The stock market faced some selling pressure after six straight weeks of gains for the S&P 500. The S&P 500 closed 1.0% lower last week and the Dow Jones sank 2.7%. The profit-taking activity was fueled by rising market rates. The yield on the 10 year US Treasury ended 16 basis points higher last week at 4.23% and the 2-yr yield settled 15 basis points higher this week at 4.10%. This week’s selling in the Treasury market expanded the 2s10s spread by one basis point to 13.
The Nasdaq managed to settle 0.2% higher for the week, benefitting from buying activity in mega caps and semiconductor shares. The Vanguard Mega Cap Growth ETF (MGK) rose 0.3% and the PHLX Semiconductor Index (SOX) eked out a 0.1% gain. Some of the buying in mega cap shares was related to the huge jump in Tesla (TSLA) following impressive Q3 earnings and an aggressive 2025 vehicle growth forecast.
On Friday we received Durable Orders for the month of September which came in at -0.8% (consensus -0.9%) and August’s orders were revised downwards to -0.8% from 0.0%. However, September Durable Orders ex-transportation came in at +0.4% (Briefing.com consensus -0.1%). The key takeaway from the report is that it had a split growth personality. A 0.5% increase in nondefense capital goods orders excluding aircraft conveyed a pickup in business spending, yet the 0.3% decline in shipments of nondefense capital goods orders excluding aircraft, which factors into GDP computations, declined 0.3% on the heels of a 0.1% decline in August and a 0.4% decline in July.
Over the weekend, Israel launched a reprisal attack against Iranian military targets. Preliminary reports indicate that neither Iranian energy production infrastructure nor nuclear sites were hit.