Stocks Pressured as Bond Yields Rise

Today, the S&P 500 Index ($SPX) (SPY) has witnessed a slight decline of -0.03%, while the Dow Jones Industrial Average ($DOWI) (DIA) edged up by +0.02%. The Nasdaq 100 Index ($IUXX) (QQQ) is down -0.12%. Additionally, December E-mini S&P futures (ESZ25) have dropped by -0.05%, and December E-mini Nasdaq futures (NQZ25) are down -0.13%.

The fluctuations in stock indexes today pulled back from their earlier highs and displayed a mixed performance as bond yields experienced an increase. A notable development was the rise in the 10-year Treasury note yield by +2 basis points, reaching 4.13%, driven by unexpected good news: U.S. August new home sales jumped to a 3.5-year high.

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One supportive factor for stocks today is the strength exhibited by chip makers, alongside a +1% surge in WTI crude oil prices that is benefiting energy producers. Additionally, the technology sector is buoyed by AI optimism, particularly after Alibaba revealed plans to significantly increase its AI investment beyond its initial $50 billion target.

The U.S. Mortgage Bankers Association (MBA) reported a rise of +0.6% in mortgage applications for the week ending September 19. This includes a +0.3% increase in the purchase mortgage sub-index and +0.8% in the refinancing mortgage sub-index. The average rate for a 30-year fixed mortgage has also declined by -5 basis points, settling at 6.34%, down from 6.39% the previous week.

Another piece of positive news came from August new home sales, which unexpectedly surged by +20.5% month-on-month, reaching a 3.5-year high of 800,000 sales, contrary to forecasts that anticipated a decrease to 650,000.

Bullish sentiments are further supported by rising corporate earnings expectations. According to Bloomberg Intelligence, over 22% of companies in the S&P 500 have issued positive guidance for their Q3 earnings, predicting results that are likely to exceed analysts’ projections, marking the highest rate in a year. Additionally, companies within the S&P are expected to report a +6.9% earnings growth for Q3, which is an increase from the +6.7% anticipated at the end of May.

This week, market attention will be closely monitored for any updates regarding trade or tariff negotiations. On Thursday, the initial weekly unemployment claims are estimated to rise by +2,000 to a total of 233,000 claims. Furthermore, August’s core capital goods new orders (excluding defense and aircraft) are projected to decrease by -0.1% month-on-month. GDP figures for Q2 are expected to remain unchanged at +3.3% (quarter-on-quarter annualized), and existing home sales for August could drop by -1.3% to 3.96 million.

Looking toward Friday, forecasts indicate that personal spending for August may rise by +0.5% month-on-month, while personal income is expected to increase by +0.3% month-on-month. Additionally, the August core PCE price index, which is the Federal Reserve’s preferred measure of inflation, is projected to grow by +0.2% month-on-month and +2.9% year-on-year. Finally, the University of Michigan’s consumer sentiment index for September is anticipated to hold steady at 55.4.