For the second trading day in a row, market indices slid into the closing bell at or near session lows. It’s been a pretty dreadful day and a half of trading, or thereabouts — tracing back to Fed Chair Jerome Powell’s press conference yesterday where he revealed a new dot-plot for interest rate levels that basically keeps them even through full year 2024. That, plus 10-year bond yields now climbing toward 5% are throwing a wet blanket on equities trading, even as we see a fairly healthy Q3 earnings season on the horizon in a couple weeks.
Markets are now lower across the board month-to-date for the first time since late August, which was a mere blip on the screen. It feels more bearish this time around, with the Dow dropping -370 points, -1.08% on the day; the Nasdaq giving up -245 points, -1.82%, and the S&P 500 off 72 points to -1.64% on the session. Even the small-cap Russell 2000 lost -1.56% for the day. And remember: this was on a good news day for domestic employment and the nation’s current account deficit.
Existing Home Sales numbers for August hit the tape this morning after the opening bell, unexpectedly posting its third straight down month with a total of 4.04 million seasonally adjusted, annualized units. This was below the 4.10 million anticipated and the 4.07 million from the previous month. High mortgage rates and housing prices (with low inventories, -0.9% from July) were to blame, of course. Median pricing for an existing home rose nearly +4% year over year, with a mortgage rate now north of +7%.
Leading Economic Indicators (LEI) in the U.S. for August declined -0.4%, a tad better than expected but lower than the upwardly revised -0.3% in July. For the trailing six months (February-August), LEI is down -3.8%, 10 basis points better than the six months previous to that. Still, that’s now nearly a year and a half straight of falling LEI, which is one metric tracked for signs of a recession. Weaker new orders and tighter credit conditions helped the continued negative impact. That said, expectations are for a mild and brief recession in 2024, if we do have one at all.
For tomorrow, Fed presidents and governors will be out and about discussing publicly their decision to keep interest rates unchanged at this week’s monetary policy meeting, and will likely be prodded about their expectations for future economic growth. Aside from that, we’ll get S&P flash Manufacturing and Services PMI for September out shortly after the opening bell, but otherwise we’ll be a bit sleepy for Friday. Hopefully this will translate to a trading day less severe in its pullback than we’ve seen since yesterday afternoon.
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