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Wall Street Extends Wednesday's Drop
11-Oct-18 16:30 ET
Dow -545.91 at 25052.83, Nasdaq -92.99 at 7329.25, S&P -57.31 at 2728.21

https://www.briefing.com/investor/markets/stock-market-update/2018/10/11/wall-street-extends-wednesdays-drop.htm

[BRIEFING.COM] Wall Street extended Wednesday's tumble on Thursday in a volatile day of trading. The major averages settled notably lower, with the S&P 500 losing 2.1%, the Dow Jones Industrial Average falling 2.1%, and the Nasdaq Composite shedding 1.3%. With Thursday marking its sixth straight decline, the S&P 500 is now down 5.5% for the week and is 6.9% below its September 20 record close.

At session lows, the S&P 500 was down 2.7%. Stocks were able to reclaim some losses in the final hour of trading following a Washington Post report that President Trump and Chinese leader Xi Jinping have agreed to meet at next month's G-20 summit in Argentina with hopes of resolving their trade conflict. That knee-jerk move higher was largely undone by the closing bell though.

A drop in bond yields did provide some relief for stock traders, who have been cautious since yields shot to multi-year highs last week. Yields on longer-dated issues fell quite a bit more than yields on shorter-dated issues, leading to a flattening of the yield curve; the yield on the 2-yr Treasury note slipped one basis point to 2.85%, while the benchmark 10-yr yield fell nine basis points to 3.13%.

That yield curve flattening weighed on lenders, which depend on the interest-rate differential between what they pay for deposits and what they make on loans. The S&P 500's financial sector lost 2.9%. The oil-sensitive energy sector was another notable underperformer, losing 3.1%, as crude prices fell to a three-week low, further retreating from multi-year highs. WTI crude fell 3.0% to $70.98/bbl.

All 11 S&P 500 sectors declined on Thursday. However, the communication services and information technology sectors, which contain many of the high-growth and widely-held names that have consistently led the market higher for some time, tried to stage a rebound after dropping sharply on Wednesday. The groups were up modestly intraday, but eventually finished lower by 0.8% and 1.3%, respectively; still, that's notably better than the broader market.

President Trump blamed the recent selling on the Federal Reserve, which he says has "gone crazy" with its rate hikes. When asked if he is considering firing Fed Chairman Jerome Powell, who he appointed, the president said he wouldn't, adding that he's "just disappointed."

From a technical standpoint, the S&P 500 got into trouble once again on Thursday, closing below its 200-day moving average (2766) for the first time since March, after breaching its 50-day moving average the day before. The Dow Jones Industrial Average also fell below its 200-day moving average (25140) and the Nasdaq Composite and Russell 2000 stayed below theirs.

In earnings news, shares of Dow component Walgreens Boots Alliance (WBA 70.90, -1.41) fell 2.0% after the company reported better-than-expected earnings for its fiscal fourth quarter, but missed on the top line. Meanwhile, shares of Delta Air Lines (DAL 51.48, +1.77) rallied 3.6% after the company reported above-consensus earnings and upbeat revenue guidance.

Financial giants JPMorgan Chase (JPM 108.13, -3.34), Citigroup (C 68.38, -1.57), and Wells Fargo (WFC 51.44, -0.99) will unoffically kick off the third quarter earnings season on Friday morning.

Also of note, the CBOE Volatility Index (VIX) spiked once again on Thursday, jumping 11.8% to 25.57, marking its highest level since February.

Reviewing Thursday's economic data, which included the Consumer Price Index for September and the weekly Initial Claims report:

Total CPI and core CPI, which excludes food and energy, increased 0.1%. Both were expected to increase 0.2%, according to the Briefing.com consensus estimate.
The key takeaway from the report is that it helped temper concerns about rising inflation for the time being, yet with total CPI and core CPI running above the Fed's longer-run inflation target of 2.0%, it still left little reason to think the Fed is going to back away from a rate hike in December.
Initial claims for the week ending October 6 increased by 7,000 to 214,000 (Briefing.com consensus 205,000) while continuing claims for the week ending September 29 increased by 4,000 to 1.66 million.
The key takeaway from that report is that it remains reflective of a tight labor market, which will catch the Fed's eye as a contributing factor for why it can validate the continuation of gradual rate hikes.

Looking ahead, investors will receive Import/Export Prices for September and the preliminary reading of the University of Michigan Consumer Sentiment Index for October on Friday.

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