Stocks fluctuated on Wall Street on October 27, 2023, as the market prepared for its first weekly loss in four weeks. The S&P 500 remained mostly unchanged in late afternoon trading after dipping as much as 1.3% earlier in the day. The Dow Jones Industrial Average managed to gain 31 points, or 0.1%, recovering from earlier losses. In contrast, the Nasdaq Composite fell 0.4% as of 15:04 Eastern Time, primarily driven down by declines in major technology stocks.
While there were more gainers than losers within the S&P 500, the index was adversely impacted by a 1% drop for Apple and a 2.8% decline for Broadcom. These large-cap companies hold significant sway over market movements due to their substantial valuations. Investors remained focused on the latest quarterly earnings reports and forecasts from U.S. companies, which have become crucial in assessing the market’s high valuations.
Earnings Reports Highlight Mixed Results
Payments company Block, which operates well-known services like Square and Cash App, saw its stock plummet by 6.8% after reporting results that did not meet analysts’ expectations. Conversely, Peloton experienced a surge of 11.8% following a favorable earnings report that exceeded estimates. Expedia Group also saw a significant increase, with its stock soaring by 19.8% after outperforming analysts’ forecasts.
More than 90% of companies in the S&P 500 have released their earnings for the latest quarter, with most reporting growth that surpassed Wall Street expectations. Notably, the technology sector has demonstrated the strongest growth, according to data from FactSet.
The ongoing scrutiny of corporate profits and forecasts is intensified by the current U.S. government shutdown, now the longest on record. This situation has resulted in the absence of critical economic reports, including the monthly employment data for October, which typically provides insights into job market trends.
Consumer Sentiment Declines Amid Economic Concerns
The lack of employment data is particularly concerning given the existing signs of a weakening job market. On October 27, the University of Michigan released its monthly consumer sentiment report, revealing a significant drop in sentiment, which hit a three-year low. Economists had anticipated a slight improvement. Eugenio Aleman, chief economist for Raymond James, noted in a report, “Consumers are starting to get concerned about the potential effects of the government’s shutdown on economic activity.”
The survey also indicated a slight increase in inflation expectations. The absence of government data on consumer prices and other inflation measures poses challenges for Wall Street, especially as inflation has remained persistently high. This situation is compounded by a volatile U.S.-China trade relationship, which adds further pressure on inflation rates.
The Federal Reserve is in a delicate position as it navigates these economic challenges. Although it has cut interest rates twice this year to stimulate economic growth, ongoing inflation concerns complicate the decision-making process. Investors are currently pricing in a 66% chance of another rate cut at the Fed’s meeting in December, according to CME FedWatch.
In the bond market, Treasury yields remained stable, with the yield on the 10-year Treasury holding at 4.09%. The yield on the two-year Treasury slightly decreased to 3.55% from 3.56% at the close of the previous day.
Globally, markets in Europe and Asia closed lower, reflecting broader economic worries. In China, export data revealed a contraction of 1.1% in October, with shipments to the United States dropping by 25% compared to the previous year. Despite this, economists remain optimistic that Chinese exports may rebound following recent diplomatic discussions between U.S. President Joe Biden and Chinese leader Xi Jinping, aimed at reducing trade tensions between the two largest economies.
