U.S. stocks fell on Monday as surging oil prices and rising Treasury yields weighed on market sentiment. The Dow Jones Industrial Average dropped 398.51 points, or 0.94%, to close at 41,954.24. The S&P 500 slid 0.96% to 5,695.94, and the Nasdaq Composite lost 1.18%, ending at 17,923.90.
October UMich Consumer Sentiment Index down to 68.9 vs. 71 est. & 70.1 prior; current conditions down to 62.7 vs. 63.3 prior; expectations down to 72.9 vs. 74.4 prior pic.twitter.com/fy43beuQCB
— Liz Ann Sonders (@LizAnnSonders) October 11, 2024
Rule of 20, which says market is fairly valued when S&P 500's P/E and CPI y/y add to 20, continues to suggest stocks look expensive pic.twitter.com/C4H6AYTILq
— Liz Ann Sonders (@LizAnnSonders) October 11, 2024
The benchmark 10-year Treasury yield rose more than 4 basis points to 4.02%, marking its first time topping 4% since August. Oil prices saw a significant increase as tensions in the Middle East remain high, with U.S. crude climbing more than 3% per barrel. Art Hogan, chief market strategist at B.
Riley Wealth, said, “You’re coming off a week that was saved by the jobs report on Friday.
Morning Report: S&P 500, Dow Jones hit records, boosted by bank earnings surprisehttps://t.co/Ok9W9jFbh3
— CommSec (@CommSec) October 13, 2024
The two things that investors are watching with the most caution are the yields of Treasurys inching back up and energy prices creeping higher.”
Energy stocks, up about 0.4%, were the only sector in the S&P 500 to close in positive territory. The utilities and consumer discretionary sectors were among the benchmark’s laggards, both down around 2%.
dow dips on oil price surge
Key releases this week include the Federal Reserve meeting minutes on Wednesday and the consumer price index report on Thursday. The earnings season also begins to heat up, with several key companies set to release results on Thursday and Friday.
JPMorgan has noted that U.S. equities currently look stretched after a strong recent rally, which could contribute to higher concentration risk and potential for momentum reversal. The bank wrote, “If markets weaken, the U.S. typically held up better than other regions during risk-off periods, but the concern is that the U.S. is trading at relative P/E and EPS highs, and that could constrain its absolute performance from here.”
The yield spread between the 2-year and 10-year Treasury notes is nearing danger territory once more. A negative value between the two yields, with the 2-year going above the 10-year, has been a nearly fail-safe indicator of recessions going back to at least the mid-1970s.
Shares of Super Micro jumped around 15% during Monday’s session after the computer server company announced shipments with its liquid cooling solution for “some of the largest AI factories ever built” and other cloud service providers. Despite a strong September jobs report, Nomura has suggested that U.S. equities could struggle to rise further. The bank wrote, “We think U.S. equities may struggle to make significant gains as long as macro hedge funds continue downsizing their aggregate net long position in U.S. equities.”
Three new exchange-traded products launched Monday could change how investors gain exposure to international stocks.
Precidian Investments debuted securities that include the American depositary receipt for foreign stocks, along with a currency hedge. Sam Stovall, chief investment strategist at CFRA Research, pointed to a pullback in third-quarter earnings expectations as a source of market weakness to start the week.
