S&P 500 stabilises above 4650, set to post modest gains amid subdued trading conditions

Trading conditions on Thursday have been contained, with many US market participants away for Veteran’s Day. Bond markets have been closed. The S&P 500 index started the session above 4660 but has gradually ebbed lower to around the 4650 mark, where it trades with one the day gains of about 0.1%. The broad stabilisation comes following the S&P 500’s worst day in over a month on Wednesday when investors took profit in wake of the highest US YoY Consumer Price Inflation reading since 1990.

The Nasdaq 100 is up 0.3%, though has also pulled back from prior session highs above 16,100 to current levels just above the 16K level. The Dow is the underperformer, down 0.4%, dragged lower by a near-7.0% fall in index heavyweight Disney’s share price following a disappointing earnings release. Equity analysts cited disappointing growth in streaming subscriber numbers and in theme park revenues. Also contributing to the Dow’s underperformance was the fact that investors seemed to favour growth stocks (of which the Nasdaq 100 is a proxy) over value stocks (of which the Dow is a proxy).

One reason for growth stock outperformance may well have to do with the fact that US bond markets were shut on Thursday in observance of Veteran’s Day. US bond yields spiked on Wednesday, weighing heavily on duration-sensitive growth names – higher bond yields increase the opportunity cost of holding stocks whose value depends to relatively more upon expectations for future earnings growth rather than on current earnings. Tech stocks (which disproportionately make up the growth stock contingent) also got a boost from a strong performance by semi-conductor names. The Philadelphia SE Semiconductor index was up 1.7% on Thursday, mostly erasing Wednesday’s post-US inflation data losses, led by a near-3.0% rally in Nvidia’s share price after Susquehanna raised the co.’s price target to $360 from $250 (it currently trades just above $300).

US stock market focus now shifts to the release of the September job openings (JOLTs) reports at 1500GMT, which should show that labour demand remains very strong. Also in focus at 1500GMT will be the release of the preliminary November University of Michigan Consumer Sentiment report, which will give a timely insight as to the state of US consumer health heading into the winter holiday shopping season. As ever, the consumer inflation expectation data in the report will be closely scrutinised.

US equity investors will also closely scrutinise a speech from influential FOMC Board of Governors member and NY Fed President John Williams. San Fransisco Fed President and FOMC member Mary Daly has been the only FOMC member to address this week’s shock consumer price inflation report so far. While she expressed concern about high inflation, she reiterated the stance laid out by Fed Chair Jerome Powell at the latest policy meeting that inflation pressures will likely subside next year and the Fed should be patient on rate hikes to allow time for the labour market to recover. Williams’ comments will carry more weight.