US equity indexes faced a downturn in midday trading Monday, primarily driven by surging government bond yields and a notable sell-off in the real estate sector. The S&P 500 experienced a decline of 0.3%, settling at 5,848.2, while the Dow Jones Industrial Average decreased by 0.6% to reach 42,997.6.
Similarly, the Nasdaq Composite dipped slightly, losing less than 0.1% to 18,483.1 in anticipation of a wave of upcoming earnings reports. In a contrasting trend last week, the S&P 500 and the Dow had recorded new all-time highs, bolstered by positive earnings that enhanced market sentiment. Yet, recent macroeconomic data have not derailed optimism regarding a potential interest-rate cut anticipated next month. Across the trading spectrum, nearly all sectors, with the exception of technology, experienced losses, with real estate emerging as the most significant decliner amid shifting investor sentiments. As investors began to adjust their positions, most notably in the real estate sector, the likelihood of the Federal Reserve maintaining its interest rate at the upcoming policy meeting on November 7 surged to 15%, a notable increase from 10% the day prior.
This marks a significant change from the near-zero probability of a Fed pause that was observed a month ago, although the prevailing expectation remains an 85% chance for a 25 basis point reduction. The US Treasury yields commenced the week on an upward trajectory, with the 10-year yield increasing by 10.5 basis points to 4.18%, marking its highest level since the end of July.
Concurrently, the two-year yield saw a boost of seven basis points, reaching 4.03%. The CBOE Volatility Index, often referred to as the investors' fear gauge, rose by 3.3% to 18.62. Precious metals also saw a positive shift with gold prices increasing by 0.4% to $2,739.51 an ounce, and silver prices climbing 2.5% to $34.07, with both metals reaching their respective 52-week highs during intraday trading. On the economic front, the Conference Board's measure of leading indicators indicated a 0.5% decline in September, slightly below the average analyst estimates compiled by Bloomberg, which forecasted a drop of 0.3%.
This fall aligns with the decline observed in August. The Q3 earnings season is set to take center stage this week, with 110 S&P 500 companies expected to report their results. According to a D.A. Davidson note, this upcoming wave of earnings will coincide with reports from firms listed on other exchanges as well.
Thus far, information technology companies within the S&P 500 have reported only 7% of their results, showcasing an impressive 55% earnings growth compared to the 15% consensus. Major companies such as SAP and Logitech International are scheduled to report their quarterly results following the market close on Monday.
Additionally, industry giants like Amazon.com, IBM, and Texas Instruments will be in the spotlight as they report later this week. In corporate news, Boeing machinists currently on strike are set to vote on a new contract proposal that entails a 35% pay increase over four years, as stated by IAM District 751 last Saturday.
Shares of the aircraft manufacturing giant saw a notable increase of 3.5% during intraday trading, making it the leading gainer on the Dow. Furthermore, West Texas Intermediate crude oil prices witnessed a climb of 2.3%, reaching $70.81 a barrel, following China's interest rate cuts aimed at stimulating its weakening economy.
As the largest oil importer globally, China's actions are expected to support oil prices after WTI experienced an 8% slump last week, amid easing concerns that Israel may target Iran's energy infrastructure in light of Tehran's missile attack on October 1. Overall demand remains subdued, and OPEC+ is poised to increase market supply by adding 180,000 barrels per day starting in December as it gradually unwinds its existing voluntary production cuts totaling 2.2 million barrels per day..