Market snapshot: FTSE firing, US not hiring

Bond yields have continued their ascent, thus keeping a lid on any progress for US equities.

Heading into the final day of the third quarter, and despite the relentless pressure from the bond market, equities have nonetheless remained resilient for the most part. In the year to date, the benchmark S&P500 has added 12%, while the more traditional Dow Jones and the tech-focused Nasdaq are ahead by 6.8% and 15.3% respectively.

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This has more recently been bolstered by a resurgence of interest in the AI trade, but the strongest support has come from stellar first- and second-quarter earnings seasons. As such, the imminent third-quarter reporting season, which begins in earnest in a couple of weeks, will assume added significance. On the one hand, it could provide a new foundation for stocks, though bumping up against the exceptional comparatives of the previous quarters will be a tough act to follow.

In the meantime, pressure from the bond market shows little signs of abating, with the 30-year Treasury yield rising again to a high above 5.6%, a level not seen since 2002, and around 5.3% for the 10-year benchmark which has risen by almost 1% over the last quarter. At this “shorter end” the focus is more on the immediate inflationary concerns, which is duplicated at the “long end” of the 30-year yield but which carries the additional premium investors are demanding for their worries over the levels of government debt.

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The latest economic snapshot comes later today with the release of the Personal Consumption Expenditure (PCE) index, the Federal Reserve's preferred measure of inflation. The August PCE is expected to rise to 0.4% from 0.2% month over month, although unchanged year over year at 3.7%. It comes with the strange implication that a hotter print will add to the case for more interest rate hikes, whereas a weaker print may be ignored since it does not contain the effects of the oil price in September.

The data follows two releases yesterday showing consumer confidence slumped in September to its lowest in 12 years, as the impacts of higher gasoline prices and clothing are washing through, even though this has yet to be echoed in consumers’ actual behaviour.

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A separate release revealed that fewer job openings had been posted in August, as the “low hire, low fire” environment continues, and with the non-farm payrolls report on Friday therefore carrying the usual possibility to be market-moving depending on the strength or otherwise of the print.

The FTSE100 was off to a positive start, although it remains to be seen whether the themes of this week will be repeated, namely a brisk opening leading to a negative close.

Early risers included the miners, with the double whammy of stronger copper prices and broker upgrades lifting the likes of Antofagasta (LSE:ANTO), Anglo American (LSE:AAL) and Rio Tinto  Ordinary Shares (LSE:RIO). Oil stocks swam against the tide despite the underlying commodity continuing to hold firm, with some weakness in BP (LSE:BP.), Shell (LSE:SHEL) and Ithaca Energy  Ordinary Share (LSE:ITH).

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Even so, the direction of travel for the index was firmly established by a broad markup across sectors, while a better-than-expected UK GDP print for the second quarter did no harm at all, lifting financials, retailers and more domestically focused names.

While the FTSE100 remains around 2% away from its record close reached at the end of February just as the Middle East conflict began, a gain of 8% in the year to date has been a welcome reward for investors, especially given an average dividend yield of 3.1% across the index which boosts the total return.