Stocks retreated Friday to cap a brutal month as Wall Street digested a fresh read on the Federal Reserve’s preferred inflation gauge that could feed into interest rate expectations.
The S&P 500 (^GSPC) reversed below the flatline Friday afternoon, finishing 0.3% lower. The Dow Jones Industrial Average (^DJI) also lost grip of earlier gains to trade 0.5% lower. The tech-heavy Nasdaq Composite (^IXIC) struggled to hold on to an advance, finishing up just 0.1% for the day.
The moves Friday were part of sharp losses for the month and quarter as a brutal September came to a close. The major indexes saw drops of between 3% and 5% for the month, battered by surging oil prices and fears the Fed’s higher-for-longer rates strategy means another hike this year.
Firmly in focus Friday was the release of the Personal Consumption Expenditures (PCE) index, the Fed’s preferred inflation indicator. The August data showed that “core” PCE — which strips out food and energy — rose 3.9% on the year, the lowest in almost three years and down from 4.2% in July. A cooling might dampen expectations the Fed will hike in November.
Read more: What the Fed rate-hike pause means for bank accounts, CDs, loans, and credit cards
Bonds also saw some relief from those pressures on Friday, after comments from Fed officials helped soothe rate jitters. The yield on 10-year Treasuries (^TNX) fell after hitting levels not seen in over 15 years. But while the 30-year Treasury yield (^TYX) retreated, it’s still on track for its biggest jump since 2009 — stoking anxiety about the impact of the bond rout.
Also still weighing on minds is the looming US government shutdown, with its promise of significant harm to the economy and stock market. It’s looking all but inevitable that lawmakers will miss the midnight Saturday deadline to avert it — especially given the lack of a clear sticking point that’s seen it be called the “Seinfeld” shutdown.
In individual stocks, shares of Nike (NKE) put on over 6% after the retailer reported first quarter profit that topped estimates and stressed its confidence in Chinese demand.
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Stocks close mostly lower to cap a losing September
Wall Street let go of the day’s earlier optimism and mostly retreated into the red as more signs pointed to a government shutdown.
The S&P 500 (^GSPC) lost roughly 0.3%, while the Dow Jones Industrial Average (^DJI) decreased by about 0.5% or 150 points. The tech-heavy Nasdaq Composite (^IXIC) gained 0.1%. All three indexes lost ground for the month of September.
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A look at the week ahead
As September comes to an end, registering a losing month, the first trading sessions of October will arrive next week. Updates on the government shutdown — if it’s not averted by then — the autoworkers strike, and the September jobs report await investors. Yahoo Finance’s Brent Sanchez has a graphical breakdown of what to watch next week.
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September is living up to its reputation
September and Q3 are nearly a wrap. Yesterday, we took a look at what to expect for the rest of the year. But today, Yahoo Finance’s Jared Blikre will recap how the historically worst month of the year fared in 2023 (spoiler alert: September is living up to its reputation).
With three months to go, September is by far the worst month this year in the Nasdaq Composite (^IXIC), Nasdaq 100 (^NDX), S&P 500 (^GSPC) and Russell 2000 (^RUT) indices — all down 5% to 6%. For the Dow Industrials (^DJI), February’s 4.2% loss was worse than the 3.7% decline this month.
For the Dow, Nasdaq Composite, Nasdaq 100 and the S&P 500, it’s the worst quarter in a year, as the third quarter of 2022 was pretty bad in the indices. The Russell 2000 hasn’t had a worse quarter since Q2 of last year.
As far as sectors go, only energy is green in September, up 1.5%. As rates have been screaming higher, the bottom three sectors are not surprisingly the most interest rate sensitive: utilities (down 6.7%), tech (down 6.9%), and real estate (down 8.2%).
While the trends in the major stock indices reversed down this year after peaking in July, a few streaks are still alive on the monthly time frame. Both the 5- and 10-year U.S. Treasury yields (^FVX, ^TNX) have notched five straight months of gains, while both WTI and Brent crude oil (CL=F, BZ=F) are up four months in a row.
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The shutdown ‘about nothing’ is coming at a terrible time for the economy
All the brinkmanship that has led to a likely government shutdown starting this weekend is coming at a precarious time for the US economy and the stock market.
But what makes the threat of the impending shutdown even more painful and unique, writes Yahoo Finance’s Brett LoGiurato, is that there is no clear reason behind the impasse. It’s a shutdown about nothing. Or, as Neil Bradley, the executive vice president of the US Chamber of Commerce, termed it, the “Seinfeld” shutdown.
While prior shutdown fights revolved around “misguided” efforts to defund Obamacare or to secure more funding for Trump’s proposed border wall, this time around there’s no alignment on what congressional Republicans want out of it.
The imminent shutdown’s timing could ve especially damaging. As Gregory Daco, the chief economist at EY, has pointed out, the US economic outlook is facing a quadruple threat for the economy at large — in addition to the shutdown, the United Auto Workers strike, the resumption of student loan payments, and rising oil prices are all looming.
This has come amid other headwinds for the economy, most notably the Fed’s firming positioning that interest rates will need to remain “higher for longer.” A shutdown feels like the most unnecessary risk — every other headwind has an end goal or was largely unavoidable.
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X CEO to meet with bankers who funded Musk’s Twitter acquisition
Following a tense and strange interview at the 2023 Code Conference earlier this week, X CEO Linda Yaccarino is set to deliver a message to a different audience: bankers.
