Stocks Drop, Failing to Build on Prior Day’s Gains…..

U.S. stocks could not keep yesterday’s positive momentum going and closed the session noticeably lower, with tech and energy absorbing the brunt of the slide. Seemingly unwavering political and COVID-19 uncertainties remained a focus for market participants, and largely overshadowed any positive sentiment felt by upbeat global reports on September manufacturing and services sector activity. The markets again watched as Federal Reserve Chairman Jerome Powell continued his Congressional testimony which remained consistent with the day before as he reiterated the Fed’s commitment to supporting the economy, but noted that additional fiscal support likely will be needed as uncertainty remains. In equity news, Nike’s upbeat earnings results and Johnson & Johnson’s announcement that its experimental single-dose COVID-19 vaccine has entered the final stage of testing provided a few of the bright spots for the day. Treasury yields were mixed and the U.S. dollar gained ground. Crude oil prices were higher and gold saw pressure. Asia finished mixed and Europe closed mostly in the green.

The Dow Jones Industrial Average fell 525 points (1.9%) to 26,763, the S&P 500 Index lost 79 points (2.4%) to 3,237, and the Nasdaq Composite decreased 331 points (3.0%) to 10,633. In heavy volume, 1.0 billion shares were traded on the NYSE and 4.0 billion shares changed hands on the NASDAQ. WTI crude oil added $0.13 to $39.93 per barrel and wholesale gasoline was $0.02 higher at $1.16 per gallon. Elsewhere, the Bloomberg gold spot price dropped $38.25 to $1,861.96 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—moved 0.4% higher at 94.39.

September business activity remained in expansion territory, Powell continued testimony…..

The preliminary Markit U.S. Manufacturing PMI Index for September rose to 53.5 from August’s unrevised 53.1 figure, remaining above the demarcation point between expansion and contraction of 50 and matching of the Bloomberg consensus estimate. The preliminary Markit U.S. Services PMI Index showed output for the key U.S. sector dipped to 54.6 from August’s 55.0 figure, slightly south of forecasts of a decline to 54.7.

Markit said U.S. companies signaled a further solid rise in business activity during September, albeit one that was slightly weaker than seen in August, rounding off a solid third quarter. Manufacturers and service providers alike noted strong expansions in output, with goods producers registering a faster rise in production.

The MBA Mortgage Application Index rose by 6.8% last week, following the prior week’s 2.5% decrease. The increase came as an 8.8% jump in the Refinance Index was accompanied by a 3.4% gain for the Purchase Index. The average 30-year mortgage rate rose 3 basis points (bps) to 3.10%.

Additionally, Federal Reserve Chairman Jerome Powell continued his busy week on Capitol Hill with his appearance in front of the House Select Subcommittee on the coronavirus to discuss the Central Bank’s response. Powell’s comments today were mostly in line with yesterday’s testimony to the House Financial Services Panel where he reiterated the Fed’s commitment to supporting the economy, however noting additional fiscal support likely will be needed as uncertainty remains. Powell will conclude his three days of testimony tomorrow in front of the Senate Banking Committee, along with Treasury Secretary Steven Mnuchin.

Treasuries were mixed, as the yield on the 2-year note ticked 1 bp higher at 0.14%, while the yield on the 10-year note was unchanged at 0.67%, and the yield on the 30-year bond ticked 1 bp lower at 1.42%.

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