We can’t say that rising interest rates got the better of the stock market on Wednesday, but we can say that they got the stock market’s attention.<\/p>\n\n\n\n
On an intraday basis, the yield on the 10-yr note climbed from 4.48% to 4.64%; however, the S&P 500 ended the day basically flat, helped by an afternoon rebound bid that occurred while the 10-yr note yield was rising.<\/p>\n\n\n\n
It was a striking performance by the stock market, which many attributed to the mechanical\/technical functioning of a market that has been seeing a buildup of short interest and is in a short-term oversold condition.<\/p>\n\n\n\n
In other words, the recovery effort wasn’t a fundamentally-driven affair. Be that as it may, it all counts the same no matter how you get there. Granted there wasn’t much to count in terms of gains on Wednesday, but the direction of things in the afternoon was more important than the closing levels.<\/p>\n\n\n\n
Not surprisingly, the equity futures market is showing some reserve this morning. That’s partly because participants are waiting to see how things will unfold today for stocks and what role the Treasury market might play in the unfolding.<\/p>\n\n\n\n
Currently, the S&P 500 futures are down four points and are trading 0.1% below fair value, the Nasdaq 100 futures are down 34 points and are trading 0.2% below fair value, and the Dow Jones Industrial Average futures are down 10 points and are fractionally below fair value.<\/p>\n\n\n\n
Treasury yields have been on a roller-coaster ride. The 10-yr note yield, which settled yesterday at 4.63%, scraped 4.59% in overnight action before drifting back up to 4.65% in front of this morning’s data releases. It dropped to 4.60% in the immediate wake of those releases, shot higher to 4.68%, and is now at 4.64% as we write.<\/p>\n\n\n\n
The releases of note were the weekly initial and continuing jobless claims report and the third estimate for Q2 GDP, which also included benchmark revisions from Q1 2013 to Q1 2023.<\/p>\n\n\n\n
Initial claims for the week ending September 23 increased just 2,000 to 204,000 (Briefing.com consensus 215,000). Continuing jobless claims for the week ending September 16 increased by 12,000 to 1.670 million.<\/p>\n\n\n\n
The key takeaway from the report is that the low level of initial claims — a leading indicator — continues to fit the framework of a tight labor market.<\/p>\n\n\n\n
Separately, the third estimate for Q2 GDP was unchanged from the second estimate at 2.1%, as expected. The GDP Deflator, though, saw a friendly downward revision to 1.7% (Briefing.com consensus 2.0%) from 2.0%. Benchmark revisions showed real GDP increased at an annual rate of 5.6% from the second quarter of 2020 through the first quarter of 2023, 0.2 percentage point lower than previously indicated.<\/p>\n\n\n\n
The key takeaway from the report was the improved deflator reading. The 1.7% increase was the lowest since the second quarter of 2020.<\/p>\n\n\n\n
The Treasury market enjoyed some knee-jerk buying upon seeing the improved deflator reading, but that buying proved to be short-lived. Consequently, the equity futures market was reeled in and now points to a modestly lower open for stocks.<\/p>\n\n\n\n
—<\/p>\n\n\n\n