S&P 500 (SPY) Report – 10/10/23

Good morning traders!

The S&P 500 ($SPY) is trading near yesterday’s close. Let’s get into it… 

Stock futures have been trending upwards, mirroring the global markets, due to some optimistic news regarding interest rates ahead of Tuesday’s opening bell. This optimism is a welcome change as concerns over interest rates have been pulling the markets down since the summer. The shift happened on Monday when two Federal Reserve officials hinted that interest rates might remain unchanged in the upcoming policy meeting. This speculation came after noticing that a rise in long-term bond yields could potentially ease inflation without requiring additional hikes by the Fed, which could otherwise stir the market negatively.

Simultaneously, the International Monetary Fund (IMF) has voiced concerns over the slowing pace of the global economy due to the hike in interest rates, the ongoing war in Ukraine, and escalating geopolitical tensions. They projected the global economic growth to decelerate to 2.9% in 2024 from the expected 3% in the current year. This revised forecast is a slight dip from the 3% predicted earlier in July. Meanwhile, corporate America also showed some movements. For instance, PepsiCo’s stock rose by 1.1% in premarket trading following their profit forecasts beating Wall Street’s expectations, thanks to their pricing strategy over the past quarters.

In other corporate reactions, defense contractors saw a modest rise in their shares on Tuesday following significant gains the previous day. This rise is speculated to be due to the anticipation of a prolonged military conflict in the Middle East, especially after Israel’s declaration of war against Hamas over the weekend. The shares of companies like Northrop Grumman, General Dynamics, and Lockheed Martin rose between 8% to 12%. On the international front, major stock indices in Europe and Asia also experienced a surge, with Germany’s DAX, Britain’s FTSE 100, and Tokyo’s Nikkei 225 all closing higher on Tuesday.

Amidst this, the oil market experienced some fluctuations due to the military conflict in the Middle East. Although the area is not a significant oil producer, fears of the conflict impacting the crude market sent U.S. oil prices up on Monday. However, it saw a slight dip early Tuesday. The volatility in oil prices, alongside interest rate concerns, has been significantly impacting market trends and investor behavior. The current week is crucial as it will not only mark the unofficial start to the earnings reporting season for the S&P 500 but also bring forth important data on inflation at consumer and wholesale levels, before the Federal Reserve’s next announcement on interest rates on Nov. 1.

Tuesday Economic Events:
NFIB Small Business Index 6:00am ET
Redbook Sales 8:55am ET
Wholesale Trade 10:00am ET

Fed Speaker Scheduled:
Raphael Bostic 9:30am ET
Christopher Waller 1:30pm ET
Neel Kashkari 3:00pm ET
Mary Daly 6:00pm ET

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