U.S. equities added to yesterday’s rout with another solid decline today, with all sectors posting losses amid the continued uneasiness surrounding the recent surge in global bond yields and increased trade anxiety heading into the unofficial start to Q3 earnings season beginning with key banking sector earnings reports tomorrow. However, Treasury yields did decline, following cooler-than-expected consumer price inflation data, and crude oil prices fell sharply amid a much larger-than-expected rise reported in the government’s oil inventory report. Meanwhile, the U.S. dollar declined and gold rallied.
The Dow Jones Industrial Average (DJIA) plunged 546 points (2.1%) to 25,053, the S&P 500 Index declined 57 points (2.1%) to 2,728, and the NASDAQ Composite fell 93 points (1.3%) to 7,329. In heavy volume, 1.2 billion shares were traded on the NYSE and 3.1 billion shares changed hands on the NASDAQ. WTI crude oil lost $2.20 to $70.97 per barrel and wholesale gasoline fell $0.09 to $1.93 per gallon. Elsewhere, the Bloomberg gold spot price rallied $27.36 to $1,222.15 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.5% lower at 95.06.
The Consumer Price Index (CPI) rose 0.1% month-over-month (m/m) in September, below the Bloomberg estimate calling for a match of August’s unrevised 0.2% increase. The core rate, which strips out food and energy, also ticked 0.1% higher m/m, south of expectations of a 0.2% gain, and matching August’s unadjusted increase. Y/Y, prices were 2.3% higher for the headline rate, below forecasts of a 2.4% rise and August’s unrevised 2.7% increase. The core rate was up 2.2% y/y, south of projections of a 2.3% rise and matching August’s unrevised increase. The subdued inflation report showed a solid rebound in apparel prices was countered by a sharp drop in prices for used cars and trucks.
Weekly initial jobless claims rose by 7,000 to 214,000, versus estimates calling for a match of the prior week’s unrevised 207,000 figure. The four-week moving average increased by 2,500 to 209,500, while continuing claims rose by 4,000 to 1,660,000, in line with estimates.
Treasuries turned higher, as the yield on the 2-year note was unchanged at 2.84%, the yield on the 10-year note lost 2 basis points (bps) to 3.14%, while the 30-year bond rate was down 4 bps at 3.31%.
The global markets remain rattled by the pace of the recent rally in bond yields, led by Treasury rates, which has come as commentary in the past week from Fed Chairman Jerome Powell appeared to strike a more hawkish takeaway. The comments seemed to foster concerns about a monetary policy mistake by continuing to hike rates in the face of signs of decelerating global growth, escalated trade tensions.
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