Wall Street takes a step back
Main U.S. indexes red: Nasdaq off ~1%
Tech weakest S&P 500 sector; utilities sole gainer
Euro STOXX 600 index up ~0.4%
Dollar, bitcoin slip; gold rallies, crude edges up
U.S. 10-Year Treasury yield rises to ~4.32%
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WALL STREET TAKES A STEP BACK (1018 EDT/1418 GMT)
Wall Street's three main indexes are lower on Friday in a session that broadcast some risk-off signals as investors examined the latest crop of economic data and looked ahead to the next Federal Reserve policy decision on Sept. 20.
Doing little to change the mood, Friday's University of Michigan survey preliminary consumer sentiment reading was at 67.7 vs a consensus expectation for 69.1 and August's final reading of 69.5.
Production at U.S. factories barely rose in August as motor vehicle output dropped and activity could plunge in the months ahead after the United Auto Workers (UAW) union embarked on strikes at three factories on Friday.
The United Auto Workers union launched simultaneous strikes at three factories owned by General Motors GM.N, Ford Motor F.N and Chrysler parent Stellantis STLAM.MISTLA.K.
The most ambitious U.S. industrial labor action in decades, which started at midnight is causing some choppiness in shares of the Detroit Three. While the stocks fell in premarket they look brighter in regular session trading with GM shares up 1.9% while Ford shares are up 0.6% and Stellantis U.S.-traded shares are gaining 1.6%.
On the bright side, the newly minted Nasdaq-traded shares in ARM Holdings ARM.O, while off their high for the session so far, are holding their debut gains on Friday.
Among the S&P's 11 major industry indexes, defensive utilities .SPLRCU are showing some strength, while growth-focused, interest-rate sensitive consumer discretionary .SPLRCD and technology .SPLRCT are jousting for the position of top laggard.
Here is your snapshot from 1018 EDT:
(Sinéad Carew)
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ENERGY STOCKS COME OUT ON TOP IN PAST 3-MONTHS AFTER LAGGING THIS YEAR (0929 EDT/1329 GMT)
The energy index .SPNY has surged 16.4% in the past three months, the most among S&P 500 sectors .SPX in part owing to the rise in oil prices, and bets that the economically-sensitive group will benefit from an improving outlook for U.S. growth.
The benchmark S&P 500 .SPX climbed 3% in the last three months and 17.3% so far this year. The energy sector, which tracks a rise in oil prices, added just 5.8% in 2023.
Oil prices LCOc1 have jumped 12% so far this year, driven by supply constraints due to the Russia-Ukraine conflict and production curbs by OPEC+. In the past three months, WTI crude has risen nearly 30%.
"One of the drivers for continued strength in energy that we think investors should pay more attention to is the effect of geopolitical developments," said Greg Bassuk, chief executive officer of AXS Investments in New York.
"There had been prior consensus that the Russia-Ukraine war would have ended by now."
A surge in gasoline prices was largely behind the biggest increase in U.S. consumer prices in 14 months in August, data this week showed.
But that did little to change monetary policy expectations of a pause in rate hikes next week with bets split between a pause and hike in November.
Meanwhile, growing expectations that the U.S. Federal Reserve would be able to avoid a hard landing is also helping sectors linked to economic growth - financials .SPSY and energy - to outperform the S&P 500.
"We expect the continued strength to flow through the end of the year," Bassuk said on the energy sector.
(Medha Singh and Shristi Achar)
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U.S. 10-YEAR TREASURY YIELD BACK UP TO CHALLENGE HIGHS (0900 EDT/1300 GMT)
On Wednesday of this week, the U.S. 10-Year Treasury yield US10YT=RR hit 4.3520%, putting it just shy of its August 22 high at 4.3660%.
Despite backing away into a 4.2210% low on Thursday, in the wake of hotter-then-expected economic data, the yield finds itself around 4.33% on Friday as it once again challenges what was its highest level since November 2007 just days before the highly anticipated September 19-20 FOMC meeting:
The week in August, when the yield hit 4.3660%, also marked the end of a six-week winning streak. Of note, since bottoming in March 2020, and prior to the most recent push, there were four weekly winning streaks of six weeks or more.
Once these streaks ended, the yield was at, or near, a significant high, ultimately leading to a multi-week pullback.
The yield did slide to 4.06% during the week ending September 1 before it quickly reversed back to the upside. However, the end of the recent weekly win streak may still portend a more extensive pullback.
Additionally, of note, at 71.5, the weekly relative strength index (RSI) is still shy of its August-25 close of 72.018, despite the yield being on track for its highest weekly close since late-October 2007.
The RSI also faces a resistance line from its early-2021 high which now comes in around 81.5.
Lagging momentum both short and longer-term suggests the yield may be vulnerable to a reversal.
In terms of levels above 4.3660%, the yield faces weekly Gann Line resistance which now resides at about 4.41%, and ascends to around 4.415% next week. Gann Lines are trend lines running at certain angles off significant highs and lows.
When the yield's 12-week win streak was ending in October 2022, it managed just one marginal close above this line. The yield reversed the next week to end the streak just as a sharp multi-week decline was kicking off.
In the event of further runaway gains, there is a wave equality projection around 4.71% (Elliott Wave basis). Additional resistance is in the 5.06%-5.15% area.
A reversal below 3.9765%, or the 23.6% Fibonacci retracement of the 1981-2020 decline, may see the yield refocus on its 3.2530% April 2023 low.
(Terence Gabriel)
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FOR FRIDAY'S LIVE MARKETS POSTS PRIOR TO 0900 EDT/1300 GMT - CLICK HERE
10yyield09152023 https://tmsnrt.rs/3LlWwW4
Energy stocks outperform in past 3-months https://tmsnrt.rs/44SDUE6
Wall Street indexes fall https://tmsnrt.rs/3RriRFx
(Terence Gabriel is a Reuters market analyst. The views expressed are his own)
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