Markets Sell Off…..

The U.S. equity markets saw solid declines amid the continued rise in global bond yields, while trade concerns continue to ratchet higher with worries of how it could affect results and guidance with the unofficial start to Q3 earnings season around the corner. As well, lingering political uncertainties across the pond added another layer to the anxiety. Treasuries were mixed and the U.S. dollar lost some ground, even as wholesale price inflation rebounded, while crude oil prices pared a recent rally that has also contributed to the global uneasiness, and gold was modestly higher.

The Dow Jones Industrial Average (DJIA) tumbled 832 points (3.2%) to 25,599, the S&P 500 Index fell 95 points (3.3%) to 2,786, and the NASDAQ Composite plunged 316 points (4.1%) to 7,422. In heavy volume, 1.1 billion shares were traded on the NYSE and 3.0 billion shares changed hands on the NASDAQ. WTI crude oil lost $1.79 to $73.17 per barrel and wholesale gasoline shed $0.06 to $2.02 per gallon. Elsewhere, the Bloomberg gold spot price rose $3.40 to $1,193.17 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.1% lower at 95.54.

The Producer Price Index (PPI) showed prices at the wholesale level in September rose 0.2% month-over-month (m/m), matching the Bloomberg forecast, and compared to August’s unrevised 0.1% dip. The core rate, which excludes food and energy, was up 0.2% m/m, in line with expectations, and versus August’s unrevised 0.1% decline. Y/Y, the headline rate was 2.6% higher, versus projections of a 2.7% gain and August’s unrevised 2.8% rise. The core PPI rose 2.5% y/y last month, matching estimates, and compared to August’s unrevised 2.3% increase.

The MBA Mortgage Application Index decreased 1.7%, following the prior week’s flat reading. The decline came as a 2.6% drop in the Refinance Index was met with a 1.1% fall in the Purchase Index. The average 30-year mortgage rate jumped 9 basis points (bps) to 5.05%.

Wholesale inventories were revised higher to a 1.0% m/m rise for August from the preliminary estimate of a 0.8% gain, where it was expected to remain. July’s figure was unrevised at a 0.6% increase. Sales were up 0.8% m/m, compared to July’s upwardly-revised 0.2% gain, and versus estimates of a 0.5% rise. The inventory-to-sales ratio—the amount of time it would take to deplete inventories at the current sales pace—remained at July’s 1.26 months rate.

Treasuries finished mixed, as the yield on the 2-year note was 2 bps lower at 2.87%, while the yield on the 10-year note rose 1 bp to 3.21% and the 30-year bond rate gained 2 bps to 3.39%. The global markets have been unnerved by the recent rise in bond yields, led by a rally in Treasury rates to multi-year highs and some momentum gained for the U.S. dollar. The moves have come amid expectations that the Fed will continue to tighten monetary policy, lingering trade uncertainty, higher oil prices, festering political uneasiness in Europe, and the ongoing skittishness toward emerging markets.

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