Stocks Sharply Lower as Virus Concerns Take Hold…..

  • U.S. stocks closed sharply lower, amid concerns surrounding the uptick in U.S. and Europe COVID-19 infections and the lack of a new fiscal relief bill in the U.S.
  • Corporate news did not offer optimism, as German software company SAP offered disappointing guidance, while Hasbro fell as investors scrutinized their Q3 earnings results.
  • M&A was in focus, with Dunkin’ Brands announcing that it has held preliminary discussions to be acquired by Inspire Brands.
  • Economic data was mixed, as new home sales unexpectedly declined, and the Dallas Fed Manufacturing Index improved.
  • Treasury yields were down as bond prices rose, while the U.S. dollar stabilized following a recent decline. Gold was modestly higher and crude oil prices saw pressure.
  • International equities were mostly lower, as both Asian and European markets saw losses.

The Dow Jones Industrial Average fell 650 points (2.3%) to 27,685, the S&P 500 Index was down 64 points (1.9%) at 3,401, and the Nasdaq Composite lost 189 points (1.6%) to 11,359. In moderate volume, 827 million shares were traded on the NYSE and 3.1 billion shares changed hands on the Nasdaq. WTI crude oil was $1.29 lower at $38.56 per barrel and wholesale gasoline fell $0.03 to $1.10 per gallon. Elsewhere, the Bloomberg gold spot price rose a modest $0.56 to $1,902.61 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—advanced 0.3% at 93.07.

New home sales unexpectedly decline but regional manufacturing surprisingly accelerates…..

New home sales unexpectedly declined 3.5% month-over-month (m/m) in September to an annual rate of 959,000, below the Bloomberg forecast calling for a rate of 1,025,000 units, and compared to August’s downwardly-revised 994,000 unit level. The median home price was up 3.5% y/y at $326,800. New home inventory rose to a rate of 3.6 months of supply at the current sales pace from 3.4 months in August. Sales in the Northeast fell decisively m/m, and sales in the Midwest and South declined, but sales were higher in the West. Northeast sales were lower y/y and all other regions were up sharply. New home sales are based on contract signings, offering a timelier read on housing activity compared to the larger contributor of existing home sales, which are based on closings.

The October Dallas Fed Manufacturing Index surprisingly moved further into expansion territory (a reading above zero). The index rose to 19.8 from 13.6 in September, and compared to forecasts of a dip to 13.5. The index rose to the highest level since October 2018, as growth in new orders, production and wages increased, though the rate of employment expansion slowed.

Treasuries were higher, as the yield on the 2-year note dipped 1 basis point (bp) to 0.15%, the yield on the 10-year note ticked 4 bps lower to 0.80%, and the 30-year bond decreased 5 bps to 1.59%.

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