4.10pm: Nasdaq closes at a two year low
US stocks ended down on Monday, but off earlier lows, with weakness in technology and chipmakers as investors assessed US efforts to hobble China's semiconductor industry and the impact of more interest rate hikes.
By the close the Dow Jones Industrial Average was down 94 points, or 0.32%, at 29,203, the S&P 500 fell 27 points, or 0.75%, to 3,612 and the Nasdaq Composite dropped 110 points, or 1.04%, to 10,542 to close at a two year low.
The Philadelphia SE Semiconductor index (.SOX) dropped 3.4% and touched a two-year low, after the Biden administration published a set of export controls on Friday, including a measure to cut China off from certain semiconductor chips made anywhere in the world with US equipment.
Federal Reserve Vice Chair Lael Brainard said tighter US monetary policy has begun to be felt in an economy that may be slowing faster than expected, but the full brunt of Fed interest rate increases still won't be apparent for months.
Despite growing concerns by a number of economists and analysts that the Fed's interest rate hikes could increase unemployment, Chicago Fed President Charles Evans continued to back the central bank's attempt to lower inflation, saying that while it sounds "optimistic" he believed it could do so "while also avoiding recession."
12:11pm: Chipmaker struggles drag indexes
At midday, the Dow was down 52 points, 0.2%, to 29, 245, the Nasdaq Composite had dropped 104 points, 1%, to 10,551 and the S&P 500 was 22 points lower, 0.6%, at 3,618.
The Nasdaq Composite fell to its lowest point to September 2020, due in part to declines in chipmaker stocks including Nvidia Corporation (down more than 3%) and Advanced Micro Devices Inc (down 1.3%).
“The impact of Friday’s payroll report and its implications for Fed policy and the economic outlook continue to loom large over markets," Chris Beauchamp, chief market analyst IG, wrote Monday. "While Friday’s knee-jerk move was perhaps an overreaction in the near-term, the overall outlook remains highly unfavourable to equities. Even the prospect of earnings season provides little comfort, since Q3 numbers are likely to be uninspiring while Q4 guidance will be cautious at best.”
9:35am: US stocks modestly higher
US stocks opened in the green after a week of disastrous losses and while the Federal Reserve's next steps remain key for investors, this week also sees third-quarter earnings season get going.
The S&P 500 climbed 0.3%, while the Dow Jones Industrial Average gained 140 points, or 0.5%. Meanwhile, the technology-heavy Nasdaq Composite inched up 0.1%.
The moves come after a volatile week that began with a small rally and concluded with a bloodbath that wiped out the resulting gains.
6.30am: Data hangover
US stocks are expected to open lower amid concerns that US rate-setters will continue hiking interest rates aggressively, despite the threat to the wider economy, following Friday's strong jobs data.
Futures for the Dow Jones Industrial Average were down 0.1% in pre-market trading, while those for the S&P 500 were 0.2% lower and contracts for the Nasdaq-100 shed 0.3%.
“Friday’s US jobs data wasn’t exactly what investors had wished for. That was the exact opposite of what could’ve been great for the Federal Reserve expectations,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
The jobs data released on Friday showed continued strength in the US labor market with non-farm payrolls increasing by 263,000 in September, falling from 315,000 in the previous month but coming in above the consensus of around 255,000. Wages grew by 0.3% over the month, as expected, but the unemployment rate eased to 3.5%.
“The US unemployment rate printed last Friday was the lowest number since 1969 and came as another proof that whatever the Fed does, the US jobs data remains robust,” noted Ozkardeskaya.
The data will play into the hands of the hawks on the Federal Reserve Open Market Committee (FOMC), which sets interest rates. Activity on Fed funds futures indicates about a 77% chance for a 75-basis point hike when rate-setters meet in November, said Ozkardeskaya.
The Federal Reserve has delivered three 75 basis point interest rate hikes this year and is expected to keep on raising interest rates as it attempts to tackle runaway inflation, but its moves are also expected to dampen growth.
Looking ahead, this week brings more key data on price pressures. Producer price data for September are due on Wednesday and consumer price inflation data, also for September, are due on Thursday.
The focus will also be on quarterly earnings figures from key banks later this week. Blackrock reports on Thursday while JP Morgan Chase and Morgan Stanley (NYSE:MS) report on Friday.
The escalation in Russia’s bombing of Ukraine is also ratcheting up market nervousness. Russia has begun a new wave of bombing, targeting key Ukrainian cities, including the capital, Kyiv, as it blames Ukraine for an attack over the weekend which damaged a bridge linking Russia and occupied Crimea.
Contact the author at jon.hopkins@proactiveinvestors.com