By Vivien Lou Chen and Mark DeCambre
All three major U.S. stock indexes finished lower Monday, posting their largest one-day point drops in a week, as investors remained focused on the release of fresh inflation data and third-quarter earnings this week.
The Treasury market was closed in observance of the Columbus Day holiday, but other markets remained open as usual. Wednesday’s U.S. consumer-price report for September is the next major data release in the week ahead.
How did major indexes perform?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +1.40% fell 250.19 points, or 0.7%, to end at 34,496.06
The S&P 500 /zigman2/quotes/210599714/realtime SPX +2.07% dropped 30.15 points, or 0.7%, to close at 4,361.19.
The Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +3.03% shed 93.34 points, or 0.6%, finishing at 14,486.20.
Stocks wobbled on Friday, but logged weekly gains. The Dow advanced 1.2% last week, while the S&P 500 rose 0.8% and the Nasdaq Composite eked out a 0.1% rise.
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What drove the market?
The path of least resistance was initially higher to start the week of trading, but all three major indexes turned lower on the day after the early rally faded on lingering negative sentiment among investors.
“What you saw at the open was really a head fake because futures were negative all morning,” said Matthew Tuttle, chief executive and chief investment officer of Tuttle Capital Management in Greenwich, Connecticut. “Buyers came in and tried to rally the market and that failed miserably.”“Sentiment is fairly negative,” he said by phone. In addition to the prospect of the Fed tapering bond purchases and then raising rates down the road, “there are a whole bunch of inflation numbers this week and people aren’t expecting that to be good news in any way, shape or form.” Moreover, the S&P 500 is below its 50-day moving average and “if you’re trying to sit out there and be a buyer, there’s not a whole lot to grab onto.”
Analysts have expressed concern that supply-chain issues that have spread throughout the global economy will compress profit margins, and that inflation will limit consumer demand. Investors are awaiting Wednesday’s consumer-price index report for September — which could reflect record gas prices, higher shipping rates, and supply constraints —to determine how much longer price pressures might persist.
The yield on the benchmark 10-year Treasury /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y -1.10% rose 14 basis points last week to 1.60%, the biggest weekly gain since Feb. 19. The rise in yields for bonds suggest that, at least, fixed-income investors are anticipating that the Fed will reduce its monthly purchases of $120 billion in Treasurys and mortgage-backed securities.
“Friday’s U.S. employment report was sufficiently mixed to revive the debate over whether the Fed will really go ahead with the planned tapering next month. Despite the headline miss, the underlying numbers should just about meet Chair [Jerome] Powell’s requirement of ‘decent’ and ensure that the existing schedule remains intact,” said Ian Williams, strategist at U.K. broker Peel Hunt.