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Stock Market News for Nov 5, 2021

U.S. stock markets closed mixed on Thursday as market participants were busy analyzing post FOMC statement of the Fed Chairman.

This story originally appeared on Zacks

U.S. stock markets closed mixed on Thursday as market participants were busy analyzing post FOMC statement of the Fed Chairman. The central bank has decided to start pulling back its gigantic stimulus effective this month. The S&P 500 and the Nasdaq Composite ended in green while the Dow finished in red.

- Zacks

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) dropped 0.1% to close at 36,157.58, terminating its five-day winning streak. Notably, 15 components of the 30-stock index ended in the green while 15 in red.  The major loser of the blue-chip index was Dow Inc. DOW. Shares of Dow tumbled 3.2%. Dow sports a Zacks Rank #1 (Strong Buy).  You can see the complete list of today’s Zacks #1 Rank stocks here.

The tech-heavy Nasdaq Composite finished at 15,940.31, gaining 0.8% or 128.72 points due to strong performance by large-cap technology stocks. This marked the tech-laden index’s new closing high. In intraday trading, the index recorded a fresh all-time high of 15,966.09.

Meanwhile, the S&P 500 advanced 0.4% to end at 4,680.06. marking the broad-market index’s new closing high. In intraday trading, the index registered a fresh all-time high of 4,683.00. Six out of eleven sectors of the benchmark index closed in positive territory and five in red. The Technology Select Sector SPDR (XLK) and the Consumer Discretionary Select Sector SPDR (XLY) increased 1.6% and 1.4%, respectively.

The fear-gauge CBOE Volatility Index (VIX) was up 2.3% to 15.44. A total of 11.3 billion shares were traded on Thursday, lower than the last 20-session average of 10.4 billion. Decliners outnumbered advancers on the NYSE by a 1.12-to-1 ratio. On Nasdaq, a 1.24-to-1 ratio favored declining issues.

Fed to Pullback Monetary Stimulus

On Nov 3, the Fed Chairman Jerome Powell said in his post-FOMC meeting statement that the central bank will start reducing its existing $120 billion per month bond-buy program ($80 billion Treasury Note and $40 billion mortgage-backed securities) effective this month.

The Fed has decided to reduce its existing bond-buy program by $15 billion per month ($10 billion Treasury Note and $5 billion mortgage-backed securities) later this month. At this rate, the quantitative easing program will terminate in June 2022. The gradual elimination of the monetary stimulus is a calculated move by the central bank to avoid a 2013 like taper tantrum.

Having initiated the tapering, the Fed chair said “Our decision today to begin tapering our asset purchases does not imply any direct signal regarding our interest rate policy. We continue to articulate a different and more stringent test for the economic conditions that would need to be met before raising the federal funds rate.”

In this regard, Powell only slightly adjusted the Fed’s view on inflation from “transitory” to “expected to be transitory.” This clearly implies that the central bank is in no hurry to hike the benchmark interest rate from the current range of 0-0.25%. He also said that the Fed is ready to adjust the pace of tapering “if warranted by changes in the economic outlook.”

Economic Data

The Department of Labor reported that weekly jobless claims fell 14,000 to pandemic-era low of 269,000 for the week ended Oct 30. The consensus estimate was 275,000. This is the lowest reading since Mar 14, 2020. Previous week’s data was revised upward to 283\,000 from 281,000 reported earlier.

Continuing claims (those who already received government benefit and are reported a week behind) declined 134,000 to just over 2.1 million. This is the lowest reading since Mar 14, 2020. Total number of people receiving benefits under all programs fell 157,731 to 2.67 million.

U.S. productivity growth rate plunged 5% in third-quarter 2021, worse-than-the consensus estimate of a decline of 2.7%. This is the biggest quarterly drop since the second quarter of 1981. Second-quarter’s productivity growth rate was revised upward to 2.4% from 2.1% reported earlier.

Unit labor cost in third-quarter 2021 skyrocketed 8.3%, exceeding the consensus estimate of 6.6%. This is the combination of 5% drop in productivity and 2.9% hourly compensation. Second-quarter’s data was revised downward to 1.1% from 1.3% reported earlier.

U.S. trade deficit in goods and services reached a record high of $80.9 billion in September, surpassing the consensus estimate of $78.4 billion. The trade deficit in August was revised downward to $72.8 billion from $73.3 billion reported earlier.

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