The Market Today
Sen. Manchin Says Economic Package Framework Possible by End of Week
by Craig Dismuke, Dudley Carter
Home Prices, Sales; Consumer Confidence, Richmond Fed Index: Both the S&P CoreLogic and FHFA Home Price indices for August are scheduled for release at 8:00 a.m. CT. Both are expected to show home price gains of 1.5% MoM which would bring the S&P CoreLogic HPI to +20.0% YoY, its highest rate of gain on record. September’s New Home Sales report is expected to show a 2.3% increase in sales at 9:00 a.m. Sales are currently down 25% from their January peak (seasonally adjusted, annualized rates). The Conference Board is scheduled to release its October report on consumer confidence at 9:00 a.m. The data is expected to show further deterioration as inflation fears continue to rise. The Richmond Fed’s October Manufacturing Activity Index (9:00 a.m.) is expected bounce back into positive territory after the September report showed the first negative result since May 2020.
Big Tech Earnings: Today’s corporate earnings calendar is packed, concluding after the market close with Twitter, Alphabet, and Microsoft. Already this morning, 23 companies have reported with 18 beating expectations.
OTHER ECONOMIC NEWS
Strong Demand and Constrained Supply Remain Evident in Dallas Fed’s October Update: The Dallas Fed’s Manufacturing Index recovered more than expected in October on signs solid demand continued to collide with supply disruptions. As supplier delivery times slowed again, production and capacity utilization dropped to their second lowest levels since January even as new orders recovered after two monthly declines. That lifted orders backlogs back up near the top end of an historically elevated range and pushed shipments to the second-weakest since June 2020. Tracking the Fed’s mandate, employment was strong and prices received for finished goods hit a record. Forward-looking indicators reflected a more optimistic outlook for activity, some expected improvement in supply issues, and further tightening of the labor market, with expected wage increases hitting a series high.
Manchin Says Framework for Spending Deal May Be Closer: Bloomberg reported Monday that, “Democrats stepped closer to an agreement on President Joe Biden’s agenda as Senator Joe Manchin, who has been pushing to shrink the size of the package, said a deal on the outlines of the plan is within reach this week.” The report quoted Manchin as saying, “Having it finished with all the ‘t’s’ and ‘i’s’ and everything crossed and dotted will be difficult from the Senate side because we have an awful lot of text to go through. …But as far as conceptually, we should. I think a framework” is possible by the end of the week.
Stocks Hit New Records, Treasury Yields Edged Lower: There were several market themes underlying Monday’s U.S. trading session reflecting a cautious optimism amid persistent headwinds. The Dow inched 0.2% higher and the S&P 500 gained 0.5%, both closing at record highs together for the first time since August 16. Shares of Facebook reversed overnight losses to close 1.3% higher ahead of Monday’s after-market financial results, leading the Nasdaq to a day’s-best 0.9% jump to start an important week for earnings. Consumer discretionary shares were the S&P 500’s top performer, supported by soaring Tesla shares following reports of a major fleet purchase agreement with Hertz. Energy companies were the second strongest sector, buoyed by high oil prices. U.S. WTI climbed to a new seven-year high above $85 per barrel before pulling back to close below $84. Natural gas, a key focus during the global energy crunch, surged nearly 13% to its second highest level since 2014 (third highest since 2008). Rising commodity prices have played a sizeable role in the recent increase in inflation expectations that have boosted Treasury yields to their highest levels in many months. The 2-year yield, however, slipped 1.8 bps to 0.44% while the 10-year yield fell 0.2 bps to 1.63%.
Stocks were tracking to replace yesterday’s record levels as futures strengthened in a relatively calm but upbeat global session. Stocks were generally stronger across both Asia and Europe as investors continued to welcome in corporate earnings that more often than not have topped analysts’ expectations. Shares of Facebook were more than 2% higher after the company’s Monday-afternoon earnings announcement and Nasdaq futures were leading again ahead of more tech releases later this afternoon. At 7:30 a.m. CT, the S&P 500 and Dow were up by 0.4% and 0.3%, respectively, while Nasdaq contracts climbed 0.6%. Oil prices had inched up but remained below multi-year highs reached during Monday’s session and Treasury yields were mixed. Reversing a portion of yesterday’s decline, the 2-year yield added 1.3 bps to 0.45% ahead of today’s $60 billion auction. The 10-year yield was 0.2 bps lower at 1.63%, up from even lower levels overnight.
U.S. Foreign Travelers Guidelines Revised: The White House updated the U.S.’s foreign travelers guidelines yesterday, requiring all visitors to be fully vaccinated and have a recent, negative COVID-19 test. Residents of countries (approximately 50) with low vaccine supplies will be exempt from the vaccination requirement.