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US Market Wrap 4 October 2018

Posted by Billy Macris on 04-Oct-2018 10:16:51

Interest rates were in the headlines overnight and on the minds of investors, as US equities rose on Wednesday. All major indexes rose with the Dow notching a two day winning streak up 0.20%, the Nasdaq the better performer rising 0.32% and the S&P 500 finished in the green up 0.07%. Stocks opened higher however gains were capped late in the trading session as market sentiment about rising rates spooked the market.

U.S economic data released lifted treasury yields and financial stocks as private payrolls jumped by 230,000 jobs in September, the largest gain since February. Additionally, ISM Services PMI numbers were released at 61.6 rising against the estimate of 58. The number showed the services sector hit a 21-year high in September. Investors took the news with positivity, expectation of a December rate hike by the Fed rose and as such treasury yields climbed higher. The US-10 Year treasury notes touched its highest level in over seven year at 3.8151% and the US-2 Year treasury notes peaked at 2.8720% its heist in more than a decade. Adding to the positive news, investors also were less on edge as news came out from Italy that the government would cut its budget deficit and lower its debt, news that this earlier this week injected fears into markets .

Rising yields gave financial stocks a much needed boost, as for the past trading sessions they haven’t on investors’ list of stocks to buy. The S&P 500 financial sector which rose 0.82% equally with the Energy sector up 0.82% following another rise in crude oil which rose 1.6%. Stocks like JP Morgan rose 0.94% and Bank of America rose 1.42% to name a few. In the energy space, specifically in the refineries, we saw Phillips 66 shares rise 3.30%, Valero Energy Corp rise 3.87% and Marathon Petroleum 3.73% better off.

Recognizing some of the decliners, Utilities and Real Estate stocks came off second best as the rise in bond yields made shares in higher dividend paying companies less attractive. Notably, General Motors rose 2.1% after Honda Motor said that it would invest $2 billion over 12 years in automated driving. Michael Kors shares rose 3% after receiving a broker upgrade from Citibank as the investment bank cited its recent purchase of Versace would boost performance.

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Chart of the Day: US Generic Govt 10 Year yield (USGG10YR) Daily chart

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Topics: +U.S. Market Wrap