Dow, S&P 500 slip from record highs

Spread between S&P 500 earnings yield and 10y Treasury yield is hovering right near zero .. up off recent lows but still low relative to average over past decade pic.twitter.com/oO8XOXNHHo

— Liz Ann Sonders (@LizAnnSonders) October 3, 2024

The stock market rally lost some steam on Wednesday as the S&P 500 and Dow slipped from their record highs. The Dow Jones Industrial Average reversed earlier gains to close down about 0.7%. The S&P 500 also slipped into negative territory, declining around 0.2%. The tech-heavy Nasdaq Composite finished the day just above the flat line.

Since WWII, average volatility for U.S. stocks in October is 34% above average for other 11 months of year per CFRA
⁦@Bloomberg⁩ pic.twitter.com/IbhLZE2RHS

— Liz Ann Sonders (@LizAnnSonders) October 3, 2024

Investors are now debating the health of the US economy and the chances of another jumbo rate cut from the Federal Reserve. The debate centers on whether the Fed lowered rates by a bigger-than-usual 0.5% in response to a sluggish economy and what further malaise means for another hoped-for deep cut.

B of A’s Hartnett, one year ago: (9/29/23)

Central banks “likely ain’t finished breaking stuff. .. stay bearish/defensive & sell the last hike.”

[S&P 500 up 33.1% since.] 🇺🇸 pic.twitter.com/5wIZ6u5wSv

— Carl Quintanilla (@carlquintanilla) October 3, 2024

New home sales followed a sharp increase the month prior as ultra-high mortgage rates and lofty prices kept buyers mostly on the sidelines. Mortgage applications have leveled since 2022, according to MBA data. The growth was driven by homeowners seeking to refinance loans as rates drop. The spotlight is firmly on Thursday’s second quarter GDP print and Friday’s crucial reading on the PCE index, the inflation gauge favored by the Fed. In after-hours trading, Micron stock surged around 10% after the memory chipmaker reported earnings that surprised to the upside. Earnings per share came in $0.06 ahead of estimates at $1.18, while adjusted gross margins also beat estimates at 36.5%.

Stocks retreat amid economic uncertainties

KB Home stock slumped nearly 5% after the homebuilder reported earnings per share and net orders for the third quarter that fell short of analyst expectations. CEO Jeffrey Mezger noted that demand softened in late June through July as interest rates remained elevated and concerns about a slowing economy increased. Flutter stock soared as much as 8% to an all-time high as the company announced a $5 billion share repurchase program and projected strong growth in the US online gambling market. The company, which owns online gaming giant FanDuel, estimates the total addressable market will reach $368 billion by 2030. Disney+ has officially begun its password-sharing crackdown in the US and other regions. The company is offering an “Extra Member” add-on for $6.99 to $9.99 per month for users who share an account with someone outside of their household. Warren Buffett’s Berkshire Hathaway further trimmed its stake in Bank of America by selling 21.6 million shares, making approximately $862.7 million in profits from the sales. Berkshire has sold BofA stock in 10 of the past 11 weeks starting in mid-July. In sector action, Utilities led the way, up about 0.7%, while Energy served as the day’s biggest laggard, down about 1.6%. Crude oil fell more than 2% to trade around $70 a barrel. Nvidia shares are rising after a Mizuho analyst cited a report forecasting significant growth in the market for artificial intelligence hardware and software. The AI darling’s stock is also moving higher on reports that CEO Jensen Huang is heavily involved in the company’s operations.