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Stock Market News for Oct 2, 2023

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Wall Street ended a mixed Friday to close out a losing September. Investors pondered on how to interpret the Fed’s favorite inflation metric, the PCE index, while remaining generally on a sell-off mode. The anticipated government shutdown also weighed down on the market. Two of the three major stock indexes ended in the red, while one ended flat.

How Did the Benchmarks Perform?

The Dow Jones Industrial Average (DJI) declined 0.5% or 158.84 points to close at 33,507.5. Twenty components of the 30-stock index ended in negative territory, while 10 ended in positive.

The tech-heavy Nasdaq Composite gained 18.05 points or 0.1% to 13,219.32.

The S&P 500 fell 0.3%, or 11.65 points, to end at 4,288.05. Seven broad sectors of the benchmark index closed in the red, while four ended in the green. The Energy Select Sector SPDR (XLE), the Financials Select Sector SPDR (XLF) and the Health Care Select Sector SPDR (XLV) lost 2%, 0.9% and 0.8%, respectively, while the Consumer Discretionary Select Sector SPDR (XLY) added 0.5%.

The fear-gauge CBOE Volatility Index (VIX) increased 1% to 17.52. A total of 11.3 billion shares were traded on Friday, higher than the last 20-session average of 10.4 billion. Advancers outnumbered decliners on the Nasdaq by a 1.1-to-1 ratio. On the NYSE, declining issues led advancers by 1.2-to-1.

PCE Inflation Helps in Containing Session’s Losses

Throughout September, the market has been reeling under the apprehension that due to the Fed’s hawkish outlook for 2024, which expects a maximum of two rate cuts and not one before September 2024, the economy might land in a soup. The central bank also expects at least another rate hike in 2023.

Treasury yields have hit 16-year highs in the past week, fueling fears of an impending economic slowdown. The dollar value has soared, making investors worried about the competitiveness of U.S. exports. Also not helping were sectoral economic numbers and consumer-side inflation, which came in high for August.

However, the PCE inflation index, the Fed’s favorite inflation measurement tool, brought in some relief last Friday. It showed that underlying inflation had moderated in August, with the annual rise in prices, excluding food and energy, coming in at 3.9%. The number has fallen below 4% for the first time in more than two years. Even as it stayed way above the Fed’s target rate of 2%, investors look at this as a signal for the Fed to interpret that its policy tightening is producing results.

However, the inflation only helped contain the day’s losses and the sell-off continued to round up the dreaded month of September. Consequently, shares of Norwegian Cruise Line Holdings Ltd. (NCLH - Free Report) and Walmart Inc. (WMT - Free Report) shed 2.7% and 1.6%, respectively. Walmart carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Anticipated Government Shutdown Weighs Down

On Friday, House Republicans rejected a bill proposed by Speaker Kevin McCarthy proposing to temporarily fund the government by a 232-198 vote. This now makes it almost certain that various federal agencies will partially shut down starting Sunday. This has also kept investors extremely nervous as it would have a negative impact on the credit-worthiness of the government, and the news weighed down on the market.

Weekly Roundup

Two of the three widely followed indexes closed a losing week last Friday, while one closed flat. The Dow Jones Industrial Average and the S&P 500 declined 1.3% and 0.7%, respectively. Meanwhile, the Nasdaq Composite gained less than 0.1%.

Monthly Roundup

For September, the S&P 500, the Dow and the Nasdaq declined 4.9%, 3.5%, and 5.8%, respectively. For the S&P and the Nasdaq, this was their biggest monthly percentage drop in 2023.

Quarterly Roundup

For the third quarter, the S&P 500 dropped 3.6%, the Dow lost 2.6% and the Nasdaq fell 4.1%. For all three indexes, this was their first quarterly decline of the year.

Economic Data

The University of Michigan reported that consumer sentiment for September had come in at 68.1, higher than the 67.7 it had registered in August.

Per the Bureau of Economic Analysis, Personal income increased 0.4% in August. Disposable personal income increased 0.2%. Personal savings were $794.1 billion and the personal saving rate was 3.9% in August.

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