Stocks Finished Mixed, Overcoming Initial Weakness…..

U.S. stocks ended the day mostly positive after battling back from some early weakness, as the markets weighed the upbeat early Q3 earnings season with the uncertainty of inflationary pressures, supply chain issues, heightened energy prices, and data suggesting a slowdown in China. In equity news, Zillow Group announced a pause of new home purchases, but Albertsons Companies topped Q3 earnings expectations, lifted its guidance and boosted its quarterly dividend. The economic week kicked off with a disappointing read on industrial production but a surprising improvement in October homebuilder sentiment to a three-month high. Treasuries were mixed and caused some curve flattening with rates rising on the short-to-mid-end of the curve, but declining on the long end, while the U.S. dollar was little changed. Crude oil prices were nearly unchanged following a recent rally and gold ticked lower. Europe was mostly lower and Asia finished mixed after the disappointing Chinese data and some hawkish commentary out of the Bank of England.

The Dow Jones Industrial Average was down 36 points (-0.1%) to 35,259, the S&P 500 Index increased 15 points (0.3%) to 4,486, and the Nasdaq Composite gained 124 points (0.8%) to 15,022. In moderate volume, 779 million shares were traded on the NYSE and 4.1 billion shares changed hands on the Nasdaq. WTI crude oil declined $0.04 to $81.69 per barrel. Elsewhere, the gold spot price dropped $2.80 to $1,765.50 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was flat at 93.96.

The Federal Reserve’s report on industrial production showed a 1.3% month-over-month (m/m) drop in September, versus estimates of a 0.1% increase, and compared to August’s downwardly revised 0.1% decline. Capacity utilization decreased to 75.2%, versus forecasts to rise modestly to 76.4% from the prior month’s upwardly-revised 76.2% rate.

The National Association of Home Builders (NAHB) Housing Market Index showed homebuilder sentiment in October unexpectedly improved to 80 from September’s 76 level, and compared to estimates of a dip to 75. The index hit a three-month high as the NAHB said, “Although demand and home sales remain strong, builders continue to grapple with ongoing supply chain disruptions and labor shortages that are delaying completion times and putting upward pressure on building material and home prices.”

Treasuries were mixed with yields on the short-to-mid-range of the curve moving higher, while rates on the longer end dipped. The markets continue to grapple with expectations that the Fed is set to begin to rein in its extraordinary measures put in place to combat the impact of the pandemic, against the backdrop of persisting inflation pressures and recent upbeat economic and earnings data.

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