Stimulus Stalemate Stymies Stocks…..

U.S. equities were lower to add to yesterday’s decline, as the continued saga over an ever-elusive stimulus package remained at the forefront of investors’ minds. However, stocks were able to finish off the lows of the day, as Treasury Secretary Mnuchin indicated that he may cede some ground in the negotiations and President Trump said he would raise his offer. Adding to the mix, fresh restrictions in Europe due to rising virus infections upped the caution as the markets weighed the potential ramifications to the global economic recovery. Earnings results continued to roll in, but were mixed, as Morgan Stanley surpassed estimates and Walgreens Boots Alliance offered an upbeat outlook, however Alcoa warned of a decline in Q4 and United Airlines suffered a large loss amid the coronavirus lockdowns. On the economic front, September’s inflation picture rounded out with an inline Import Price Index and initial jobless claims rose, while regional manufacturing activity in the New York region ticked lower, but surged in Philadelphia. Treasury yields were nearly unchanged and the U.S. dollar gained ground, while crude oil prices declined slightly and gold was modestly higher. Stocks in Europe were sharply lower amid the expanded restrictions in the region, while markets in Asia finished lower.

The Dow Jones Industrial Average fell 20 points (0.1%) to 28,494, the S&P 500 Index decreased 5 points (027%) to 3,483, and the Nasdaq Composite lost 55 points (0.5%) to 11,714. In moderate volume, 758 million shares were traded on the NYSE and 3.3 billion shares changed hands on the Nasdaq. WTI crude oil was $0.08 lower at $40.96 per barrel and wholesale gasoline shed $0.02 to $1.18 per gallon. Elsewhere, the Bloomberg gold spot price increased $5.14 to $1,906.66 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was up 0.5% at 93.82.

Regional manufacturing activity mixed, claims rise again, inflation picture rounds out…..

The Import Price Index rose 0.3% month-over-month (m/m) for September, matching expectations, and versus August’s unadjusted 0.9% gain. Compared to last year, prices were down 1.1%, versus forecasts of a 1.2% decrease and a slight recovery from August’s unrevised 1.4% fall.

Weekly initial jobless claims came in at a level of 898,000 for the week ended October 10th, above the Bloomberg estimate of 825,000 and higher than the prior week’s upwardly-revised 845,000 level. The four-week moving average rose by 53,000 to 866,250, while continuing claims for the week ended October 3rd dropped by 1,165,000 to 10,018,000, south of estimates of 10,550,000. The four-week moving average of continuing claims fell by 682,250 to 11,481,750.

The Empire Manufacturing Index, a measure of activity in the New York region, fell more than expected to 10.5 in October from 17.0 in September, compared to the Bloomberg forecast of a decline to 14.0, with a reading above zero denoting expansion. The report marks the fourth-straight month of expansion, as new orders and shipments remained strong.

Meanwhile, the Philly Fed Manufacturing Index further entrenched itself into expansion territory (a reading above zero) in October, soaring to a reading of 32.3 versus the Bloomberg estimate of a slight decline to 14.8 from September’s 15.0 level. All components of the index improved during the month, with noticeable increases in new orders, shipments and delivery times.

Treasuries were mostly higher, as the yields on the 2-year and 10-year notes were little changed at 0.13% and 0.72%, respectively, while the yield on the 30-year bond rate inched 1 basis point higher to 1.51%.

©2020 Charles Schwab & Co., Inc. All rights reserved. Member SIPC.

Schwab Center for Financial Research (“SCFR”) is a division of Charles Schwab & Co., Inc. The information contained herein is obtained from third-party sources and believed to be reliable, but its accuracy or completeness is not guaranteed. This report is for informational purposes only and is not a solicitation, or a recommendation that any particular investor should purchase or sell any particular security. The investment information mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. All expressions of opinions are subject to change without notice in reaction to shifting market conditions.