S&P 500 swings between small gains and losses in upper 4600s amid indecisive start to week

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  • The S&P 500 has swung between gains and losses on the first day of the week within a 4675-4695 range.
  • The Nasdaq 100 is an underperformer amid a rise in long-term US yields.

The S&P 500 has seen choppy trade thus far this Monday, swinging within a 20-point 4675-4695 range amid an indecisive start to the week. At present, the index is roughly at the midpoint of this range just under 4685, meaning it trades flat on the day. The Nasdaq started the session in the green, rising as high as 16.25K at one point, but has since dropped back into negative territory, and currently trades around 16.15K, down about 0.3% on the day. So far, the 16.1K level which coincides with last Thursday’s highs has offered decent support.

Weighing on the Nasdaq 100 index has been a rise in long-term US bond yields. That’s because so-called growth stocks, whose valuation is disproportionately dependent upon expectations for future earnings growth rather than on actual reported numbers, make up a heavy weighing in the Nasdaq 100. As long-term interest rates rise, this increases the opportunity cost of betting on earnings growth. Further downside in Tesla’s share price amid a Twitter storm from CEO Elon Musk that saw him lash out against left-wing US politician Bernie Sanders (who called for higher taxes on billionaires) probably hasn’t helped. Musk sarcastically asked Sanders if he should sell more shares (after publically criticising/insulting him). Tesla shares are down another near-5.0% on Monday and back under $1000, having pulled back more than 15% last week as Musk unloaded shares.

The Dow is currently trading roughly flat on the session like the S&P 500. A 5.0% surge in Boeing’s share price amid reports that the Saudi Arabians are in talks with the company over a wide-body jet order has failed to give the index a meaningful lift. In terms of the S&P 500 GICSs sectors, banks are outperforming the index and are up 0.2% as long-term yields rise. Materials are underperforming the index, down 0.5%, as traders cite concerns about metal demand amid further evidence during Monday’s Asia session that growth in the Chinese real estate sector continues to slow.

Aside from the knock-on impact that higher long-term yields had on growth stocks after they rallied in wake of the strong NY Fed survey, the data has been ignored. But it does bode well for upcoming US PMI surveys and hard activity data for November further down the line. Equities will be much more attuned to Tuesday’s US October Retail Sales report. Investors will also keep a keen eye on the “unofficial end” to earnings season as brick-and-mortar retailers, Walmart, Target, Home Depot and Macy’s report this week. Walmart is up first on Tuesday. Investors will be hoping they round off what has thus far been an excellent earnings season.