S&P 500 chops between gains and losses under 4700, broader equity sentiment remains well support

• The S&P 500 has been choppy, swinging between gains and losses, though remaining close to record highs.
• Strong US macro data and a solid finish to the Q3 earnings season is keeping sentiment underpinned for now.
• The Nasdaq 100 index is in the green amid strength in chipmakers after Nvidia earnings.

US equities are seeing choppy trading conditions at the start of the US session. The S&P 500 index has already swung within a more than 30-point 4670-4700ish range and has traded with both gains and losses on the day. At present, the index is lower by about 0.1% in the mid-4680s, leaving less than 1.0% below record highs posted at the start of the month.

A much stronger than expected Q3 earnings season has helped to power the index more than 9.0% higher from its early October lows under the 4300 level. Earnings season is drawing to a close now and the highlight this week has been reporting from major US retailers, which for the most part have been strong, helping to keep broader markets underpinned. Walmart and Target reported earlier in the week and analysts interpreted their results as indicating that consumer spending remains strong despite rising inflation, with good momentum heading into the Q4 holiday shopping season.

Economic data out of the US is also helping to keep equity sentiment broadly underpinned. According to the October Retail Sales report, consumer spending grew at a healthy pace last month. According to the November NY and Philadelphia Fed manufacturing surveys, industrial activity is growing at a health pace this month. Labour market trends also look positive heading into November, with weekly jobless claims numbers released on Thursday showing the number of weekly initial claims falling to a new post-pandemic low of 269K, not far above pre-pandemic levels.

According to Peter Cardillo, chief market economist at Spartan Capital Securities in New York, “the stock market should resume its year-end rally based on the good earnings season and good macro news that's continuing to flow… Inflation has gone up but for now the consumer is not showing any signs of pulling back. And that's a key.”

Nasdaq 100

Turning to the other major US indices; the Nasdaq 100 index has also seen choppy trade but, for now, has managed to remain in positive territory above 16,300, having come within only about 20 points of the record highs posted at the start of November at 16,450. Strength in heavyweight chipmakers is supporting the index. Nvidia shares are up more than 9.0% following a strong Q3 earnings report that saw the company beat on top and bottom lines and delivered strong earnings guidance amid expected gains in its metaverse and data centre investments. This dragged other chip names higher in tandem and lifted the PHLX Semiconductor index by 1.0% and to a new record high.

Dow

The Dow is down 0.4%, perhaps reflecting some concern about the newsflow surrounding the struggles the Biden Administration is having of pushing its “Build Back Better” social spending package through Congress. According to the US press, a vote on the $1.75T spending package could take place in the House of Representatives as soon as Friday, as soon as the US Congressional Budget Office releases its complete cost estimate for the plan. It is expected to pass in the House, but faces problems in the Senate.

Moderate Democrat Senator Joe Manchin is yet to indicate his support for the bill and continues to raise concern about the bill’s timing amid the current spike in US inflation. His vote will be needed so that Democrats can pass the spending package in the Senate via the budget reconciliation process, which only requires a simple majority. Manchin, currently viewed as a thorn in the side of the Biden administration’s attempts to implement their legislative agenda, is enjoying a strong approval rating in his domestic state of West Virginia, bolstering his obstructionist resolve.