U.S. stocks plunge, traders look for washout
Main U.S. indexes all slide >1%: Nasdaq down ~1.6%
All S&P 500 sectors red; Cons disc weakest group
Euro STOXX 600 index down ~1.1%
Dollar up slightly, crude up >1%; gold slips; bitcoin off ~1.6%
U.S. 10-Year Treasury yield jumps to ~4.77%
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U.S. STOCKS PLUNGE, TRADERS LOOK FOR WASHOUT (1218 EDT/1618 GMT)
The S&P 500 index .SPX, at around 4,225, is sliding around 1.5% on Tuesday, putting it down about 8% vs its late-July closing high.
With this, the benchmark index is also breaking below the support line from its October 2022 trough amid a plethora of signals suggesting a very weak market:
The next SPX support resides at the 50% retracement of the March-July rally at 4,207.97, and the rising 200-DMA which is now around 4,201.
There is a rising weekly Gann line which is now around 4,190, the 50% retracement of the S&P 500's 2022 decline is at 4,155, and there is another weekly Gann Line, which is declining, and is now around 4,135. (Gann Lines are trend lines running at certain angles off significant highs and lows).
Meanwhile, of note, a number of market internal measures are flirting with deeply oversold readings.
For example, the percentage of S&P 500 stocks trading above their 50-day moving average is now down around 12%, putting at its lowest reading since 10.7% on October 14, 2022. October 12 marked the SPX's low close in its 2022 decline, while its intraday trough occurred on October 13.
This measure fell to 2.8% in late September 2022.
The Nasdaq Composite .IXIC is also being thrashed, down about 1.7% on Tuesday at around 13,090, yet it's still holding above last week's 12,963 intraday low.
With this, the Nasdaq New High/New Low index has now fallen to 9.9%, or its lowest reading since October 5, 2022. The IXIC's intraday low for its 2021-2022 decline also occurred on October 13.
In late September 2022, this measure fell to as low as 4.5%.
Additionally, the NYSE Composite .NYA is down about 1.4% on Tuesday. Of note, traders look for 90% down days. One such calculation is where advancing issues as a percentage of advancing + declining issues and advancing volume as a percentage of advancing + declining volume are both 10% or lower. Traders look to these readings to potentially signal, or set the stage for, capitulation.
On Tuesday, these NYSE readings now stand at 12% and 12% - not quite there yet, but very close.
(Terence Gabriel)
*****
A JOLT SKYWARD: JOB OPENINGS UNEXPECTEDLY SURGE (1106 EDT/1506 GMT)
The Labor Department kicked off this week's series of job market reports with an oldie but a goodie, echoing clear back to August: the JOLTS report.
It showed unfilled gigs unexpectedly jumped by 7.7% to 9.61 million in the latest sign that if the economy is indeed starting to soften, the labor market hasn't gotten the memo.
Consensus estimates called for a slight 0.3% decline.
But elsewhere in the Labor Department's Job Openings and Labor Turnover Survey (JOLTS) USJOLT=ECI, labor market churn appeared to grind to a stand-still.
Hiring, firing and quitting - as percentages of the workforce - were all essentially unchanged from the previous month.
"With job openings remaining well above levels recorded prior to the pandemic and moving in the wrong direction in August, these data support a higher for longer message on rates from the Fed and will likely keep the FOMC open to another rate hike this year," says Rubeela Farooqi, chief U.S. economist at High Frequency Economics.
Nancy Vanden Houten, lead U.S. economist at Oxford Economics, agrees.
"The Fed continues to monitor (JOLTS) as a gauge of labor market conditions and on the surface, it's telling us that labor market conditions remain tight," Houten writes.
Yes, Powell & Co are likely giving a side-eye to that jump in job openings, which matches recent business survey data from the National Federation of Independent Business and the Institute for Supply Management, both of which identify scarcity of qualified labor as a major headwind.
It's this scarcity which puts upward pressure on wage growth, which inched down in August to 4.3%, year-over-year - still more than double the Fed's average annual 2% target.
And if recent jobless claims data provides any clues, employers appear to be holding on to whatever employees they have even as the economy softens, spooked by the possibility that they won't be able to rehire when the need arises.
But the main event happens this Friday, with the Labor Department's September employment report.
Economists polled by Reuters expect the economy added 170,000 jobs last month, with the unemployment rate easing to 3.6%.
Average hourly wages, importantly, is seen moving sideways at 4.3% annual growth rate.
(Stephen Culp)
*****
U.S. BANKS POISED FOR EARNING-SEASON RELIEF BOUNCE -DB (1002 EDT/1402 GMT)
Don't expect fireworks from U.S. banks during the upcoming Q4 season but inline numbers should be enough to give a good boost to a sector that has lost heavily following the collapse in March of some regional lenders.
That is, in summary, what Deutsche Bank expects, but for the longer term, analysts at the German bank are staying cautious.
"Following recent weakness in bank stocks, banks are now down 50% since the Jan 2022 cyclical high. Given this and what is likely to be in line prints and outlooks, it feels like we are setting up for a modest relief rally on results," they say.
"That said, we remain cautious overall on bank stocks given increased macro risks (including higher for longer rates) and as bank fundamentals are likely to remain sluggish (at best) for at least another 2-4 quarters," they add.
Deutsche Bank say recent updates from lenders and a relatively stable macro during the quarter point to inline Q3 earnings in line with expectations, and also don't see major revisions for the final quarter of 2023.
It's next year that could turn more problematic: "We still worry 2024 expectations may be too high given optimism at several banks that net II will stabilize late 2023/early 2024".
Among the mega Wall Street banks, JPMorgan JPM.N, Citi C.N and Wells Fargo WFC.N kick off the dance with results on Friday, Oct. 13. Goldman Sachs GS.N and Bank of America BAC.N are due on Tuesday, Oct. 17 with Morgan Stanley MS.N to follow on Oct. 18.
(Danilo Masoni)
*****
U.S. STOCKS LOWER AS YIELDS PUSH HIGHER (0945 EDT/1345 GMT)
Wall Street's main indexes are lower early on Tuesday as prospects of an extended restrictive monetary policy pushed Treasury yields to multi-year highs, while investors awaited crucial employment data to gauge the U.S. interest rate outlook.
August Job Openings and Labor Turnover Survey (JOLTS), due at 10 a.m. EDT Tuesday, is next on the data docket with the market expecting 8.8 million openings vs a prior print of 8.827 million.
ADP National Employment numbers and the more comprehensive non-farms payrolls will also be on their radar later this week.
The U.S. 10-Year Treasury yield US10YT=RR hit a high of 4.7520% which put it within a zone defined by a wave equality projection at 4.71% and the upper monthly Bollinger Band now around 4.78%. The yield has since backed away, and is now around 4.71%.
In any event, a majority of S&P 500 .SPX sectors are lower with consumer discretionary .SPLRCD taking the biggest hit. Materials .SPLRCM leads gainers.
Under the surface, banks .SPXBK, .KRX are among weaker groups, though transports .DJT are ticking green.
Here is an early market snapshot:
(Terence Gabriel)
*****
FOR TUESDAY'S LIVE MARKETS POSTS PRIOR TO 0900 EDT/1300 GMT - CLICK HERE
earlytrade10032023 https://tmsnrt.rs/3LMW97k
JOLTS https://tmsnrt.rs/3tcFAel
JOLTS job openings and wage growth https://tmsnrt.rs/3ZFKehe
SPX10032023 https://tmsnrt.rs/3RJSYkl
(Terence Gabriel is a Reuters market analyst. The views expressed are his own)
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