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Stock Market News for Oct 3, 2023

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Wall Street closed mixed on Monday to start off October. Investors remained apprehensive about the eventuality that the Fed would keep the interest rates higher for longer. The yield on the U.S. 10-year treasury note rose even further. One of the three major stock indexes ended in the red, one ended in the green, while one ended flat.

How Did the Benchmarks Perform?

The Dow Jones Industrial Average (DJI) declined 0.2% or 74.15 points to close at 33,433.35. Nineteen components of the 30-stock index ended in negative territory, while 11 ended in positive.

The tech-heavy Nasdaq Composite gained 88.45 points or 0.7% to close at 13,307.77.

The S&P 500 added 0.34 points, remaining virtually flat at 4,288.39. Eight of the broad sectors of the benchmark index closed in the red, while three ended in the green. The Utilities Select Sector SPDR (XLU), the Energy Select Sector SPDR (XLE) and the Real Estate Select Sector SPDR (XLRE) lost 4.7%, 2% and 1.8%, respectively, while the Technology Select Sector SPDR (XLK) added 1.1%.

The fear-gauge CBOE Volatility Index (VIX) increased 0.5% to 17.61. A total of 10.8 billion shares were traded on Monday, higher than the last 20-session average of 10.5 billion. Decliners outnumbered advancers on the NYSE by a 4.61-to-1 ratio. On the Nasdaq, declining issues led advancers by 2.43-to-1.

Fed Governor Bowman Turns Hawkish

After Fed Chair Jerome Powell had mentioned in his post-FOMC meet speech that he expected another rate hike before the year ended, various other Fed officials have resonated that sentiment. Latest in line was Fed Governor Michelle Bowman, who passed her comments in a banking conference on Monday.

"I remain willing to support raising the federal funds rate at a future meeting if the incoming data indicates that progress on inflation has stalled or is too slow to bring inflation to 2% in a timely way," she said, adding, "Inflation continues to be too high, and I expect it will likely be appropriate for the (Fed) to raise rates further and hold them at a restrictive level for some time."

Earlier, at the conclusion of the September meeting, Fed officials had opted to keep the policy rate in its current 5.25-5.50% range. Investors have remained apprehensive that if this restrictive monetary policy is continued, the central bank will not be able to attain a soft landing for the economy. Bowman’s comments add to that sentiment.

10-Year Treasury Yield Continues Climbing Northward

Treasury yields have hit 16-year highs in the past week, fueling fears of an impending economic slowdown. The yield on the 10-year Treasury rose on Monday to 4.67% from 4.58% late Friday. It is currently near its highest level since 2007. High yields push investors from the stock market toward bonds that are paying much more than in the past. The utilities sector was the worst hit on Monday, experiencing its biggest decline since April 2020.

Consequently, shares of NextEra Energy, Inc. (NEE - Free Report) and The AES Corporation (AES - Free Report) shed 9% and 6.8%, respectively. Each carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank stocks here.

Economic Data

The U.S. Census Bureau reported that construction spending for August had increased by 0.5% against a consensus of 0.6% for the period. The July number was revised up to an increase of 0.9% from the previously reported 0.7%.

Per the Institute for Supply Management, the ISM Manufacturing Index for September had come in at a reading of 49, against the consensus of 48.3 for the period. In August, the reported number was 47.6.


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