Markets Pullback from Recent Rally…..

U.S. equities finished lower, giving back some of the gains seen over the past few sessions that were sparked by a COVID-19 vaccine breakthrough announcement by Pfizer on Monday. The optimism surrounding the fight against the pandemic appeared to come up against resurfacing concerns toward the continued spike in virus cases. News on the equity front was light, with Southwest Airlines adding to the uneasiness after warning about a deceleration in improving revenue trends, while Vroom’s shares suffered in the wake of some disappointing guidance. In economic news, initial jobless claims continued to moderate and consumer price inflation was cooler than expected, while Fed Chairman Jerome Powell spoke at a European Central Bank forum today, again reiterating the needs for some fiscal support from Congress. Treasury yields were lower as bond prices rose in a return to action following yesterday’s holiday break. Meanwhile, the U.S. dollar dipped, as did crude oil prices, while gold gained ground. Europe finished lower to trim a solid weekly gain, while markets in Asia were mixed.

The Dow Jones Industrial Average fell 317 points (1.1%) to 29,080, the S&P 500 Index was down 36 points (1.0%) at 3,537, and the Nasdaq Composite lost 77 points (0.7%) to 11,710. In heavy volume, 1.0 billion shares were traded on the NYSE and 3.8 billion shares changed hands on the Nasdaq. WTI crude oil was $0.33 lower at $41.12 per barrel and wholesale gasoline lost $0.02 to $1.16 per gallon. Elsewhere, the Bloomberg gold spot price rose $13.21 to $1,864.11 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—ticked 0.1% lower to 93.00.

The stock markets fell as the dust settles from wild swings the past three weeks that saw the equity markets follow up the largest weekly drop since March with the strongest weekly gain since April and then a surge on Monday bolstered by an intense rotation out of the high-flying growth stocks and into cyclically-natured and value issues.

Jobless claims continue to moderate, consumer price inflation subdued…..

Weekly initial jobless claims came in at a level of 709,000 for the week ended November 7th, below the Bloomberg estimate of 731,000, and the prior week’s upwardly-revised 757,000 level. The four-week moving average declined by 33,250 to 755,250, while continuing claims for the week ended October 31st fell by 436,000 to 6,786,000, south of estimates of 6,825,000. The four-week moving average of continuing claims dropped by 653,000 to 7,575,750.

The Consumer Price Index (CPI) came in flat month-over-month (m/m) in October, below estimates of a 0.1% gain, and compared to September’s unrevised 0.2% increase. The core rate, which strips out food and energy, also was little changed m/m, versus expectations calling for it to match September’s unadjusted 0.2% rise. Y/Y, prices were 1.2% higher for the headline rate, south of forecasts projecting a 1.3% increase and compared to September’s unadjusted 1.4% rise. The core rate was up 1.6% y/y, below projections to match September’s unrevised 1.7% gain.

The Bureau of Labor Statistics said food prices nudged higher, led by a gain in food away from home, while energy prices ticked to the upside, with a noticeable increase for electricity. Elsewhere, prices for shelter nudged higher but medical prices declined. Airline fares, recreation, and new vehicles were among other prices that rose, though prices for motor vehicle insurance, apparel, and household furnishings declined.

Treasuries rebounded somewhat from a recent slide and following yesterday’s Veterans’ Day holiday break for the bond markets. Treasury yields have shown some signs of life, amid the backdrop of the presidential election results and a string of positive economic data, while being bolstered by Monday’s breakthrough on the COVID-19 vaccine front. The yield on the 2-year note declined 2 basis points (bps) to 0.16%, while the yields on the 10-year note and the 30-year bond fell 10 bps to 0.88% and 1.64%, respectfully.

Finally, Fed Chairman Jerome Powell spoke at a European Central Bank (ECB) forum today, joining the heads of other key central banks, including the ECB and Bank of England. In his remarks, Powell again warned that the economy will need further support from the central bank even after any coronavirus vaccine becomes available, while again reaffirming the need for fiscal aid from Congress. Powell said, even after a vaccine is available, “there’s going to probably be a substantial group of workers who are going to need support as they find their way in the post-pandemic economy because it’s going to be different in some fundamental ways.”

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