Level 1 - Absolute Beginner
On Thursday, the stock market in the United States went up and down. Oil companies did very well. Technology companies did badly.
The S&P 500 fell 0.47 percent. The Nasdaq fell 1.25 percent. The Dow went up a little, by 0.10 percent.
Energy was the best part of the market. Energy shares rose 2.34 percent. Oil costs a lot now, about 93 dollars a barrel at the start of October.
People also worry about interest rates. Some traders think the central bank may raise rates in October. This is bad news for many tech companies.
- stock
- A small part of a company that you can buy.
- market
- A place where people buy and sell things.
- oil
- A thick liquid used to make fuel.
- energy
- Power for cars, homes and factories.
- technology
- Computers, phones and other modern machines.
- barrel
- A big container for oil.
- rate
- The price of borrowing money.
- worry
- To feel afraid that something bad will happen.
Level 2 - Elementary
Wall Street ended Thursday with a split decision. Technology shares dropped, but energy shares rose strongly. The S&P 500 lost 0.47 percent to close at 7,765.36, and the Nasdaq fell 1.25 percent to 27,193.34. The Dow Jones index edged up 0.10 percent to 51,231.64.
Energy was the best sector of the day, with a gain of 2.34 percent. Oil has been expensive because of the war around Iran. Early in October, U.S. crude was near 93 dollars a barrel, and gold traded around 4,189 dollars an ounce.
Interest rates are the other worry. At the start of the week, government bond yields jumped. The 10-year yield reached about 5.34 percent and the 30-year yield about 5.70 percent, the highest levels since 2002. Traders now see roughly a one in four chance that the Federal Reserve raises rates in October.
High yields make borrowing more costly and make future profits less valuable. That hits fast-growing technology companies hardest. Market commentators also warned that the middle of October could be bumpy, because fewer shares are rising than usual.
- sector
- One part of the economy, such as energy or banking.
- yield
- The yearly return on a bond, shown as a percent.
- crude
- Oil in its natural form, before it is cleaned.
- gain
- An increase.
- commentator
- A person who explains news and gives opinions.
- bumpy
- Not smooth. Going up and down.
- borrowing
- Taking money that you must pay back later.
- close
- To end the day at a certain price.
Level 3 - Intermediate
Wall Street ended Thursday's session with the market's two main engines pulling in opposite directions. Energy stocks surged 2.34 percent, the strongest of all the sectors, while a sell-off in technology dragged the Nasdaq Composite down 1.25 percent to 27,193.34. The S&P 500 slipped 0.47 percent to 7,765.36, and the Dow Jones Industrial Average, with its heavier weighting in old-economy names, edged up 0.10 percent to 51,231.64.
The rotation has a clear backdrop in commodities. U.S. crude was trading near 93 dollars a barrel at the beginning of the month, a price sustained by the confrontation with Iran and the threat to Gulf shipping and infrastructure, and gold stood close to 4,189 dollars an ounce. For producers, those prices are a windfall; for consumers and for any company with a large fuel bill, they are a tax.
Bonds supplied the second leg of the story. Early in the week Treasuries sold off sharply, pushing the 10-year yield to roughly 5.34 percent and the 30-year to about 5.70 percent, the highest since 2002. Futures markets now assign something like a 25 percent probability to a Federal Reserve rate increase this month, a prospect that would have seemed fanciful a year ago and that is particularly damaging to companies whose valuations rest on profits expected far in the future.
None of this amounts to a collapse; the S&P 500 is still near the 7,700 level it reached a week earlier. But strategists quoted in market commentaries describe poor breadth, meaning that fewer stocks are participating in gains, and warn of a volatile stretch ahead. Those conditions often reward investors who own what the world is short of, such as fuel, rather than what it hopes for, such as the next generation of software.
- rotation
- A shift of investment money from one group of assets to another.
- windfall
- An unexpected gain, often from a rise in prices.
- breadth
- The number of stocks taking part in a market move.
- valuation
- An estimate of what a company is worth.
- sell-off
- A period of heavy selling that pushes prices down.
- fanciful
- Unrealistic or imaginary.
- sustain
- To keep something going.
- probability
- How likely something is to happen.
Level 4 - Advanced
Thursday's session on Wall Street was less a retreat than a reallocation. The Nasdaq Composite shed 1.25 percent to 27,193.34 and the S&P 500 gave up 0.47 percent to 7,765.36, yet the Dow Jones Industrial Average, anchored by industrial and energy-sensitive constituents, managed a 0.10 percent gain to 51,231.64. The decisive variable was energy, which led all eleven sectors with a 2.34 percent advance, a reminder that in this market the most reliable trade is often the one linked to scarcity.
The commodity backdrop explains the preference. U.S. crude was hovering around 93 dollars a barrel at the start of the month, buoyed by the Iran confrontation and the vulnerability of Gulf export routes, while gold was changing hands near 4,189 dollars an ounce. Those levels transfer income from fuel consumers to fuel producers and, by feeding through to inflation, complicate the central bank's task.
That is the nub of the bond story. Treasuries were sold aggressively early in the week, lifting the 10-year yield to about 5.34 percent and the 30-year to roughly 5.70 percent, the loftiest readings since 2002, and futures now imply approximately a one-in-four chance of a Federal Reserve rate increase in October. The arithmetic is unforgiving for long-duration equities: when the risk-free return rises, the present value of earnings promised for later years falls, and richly valued technology stocks bear the brunt.
Equity strategists quoted in daily market notes characterise the backdrop as fragile rather than broken, with the major indices within touching distance of recent highs but with narrow participation and a volatile mid-October calendar. The figures here come from market commentaries rather than exchange data and should be checked against official closing prints, but the pattern they describe, of fuel up, software down and rates restless, is consistent across them.
- reallocation
- A shift of resources from one use to another.
- constituent
- One of the members that make up a larger group, such as an index.
- scarcity
- A situation in which something is in short supply.
- buoyed
- Kept at a high level or lifted.
- nub
- The central or most important point of a matter.
- duration
- In bonds and shares, sensitivity to changes in interest rates over time.
- brunt
- The main force of something unpleasant.
- fragile
- Easily broken or disturbed.