Price action in the stock market today is being driven by price action in the Treasury market, again, which is being driven by Fedspeak. It’s been a choppy session for the Treasury market, so it’s been a choppy session for equities, too.
The stock market seemed poised for another sell off ahead of the open as Treasury yields rose and Snap’s (SNAP 7.55, -3.24, -30.1%) comments about a difficult advertising environment stoked general growth concerns. Sentiment shifted in a hurry, though, after The Wall Street Journal published an article by Nick Timiraos at 8:52 a.m. ET.
Mr. Timiraos is thought by some to be the Fed’s preferred source for leaking insight on what they are thinking about monetary policy in order to gauge the market’s reaction to their thinking. He indicated the Fed will raise rates by another 75 basis points at the November meeting, but will then possibly consider a smaller increase at the December meeting.
The 10-yr note yield was at 4.30% when the article was published and dropped to 4.24% after the news broke. The 2-yr note yield, which was at 4.62% when the article was published, fell to 4.54% in the aftermath. Stocks responded favorably to the moves and started the session on an upbeat note. Rates then started to climb again, especially the 10-yr note yield, which reached 4.28% while stocks took a leg lower.
Stocks began to climb again after San Francisco Fed President Daly (not an FOMC voter) said she thinks stepping down on the pace of rate increases will help preserve market structure. Treasury yields again backed off their highs with the 10-yr note yield sitting at 4.23% currently and the 2-yr note yield at 4.52%.
Piling onto Ms. Daly’s comments, Saint Louis Fed President Bullard (FOMC voter) said he hopes to get a deflationary process going in 2023, adding that the job market remains strong, according to Bloomberg.
For the S&P 500 sectors, communication services (-0.3%) is the top laggard as Meta Platforms (META 128.10, -3.42, -2.6%) and Alphabet (GOOG 100.04, -0.51, -0.5%) sell off in sympathy with Snap. Meanwhile, the materials sector (+2.6%) sits atop the leaderboard.
Today’s economic data was limited to the September Treasury Budget, which showed a deficit of $429.7 billion in September versus a $219.6 billion deficit in August.
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