Wall Street experienced a steady decline amid market uncertainties, with major indices like the Dow Jones, S&P 500, and Nasdaq all falling. Tesla’s shares dropped 2.5% amid speculation about Elon Musk’s potential political involvement. The semiconductor sector faced challenges, notably a 3% decline in Intel’s stock. Meanwhile, U.S. Treasury yields fluctuated due to differing fiscal proposals from electoral candidates, raising concerns about the federal deficit, which surged significantly recently. The Federal Reserve may consider a rate cut in response to weak job creation data.
Wall Street’s Steady Decline Amid Market Uncertainty
On Wall Street, a peculiar tranquility lingered throughout the trading day, with a notable exception around 6 PM. The markets gradually succumbed to a sense of heaviness, resulting in declines across major indices: the Dow Jones dropped by 0.6%, the S&P 500 fell by 0.4%, and the Nasdaq slipped by 0.33%.
In a significant turn, the Nasdaq-100 also saw a slight dip of 0.35%, falling below the 20,000-point mark, closing at 19,896.3. Tesla’s shares took a hit, plummeting 2.5%, as speculation swirled around Elon Musk potentially joining Donald Trump’s team in a contentious election scenario.
The semiconductor sector faced challenges as well, with the SOXX index declining by 0.3%. This occurred despite a brief surge in Nvidia’s stock, which rose by 0.5% and briefly claimed the title of the world’s largest company by market cap from Apple, peaking around $139 during the session. Both tech giants oscillated around a market capitalization of approximately $3.373 to $3.374 trillion, while Intel saw a 3% decline, resulting in its market cap shrinking to $97 billion. Ultimately, Apple maintained its lead, closing with a market cap of $3.375 trillion.
Market Reactions and Economic Indicators
A key question loomed over the market: would U.S. Treasury Bonds begin to rise amid more favorable polling for Kamala Harris? The day commenced on a positive note, with 2034 T-Bonds initially reducing yield by up to 10 basis points to 4.266%. However, they later settled with a modest decrease of 4 basis points, finishing around 4.327%. Similarly, the 2-year yield fluctuated from 4.203% on Friday down to 4.129% before slightly recovering to 4.185%.
Despite these fluctuations, the market’s performance was not directly related to the later announcement of a 0.5% drop in U.S. industrial orders compared to the previous month, which was revised from an initial estimate of a 0.2% decrease. The Department of Commerce reported a 0.4% decline in industrial shipments for September as well, and a 0.2% drop in inventories led to an unchanged inventory-to-shipment ratio of 1.46 month-on-month.
The initial drop in Treasury Bonds was influenced by the differing fiscal plans of the candidates: Trump proposing $7.300 trillion versus Harris’s $3.400 trillion. The Democratic candidate’s strategy appears less likely to exacerbate deficits and inflation.
Nonetheless, the federal deficit has surged by $620 billion in just five weeks, marking a 9.7% increase in the third quarter compared to 2023, a pace not witnessed since World War II. Analysts from Oddo BHF noted that neither candidate has indicated intentions to reduce the federal budget deficit, which could lead to excess demand and price pressures in an already overstretched economy.
As the elections approach and a clear verdict seems unlikely, the Federal Reserve is anticipated to announce its monetary policy decisions. A 25 basis point rate cut is widely expected in light of the sharp decline in U.S. job creation in October, which saw only 12,000 new jobs added compared to the projected 120,000. Additionally, the latest JOLT report indicated nearly 400,000 fewer job openings than anticipated, alongside decreased manufacturing output—potentially influenced by recent strikes at Boeing and adverse weather conditions in the southern U.S.
Given the robust GDP growth of 2.8%, the Fed has ample rationale to consider easing rates.