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CNBC Daily Open: The perfect storm

NEW YORK, NEW YORK – JUNE 03: People walk by the New York Stock Exchange (NYSE) at the start of the trading day on June 03, 2022 in New York City. A new jobs report released by the Labor Department this morning shows employers added 390,000 jobs in May. Stocks pointed lower ahead of the opening bell on Friday, putting indexes back into the red for the week. (Photo by Spencer Platt/Getty Images)

Spencer Platt | Getty Images News | Getty Images

This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

What you need to know today

S&P 500 in correction
The benchmark S&P 500 index slipped into correction territory on Friday on fears of a recession, closing 10.3% lower from this year’s peak on July 31. The Dow Jones Industrial Average closed 1.12% lower, while the Nasdaq Composite held 0.38% higher. European stocks also ended lower, with the benchmark Stoxx 600 closing down 0.8%.

Hey, Big Spender  
Inflation in September rose but consumer spending came in even stronger than economists expected, numbers from the 
Commerce Department showed on Friday. The core personal consumption expenditures price index, the Fed’s key inflation measure, was 0.3% higher for the month, which was in line with the Dow Jones estimate. Even though prices picked up, personal spending continued, rising 0.7%, which was better than the 0.5% forecast.

A potential pause?
The Federal Reserve is widely seen leaving interest rates unchanged at the end of its two-day policy meeting this week, even as its preferred inflation indicator remains well above its 2% target. Earlier this month, Fed Chair Jerome Powell said “inflation is still too high,” raising expectations that another rate hike may not be entirely out of the picture.

One million share sale
JPMorgan Chase CEO Jamie Dimon is set to sell one million shares of the bank in 2024. The plan raised concerns that Dimon could be contemplating retirement. Still, a spokesperson for the country’s biggest lender said the move wasn’t related to a succession plan, and that Dimon has “no current plans” for another sale.

[PRO] The S&P 500 correction is good news
The stock market tumbled into correction territory this week, sparking fears of more turmoil is ahead. But for disciples of Warren Buffett, a 10% drawdown for the the S&P 500 shouldn’t matter.   

The bottom line

Markets survived another brutal week and are looking to wrap up an even more tumultuous month, which saw the S&P 500 and Nasdaq indexes slip into correction territory.

A correction is when an index falls more than 10% (but less than 20%) from its most recent closing high. It’s called a correction because historically the drop often “corrects” and returns prices to their longer-term trend.

Investors have had to tackle everything from multi-year high Treasury yields, a busy earnings season to multiple inflation readings. A reading on personal consumption expenditures on Friday served as the latest evidence that American consumer spending remained healthy.

Core PCE rose 0.3% in September and 3.7% year over year, matching estimates from economists polled by Dow Jones. Personal spending increased 0.7%, however, surpassing estimates of 0.5%. PCE is the Federal Reserve’s most preferred inflation metric.

The reading came ahead of the Fed’s two-day policy meeting this week, at the end of which the U.S. central bank is widely expected to pause on hiking rates.

Morningstar’s chief U.S. market strategist Dave Sekera says the Fed is done hiking, and forecasts the central bank will start to cut the federal funds rate in the first half of 2024. 

“As we forecast the rate of economic growth to slow and inflation to moderate, this allows the Fed to move to increasingly more accommodative language in early 2024 to prepare the market in advance for when they decide to begin cutting rates,” Sekera wrote.

A Fed meeting was by no means the only market-moving event investors were looking at. About 30% of the S&P 500 is scheduled to report earnings this week, among which Apple, McDonald’s and Pfizer will deliver quarterly results.

And if that wasn’t packed enough, market players will also be chasing the October jobs report due on Friday. It’s expected to show the U.S. economy added 175,000 jobs last month, according to consensus estimates from FactSet. That will follow a blowout 336,000 job additions from the prior month. 

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