Fed “pivot” narrative and stocks plunged again.

On Monday, the CBOE Vix index
VIX,
+3.48%,
a gauge of expected S&P 500 volatility, sat at 32.15, well above its long-term average of 20.

“The low interest-rate environment forced investors to chase yield and bid up the asset prices too high. Eventually the market is fair and asset values have to achieve some sense of common ground or base level valuation. So it was inevitable that this valuation correction would happen,” said Siddharth Singhai, chief investment officer for New York-based hedge fund IronHold Capital.

“Panic will swing the market towards excessive pessimism and then the valuations will be too cheap. That hasn’t happened yet. Upcoming rate hikes will most likely be a catalyst for panic, however,” he wrote in an email to MarketWatch on Monday.

Coming into Monday’s session, trading had been expected to be somewhat thinned by the Columbus Day and Indigenous People’s Day holiday, which closed the Treasury market.

Now, traders are looking toward more data later in the week for further guidance on Fed thinking and equity valuations. The U.S. producer price numbers will be released on Wednesday and the consumer prices report on Thursday, the last of their kind before the Fed’s policy decision on Nov. 2.

Then on Friday, third-quarter corporate earnings season really kicks into gear when big banks like JPMorgan
JPM,
-0.93%
and Citigroup
C,
-1.40%
present their numbers.

Read: JPMorgan, Citi, Morgan Stanley and Wells Fargo kick off bank earnings season in choppy waters and S&P 500 would be in an ‘earnings recession’ if not for this one booming sector — but that may not last long

Investors were also keeping an eye on the strong U.S. dollar, which is considered a drag on the earnings of U.S. multinationals. The dollar index
DXY,
+0.25%
rose 0.3% to 113.12 as the euro intermittently broke below $0.97 after Russia sent missiles into cities across Ukraine.

See: A rampaging U.S. dollar is wreaking havoc in financial markets. Here’s why it’s so hard to stop it.

“We expect a lot more volatility in markets for the remainder of the year as the inevitability of higher rates sinks in and the economic consequences become more pronounced,” said Arthur Laffer Jr., president of Nashville-based Laffer Tengler Investments. Fed Chairman Jerome Powell “will not be a very popular person but it seems his legacy is focused on fighting any resurgence of 1970s inflation in the U.S. at all costs.”

Companies in focus

Rivian Automotive Inc.
RIVN,
-7.28%
intends to recall about 13,000 vehicles due to a possible safety issue that has so far been found to have affected several units, the company said Friday night. Shares finished down by 7.3%.

Tesla Inc.
TSLA,
-0.05%
reported record monthly sales of China-made electric vehicles in September, as it continues to ramp production in the world’s number-two economy. The electric-vehicle maker delivered 83,135 EVs from its Shanghai plant in September, an 8% rise from August, according to a report by the China Passenger Car Association. Tesla shares nonetheless finished down by less than 0.1%.

–— Jamie Chisholm contributed to this article.
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October 10, 2022