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Stocks fall for second day as investors reassess earnings prospects, valuations
02-Oct-19 16:20 ET
Dow -494.42 at 26078.62, Nasdaq -123.44 at 7785.25, S&P -52.64 at 2887.65

https://www.briefing.com/stock-market-update

[BRIEFING.COM] The S&P 500 fell 1.8% on Wednesday, as growth concerns continued to force investors to reassess earnings prospects and premium valuations. The Dow Jones Industrial Average lost 1.9%, the Nasdaq Composite lost 1.6%, and the Russell 2000 lost 0.9%.

All 11 S&P 500 sectors finished in the red with ten sectors losing between 1.3% (utilities) and 2.6% (energy) -- much like yesterday when investors dumped equities indiscriminately and sought safety in less risky assets like U.S. Treasuries and gold ($1507.90, +19.20, +1.3%). This time, though, there was a bit more speculation and some corporate news to sift through.

Yesterday's data made it clear the U.S. manufacturing sector was weak, which caused many investors to begin to worry if global weakness would catch up to the U.S. consumer, too. This same sentiment caused more heavy selling in the cyclical sectors today and even in Apple (AAPL 218.96, -5.63, -2.5%), which had seemingly been immune to the market's recent struggles.

The market saw its worst levels of the day just before 1:00 p.m. ET, with investors perhaps beginning to look ahead to tomorrow's ISM Non-Manufacturing Index for September. This report could ameliorate or worsen the market's concerns about the economy's biggest segment: the U.S. consumer and services sector.

On a related note, private-sector jobs growth was modest in September, increasing by 135,000 in the ADP Employment Change report. This didn't do much to alter the modest expectations for Friday's nonfarm payrolls number (Briefing.com consensus 150,000).

Although the market closed off its lows, it was still a disappointing day for the stock market. Notable laggards included Delta Air Lines (DAL 54.35, -2.66, -4.7%) after it raised its FY19 unit cost outlook to +2% from +1% and Exxon Mobil (XOM 67.15, -1.80, -2.6%) after an SEC filing revealed its results could come in lighter than expected due to lower oil prices.

WTI crude lost 1.8%, or $0.90, to $52.64/bbl to extend its recent decline amid bearish inventory data and growth concerns. These growth concerns also contributed to another advance in Treasuries, driving yields lower across the curve. The 2-yr yield declined eight basis points to 1.48%, and the 10-yr yield declined five basis points to 1.60%. The U.S. Dollar Index declined 0.1% to 99.02.

Separately, New York Fed President John Williams (FOMC voter) said he thinks monetary policy is "in the right place" at this time. Market participants, meanwhile, increased their expectations for a 25-basis points rate cut at the October FOMC meeting, according to the CME FedWatch Tool. This probability increased to 75.4% from 53.4% one week ago.

Reviewing Wednesday's economic data, which included the ADP Employment Change report for September and the weekly MBA Mortgage Applications Index:

Private-sector payrolls were estimated to have increased by 135,000 in September (Briefing.com consensus 150,000) while the prior month's print was revised down to 157,000 from 195,000. Private-sector job growth averaged 145,000 in the third quarter, according to ADP, versus 214,000 in the third quarter of 2018.
Today's report is unlikely to sway expectations for Friday's nonfarm payrolls number (Briefing.com consensus 150,000), which is to say the market is expecting somewhat modest growth.
The weekly MBA Mortgage Applications Index rebounded 8.1% following a 10.1% decline in the prior week.

Looking ahead, investors will receive the ISM Non-Manufacturing Index for September, the weekly Initial and Continuing Claims report, and Factory Orders for August on Thursday.

Nasdaq Composite +17.3% YTD
S&P 500 +15.2% YTD
Dow Jones Industrial Average +11.8% YTD
Russell 2000 +9.7% YTD

Market Snapshot
Dow 26078.62 -494.42 (-1.86%)
Nasdaq 7785.25 -123.44 (-1.56%)
SP 500 2887.65 -52.64 (-1.79%)
10-yr Note +25/32 1.598
NYSE Adv 615 Dec 2188 Vol 940.0 mln
Nasdaq Adv 826 Dec 2278 Vol 2.4 bln

Industry Watch
Strong: Real Estate
Weak: Energy, Financials, Information Technology, Industrials

Moving the Market

-- Stocks fall for second straight day as investors continued to reassess earnings prospects, valuations

-- Weakness in the cyclical sectors, especially energy as oil prices continued to decline

-- Lingering worries ahead of tomorrow's ISM Non-Manufacturing Index for September

-- Less risky assets like Treasuries and gold saw increased demand