Investors Take Some Profits After Recent Rally to New Highs…..
U.S. equities finished lower, paring some of the gains of late that has seen the S&P 500 notch eight consecutive days of record highs. The markets still processed the Fed’s recent decision to begin tapering its bond purchases, while sifting through the infrastructure spending bill that has yet to signed by President Biden, which is expected to happen this week. On the economic front, wholesale price inflation came in as expected, but still at an elevated level, while small business optimism surprisingly dipped as business owners cited continued labor and inventory shortages as headwinds. In equity news, PayPal beat earnings estimates but missed on revenue, Palantir Technologies matched earnings forecasts, and General Electric announced plans to split into three separate public companies. Treasuries moved higher, pressuring yields, and the U.S. dollar nudged lower in choppy action, while crude oil prices rose, and gold saw a modest increase. Europe was mixed in some choppy trading as the markets digested the U.S. inflation data, while markets in Asia also diverged in a lackluster trading session.
The Dow Jones Industrial Average fell 112 points (0.3%) to 36,320, the S&P 500 Index declined 16 points (0.4%) to 4,685, and the Nasdaq Composite lost 96 points (0.6%) to 15,887. In moderately-heavy volume, 835 million shares were traded on the NYSE and 5.4 billion shares changed hands on the Nasdaq. WTI crude oil increased $2.22 to $84.15 per barrel. Elsewhere, the gold spot price advanced $5.70 to $1,833.70 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.1% lower at 93.96.
The Producer Price Index (PPI) showed prices at the wholesale level in October rose 0.6% month-over-month (m/m), in line with the Bloomberg consensus estimate, and north of September’s 0.5% increase. The core rate, which excludes food and energy, gained 0.4% m/m, below estimates of a 0.5% rise but above the prior month’s 0.2% gain. Y/Y, the headline rate was 8.6% higher, in line with projections and compared to September’s 8.6% gain. The core PPI increased 6.8% y/y last month, also in line with estimates, and following August’s 6.8% increase.
The National Federation of Independent Business (NFIB) Small Business Optimism Index for October surprisingly dipped to 98.2 from September’s 99.1 level, and compared to the Bloomberg estimate of a rise to 99.5. The report pointed out labor shortages and inventory shortages continue to impact business operations. The NFIB said, “Small business owners are attempting to take advantage of current economic growth but remain pessimistic about business conditions in the near future.”
Treasuries were higher, as the yield on the 2-year note was down 4 basis points (bps) at 0.41%, the yield on the 10-year note fell 5 bps to 1.44%, and the 30-year bond rate was 4 bps lower at 1.83%.
Treasury yields have been volatile in the wake of last week’s Fed monetary policy decision, where it announced that it will begin to taper its monthly asset purchases by $15.0 billion per month, as widely expected.
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