Weekly Wrap

The stock market faced some selling pressure after six straight weeks of gains for the S&P 500. Last Friday's close had the S&P 500 and Dow Jones Industrial Average at record highs, so normal consolidation was part of the story this week. 

The S&P 500 closed 1.0% lower this week and the Dow Jones Industrial Average sank 2.7%. The profit-taking activity was fueled by rising market rates. The 10-yr yield settled 16 basis points higher this week at 4.23% and the 2-yr yield settled 15 basis points higher this week at 4.10%. This week's selling in the Treasury market expanded the 2s10s spread by a basis points to 13 bps.

The Nasdaq Composite managed to settle 0.2% higher for the week, benefitting from buying activity in mega caps and semiconductor shares. The Vanguard Mega Cap Growth ETF (MGK) rose 0.3% and the PHLX Semiconductor Index (SOX) eked out a 0.1% gain.

Some of the buying in mega cap shares was related to the huge jump in Tesla (TSLA) following impressive Q3 earnings and 2025 vehicle growth forecast.

Other names that reported earnings included blue chip companies like Verizon (VZ), 3M (MMM), GE Aerospace (GE), Lockheed Martin (LMT), General Motors (GM), IBM (IBM), and Honeywell (HON).

Monday:

The stock market faced some selling pressure after six straight weeks of gains for the S&P 500 (-0.2%). The index closed at a record high on Friday, along with the Dow Jones Industrial Average (-0.8%), so Monday's downside bias was related in part to normal consolidation activity.

Selling in the stock market was also a function of rising market rates. 

The Nasdaq Composite outperformed other major indices, climbing 0.3% compared to Friday's close thanks to gains in some mega cap names. Many other stocks participated in Monday's retreat. 

The negative action in equities also reflected a wait-and-see mentality in front of a busy week of earnings.

Reviewing Monday's economic data:

• September Leading Indicators -0.5% (Briefing.com consensus -0.3%); Prior was revised to -0.3% from -0.2%

Tuesday:

The stock market held up okay at the index level. Mega caps provided integral support for index performance. Many stocks declined, however, in a continuation of the consolidation trade that began yesterday.

Rising market rates contributed to the downside bias in equities.

Earnings news since yesterday's close garnered mostly negative responses despite some better-than-expected results from blue chip names. Dow components Verizon (VZ) and 3M (MMM) were standouts in that respect, along with GE Aerospace (GE) and Lockheed Martin (LMT). General Motors (GM) went against the grain, closing sharply higher after above-consensus earnings and guidance.

There was no US economic data of note on Tuesday. 

Wednesday:

The stock market labored under the weight of losses in its biggest stocks and ongoing angst about rising Treasury yields. Stocks managed to close off their worst levels of the day, which had the Dow Jones Industrial Average down more than 500 points, yet they suffered from a lack of influential leadership and a general lack of interest from buyers that also permeated the commodities market, particularly oil and precious metals.

The weakest links were the consumer discretionary (-1.8%), information technology (-1.7%), and communication services (-1.4%) sectors, all of which house mega-cap components. The Vanguard Mega-Cap Growth ETF (MGK) was down 1.6%.

Tesla (TSLA), which reports after the close, joined with Amazon.com (AMZN) to keep the consumer discretionary sector under wraps. McDonald's (MCD), which was dealing with reports of an E. coli outbreak, added to the sector's struggles.

Reviewing Wednesday's economic data:

• Existing home sales decreased 1.0% month-over-month in September to a seasonally adjusted annual rate of 3.84 million (Briefing.com consensus 3.90 million) from an upwardly revised 3.88 million (from 3.86 million) in August. Sales were down 3.5% from the same period a year ago.
  • The key takeaway from the report is that more inventory is becoming available, yet it is still a tight market, evidenced by the ongoing increase in the median home price and a very low mortgage delinquency rate.
• MBA Mortgage Applications Index -6.7% wk/wk with refinance applications -8% and purchase applications -5%

Thursday:

The stock market closed mostly higher after a soft start to the week. Some buy-the-dip action contributed to the positive bias, which was boosted by surging shares of Tesla (TSLA) after impressive Q3 earnings and a 2025 vehicle growth estimate.

The upside bias was also related to a drop in market rates. 

The Dow Jones Industrial Average (-0.3%) underperformed major indices due to losses in IBM (IBM), Honeywell (HON), and Boeing (BA). IBM and Honeywell reported earnings results and Boeing trades down on news that workers voted 64% against accepting the latest contract proposal put forth by their employer.

Reviewing Thursday's economic data:

• Weekly Initial Claims 227K (Briefing.com consensus 246K); Prior was revised to 242K from 241K, Weekly Continuing Claims 1.897 mln; Prior was revised to 1.869 mln from 1.867 mln
  • The key takeaway from the report is that, while it might still contain some noise from the effects of the hurricanes, the initial claims data from both a seasonally adjusted and unadjusted basis connote a labor market that is still operating on solid ground that is a long way from recession-like territory.
• October S&P Global US Manufacturing PMI - Prelim 47.8; Prior 47.3
• October S&P Global US Services PMI - Prelim 55.3; Prior 55.2
• September New Home Sales 738K (Briefing.com consensus 713K); Prior was revised to 709K from 716K
  • The key takeaway from the report is that new home sales, which are tabulated when contracts are signed, likely enjoyed a tailwind from the drop in mortgage rates seen in September ahead of the FOMC decision, but with rates higher now than they were before the September 18 rate cut, it is reasonable to think October new home sales won't look as good.

Friday:

Stocks started the final session of the week on solid footing. A drop in market rates fueled broad buying interest, supported by buy-the-dip trading after this week's losses. Initial moves had the major indices trading up and market breadth favoring advancers.

The vibe in the market shifted when Treasury yields moved higher, which has been a limiting factor for equities through the week.

The market-cap weighted S&P 500 closed little changed from yesterday and the Nasdaq Composite settled 0.6% higher, boosted by strength in mega caps and semiconductor shares. The Vanguard Mega Cap Growth ETF (MGK) closed 0.5% higher and the PHLX Semiconductor Index (SOX) jumped 1.1%.

Reviewing Friday's economic data:

• September Durable Orders -0.8% (Briefing.com consensus -0.9%); Prior was revised to -0.8% from 0.0%, September Durable Goods - ex transportation 0.4% (Briefing.com consensus -0.1%); Prior was revised to 0.6% from 0.5%
  • The key takeaway from the report is that it had a split growth personality. A 0.5% increase in nondefense capital goods orders excluding aircraft conveyed a pickup in business spending, yet the 0.3% decline in shipments of nondefense capital goods orders excluding aircraft, which factors into GDP computations, declined 0.3% on the heels of a 0.1% decline in August and a 0.4% decline in July.
• October Univ. of Michigan Consumer Sentiment - Final 70.5 (Briefing.com consensus 68.9); Prior 68.9
  • The key takeaway from the report is that consumer sentiment increased for the third consecutive month in spite of the election uncertainty.