Yaccarino is planning to meet with seven banks who helped fund Elon’s takeover of the social media platform formerly known as Twitter, in an effort to sell her plans on the company’s next chapter, the Financial Times reports. After joining the company in June, Yaccarino, a former NBCUniversal advertising executive, has set out to reclaim advertisers that have fled the platform, and to help build a sustainable business with revenue lines that extend beyond ads.
The banks at next week’s meeting, including Morgan Stanley, Bank of America and Barclays, have been holding onto about $13 billion of debt from the acquisition for almost a year. US revenues for the platform have dropped 60% since going private, Musk said in a post on the platform earlier this month.
To get ride of at least some of the Musk-tied debt from their balance sheets, the banks are hoping to review a plan from Yaccarino that would help them sell it on to other investors, according to the report.
During the Code Conference interview, which has circulated widely online, Yaccarino said the platform has between 200 million and 250 million daily active users. She added, “from an operating cash flow perspective, we’re just about breakeven.” That would be a massive step forward for the company. In July 2022, Twitter clocked an operating loss of $344 million.
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Stocks trending in afternoon trading
Here are some of the stocks leading Yahoo Finance’s trending tickers page during afternoon trading on Friday:
Carnival Corporation (CCL): Shares in Carnival tumbled more than 6% Friday afternoon following stronger-than-expected third quarter earnings and record revenues earlier in the day. But investors couldn’t get past a muted near-term profit outlook.
Duolingo (DUOL): The language learning company continued its climb, rising more than 4% after UBS initiated coverage on the company with a Buy rating and a price target of $195.00. The stock trades around $170. UBS cited the company’s ability to accelerate user engagement through AI.
AMD (AMD): After rising nearly 5% on Thursday, the chipmaker gained another 0.6% during afternoon trading. The rise comes after Microsoft chief technology officer Kevin Scott said AMD’s graphics cards will be increasingly critical to tech businesses. Chipmakers have enjoyed a stellar run so far this year as companies make a run to claim market share in AI, a technology that requires more computing power.
Blue Apron (APRN): The meal-kit maker catapulted higher, more than doubling its value on Friday, after announcing a $103 million sale to the food-delivery startup Wonder. The deal reflects a premium of more than 130% of Thursday’s closing price of $5.49. But for long-time investors, the stock has been an enormous drag.
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Stocks little changed in afternoon trading
After starting the day in positive territory across all three major indexes, investors have wavered, losing ground and sending the Dow into the red.
The S&P 500 (^GSPC) rose by 0.2%, while the Dow Jones Industrial Average (^DJI) decreased by 0.1% or 32 points. The tech-heavy Nasdaq Composite (^IXIC) gained 0.7%
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What rising bond yields mean for investors
This week the yield on 10-year Treasuries hit levels not seen in more than 15 years, climbing above 4.6%.
The yields carry massive importance in the US economy, closely watched as a benchmark for borrowing costs for households and corporations. They also help determine the value of other assets, influencing where investors put their money. Yahoo Finance’s explainer on bond yields can be found here.
As investors decide where to put their money, bonds with higher yields provide an alternative to stocks, especially during times of volatility. The safety and stability of bonds can punish the stock market as investors move their money from stocks into bonds. But for many investors with an appetite for lower risk, the boosted yields can be a boon.
Higher yields and the uncertainties of the stock market also partly reflect different perceptions of the Fed’s tightening campaign and the central bank’s ability to engineer a soft landing. What’s more, outstanding questions remain over whether the COVID era will usher in a period where higher rates are the norm in order to keep inflation and unemployment stable over time.
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Fed’s preferred inflation measure shows cooling
Inflation as measured by the Federal Reserve’s preferred gauge grew at its slowest pace since September 202, new government data for August showed. The cooling has spurred bets that policymakers won’t hike US interest rates again this year.
The Personal Consumption Expenditures (PCE) Index was up 3.5% year-on-year in August, up from 3.4% the month prior and in line with expectations, Yahoo Finance’s Josh Schafer reports. “Core” PCE, which excludes the volatile food and energy categories, grew 3.9%, down from July’s 4.1% reading and in line with what economists surveyed by Bloomberg had expected.
On a monthly basis, core PCE rose 0.1% in August, down from 0.2% in July.
Core PCE is the inflation measurement most often mentioned by Fed Chair Jerome Powell, who noted last Wednesday that inflation remains “well above our longer-run goal of 2%.”
His comments came after the Fed last Wednesday maintained interest rates in a range of 5.25%-5.50%, the highest level since March 2001, while also forecasting holding interest rates higher for longer than anticipated in an effort to tame inflation. The Fed is closely following any economic developments that could stifle inflation’s path downward.
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Stocks trending in morning trading
Here are some of the stocks leading Yahoo Finance’s trending tickers page in morning trading on Friday:
AMD (AMD): After rising nearly 5% on Thursday, the chipmaker gained another 1% during morning trading. The rise comes after Microsoft chief technology officer Kevin Scott said AMD’s graphics cards will be increasingly critical to tech businesses. Chipmakers have enjoyed a stellar run so far this year as companies make a run to claim market share in AI, a technology that requires more computing power.
Blue Apron (APRN): The meal-kit maker catapulted higher, more than doubling its value on Friday, after announcing a $103 million sale to the food-delivery startup Wonder. The deal reflects a premium of more than 130% of Thursday’s closing price of $5.49. But for long-time investors, the stock has been an enormous drag.
Nike (NKE): Nike shares surged 9% after the company reported fiscal first quarter results after the bell on Thursday that topped Wall Street’s estimates.
Tesla (TSLA): The EV maker’s shares were up 1%. Wall Street analysts warned that Tesla may miss estimates for its third quarter deliveries due to factory shutdowns and softer demand.
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