Trade Jitters Weigh on Stocks

Economic Indicators - The US September NFIB small business optimism index fell by 2.0 to 98.8, weaker than expectations of 100.6 [1] Trade and Market Reactions - Escalation of US-China trade tensions has led to increased buying of precious metals, with gold and silver reaching new record highs [2] - The US-China trade conflict intensified as China sanctioned five US units of South Korean shipbuilder Hanwha Ocean Co., impacting global trade dynamics [5] - The markets are pricing in a 98% chance of a 25 basis point rate cut at the next FOMC meeting on October 28-29 [10] Stock Market Performance - Stock indexes showed mixed results, with the Dow Jones Industrial Average recovering from a one-month low, while the S&P 500 Index closed down by 0.16% and the Nasdaq 100 Index down by 0.69% [6] - Most stock indexes rallied to record highs last week due to optimism in the AI sector and expectations of resilient US economic growth [7] Corporate Developments - Walmart's stock rose over 4% after announcing a partnership with OpenAI to enhance shopping experiences on ChatGPT [3][21] - Caterpillar's stock increased by over 4% following a price target raise by JPMorgan Chase from $505 to $650, citing expected revenue growth [22] - Wells Fargo's stock rose more than 7% after reporting Q3 revenue of $21.44 billion, exceeding consensus estimates [20] Earnings Expectations - The Q3 earnings season is beginning, with over 22% of S&P 500 companies providing guidance expected to beat analysts' expectations, the highest in a year [9] - Q3 profits are projected to rise by 7.2%, the smallest increase in two years, while sales growth is expected to slow to 5.9% from 6.4% in Q2 [9] Interest Rates and Bond Markets - The 10-year T-note yield fell to a 3.5-week low of 4.00%, influenced by dovish comments from Fed Chair Powell and safe-haven buying due to trade tensions [4][11] - Falling inflation expectations supported T-notes, with the 10-year breakeven inflation rate dropping to a 3.25-month low of 2.299% [12]