Market Update
Global Markets Fall Again On Growing Recession Worries
Barry Adams
16 Dec, 2022
New York City
Benchmark indexes closed down in a broad sell-off after investors struggled to recalibrate earnings in the year ahead.
Stock on Wall Street traded lower on Friday as recession worries forced investors to reevaluate stock prices and future earnings growth outlook.
Investors have been rooting for a soft landing narrative on the hopes that the Federal Reserve may slow or even pause aggressive rate hikes after multiple increases this year.
However the soft-landing narrative has been facing headwinds with weak economic data on retail sales and housing market.
The S&P fell 2.3% and the Nasdaq declined 3% this week and extended weekly losses for the second week in a row.
Stocks and market indexes traded volatile as $2.6 trillion of index options are scheduled to expire today, according to a report from Goldman Sachs.
The S&P 500 index declined 1.1% to 3,852.36 and the Nasdaq Composite index dropped 0.97% to 10,705.41.
Commodities and Oil Face Recession Headwinds
Oil futures declined 2.5% and extended three-week slide as recession worries dominated market sentiment. Brent crude in London fell to $79 and WTI crude in New York dropped to $74 a barrel.
Crude oil declined $1.90 to $74.14 a barrel and natural gas futures eased 35 cents or 5% to $6.61 a thermal unit.
Natural gas prices dropped on the forecast of milder weather later in the month and the commodity increased 5% in the week on the strong exports demand and a drop in domestic production.
Bond Yield Curve Stay Inverted
Treasury yields advanced on Friday a day after the release of weaker-than-expected November retail sales and fears of recession mounted in financial markets.
On Wednesday Fed Chairman Jerome Powell reiterated the central bank's commitment to fight high inflation and continue an aggressive rate hike campaign.
The yield on 2-year Treasury notes inched up to 4.19%, 10-year Treasury notes jumped to 3.48% and 30-year U.S. Treasury bonds advanced to 3.55%.
U.S. Stock Movers
Goldman Sachs Group declined 1.0% to $346.36 and the investment banker and financial services provider is likely to cut as much as 8% of its workforce in January, according to a CNBC quoting anonymous source.
Second Weekly Decline In European Markets
Bridgette Randall
16 Dec, 2022
Frankfurt
European markets closed lower on Friday as fears of global slowdown and higher rates overwhelmed the market sentiment.
European markets declined as much as 1% and extended weekly loss to over 3% and dropped to one-month on the worries of economic slowdown.
The consistent reinforcement of inflation-fight messages from central bankers are rattling markets.
Investors are growing anxious that central banks in their fights to bring down sky-high inflation may dip the global economy into a recession and also stall labor markets.
The DAX index declined 0.7% to 13,893.06, the CAC-40 index dropped 1.1% to 6,453.62 and the FTSE 100 index dropped 1.3% to 7,332.16.
For the week, the DAX index declined 2.7%, the CAC index dropped 1.9% and the FTSE 100 index eased 0.25%. Major averages fell for the second week in a row.
The yield on German Bunds closed at 2.14%, French bonds at 2.66%, the U.K. Gilts at 3.35% and Italian bonds at 4.32%.
The euro edged down to $1.60 and the British pound inched lower to $1.217.
Commodities and Oil Face Recession Headwinds
Oil futures declined 2% and extended three-week slide as recession worries dominated market sentiment. Brent crude in London fell to $79 and WTI crude in New York dropped to $74 a barrel.
In New York trading, West Texas Intermediate crude oil declined $2.59 to $73.49 a barrel and natural gas futures eased 50 cents to $6.46 a thermal unit.
In London trading Brent crude oil fell $204 to $79.16 a barrel and Dutch TTF natural gas price plunged 10.1% to
Maxar Agrees to $6.1 Billion Cash Deal to Go Private
Scott Peters
16 Dec, 2022
New York City
Maxar Technologies Inc soared 122% to $51.40 after the space infrastructure company agreed to go private in a all-cash deal worth $6.4 billion led by Advent International.
Under the terms of the agreement, which has been unanimously approved by Maxar
Movers: Adobe, Darden Restaurants, Goldman Sachs, Maxar Technologies
Scott Peters
16 Dec, 2022
New York City
Goldman Sachs Group declined 1.1% to $345.94 and the investment banker and financial services provider is likely to cut as much as 8% of its workforce in January, according to a CNBC quoting anonymous source.
Averages Fall On Wall Street After Investors Reevaluate Earnings Outlook
Barry Adams
16 Dec, 2022
New York City
Stocks on Wall Street traded lower on Friday as recession worries forced investors to reevaluate stock prices and future earnings growth outlook.
Investors have been rooting for a soft landing narrative on the hopes that the Federal Reserve may slow or even pause aggressive rate hikes after multiple increases this year.
However the soft-landing narrative has been facing headwinds with weak economic data on retail sales and housing market.
The S&P is set to fall at least 1% this week and extend weekly losses for the second week in a row.
Stocks and market indexes are expected to be volatile as $2.6 trillion of index options are scheduled to expire today, according to a report from Goldman Sachs.
The S&P 500 index declined 1.1% to 3,856.25 and the Nasdaq Composite index dropped 0.6% to 11,278.0.
Commodities and Oil Face Recession Headwinds
Oil futures declined 2% and extended three-week slide as recession worries dominated market sentiment. Brent crude in London fell to $79 and WTI crude in New York dropped to $74 a barrel.
Crude oil declined $2.59 to $73.49 a barrel and natural gas futures eased 50 cents to $6.46 a thermal unit.
Bond Yield Curve Stay Inverted
Treasury yields advanced on Friday a day after the release of weaker-than-expected November retail sales and fears of recession mounted in financial markets.
On Wednesday Fed Chairman Jerome Powell reiterated the central bank's commitment to fight high inflation and continue an aggressive rate hike campaign.
The yield on 2-year Treasury notes inched up to 4.30%, 10-year Treasury notes jumped to 3.54% and 30-year U.S. Treasury bonds advanced to 3.59%.
U.S. Stock Movers
Goldman Sachs Group declined 1.1% to $345.94 and the investment banker and financial services provider is likely to cut as much as 8% of its workforce in January, according to a CNBC quoting anonymous source.
Weak Retail Sales Sparked Recession Worries On Wall Street
Barry Adams
15 Dec, 2022
New York City
Stocks on Wall Street accelerated losses in early trading after retail sales fell more than expected raising fears that multiple rate hikes are finally impacting economic activities.
Market indexes were under pressure after retail sales dropped more than expected and consumers avoided discretionary purchases and limited purchases to basic items.
Benchmark indexes traded lower as investors confront rising rates in 2023 and slowing economy and worries that additional rate hikes may dip the economy into a recession.
Investors are also worried that the Federal Reserve's campaign of slowing the inflation may come at the expense of corporate earnings and job losses.
So far earnings have held up well and met investors lowered expectations in 2022, but weaker retail sales, sharp decline in mortgage applications and slowing new home sales are suggesting a different economic picture.
Moreover, investors are worried that higher rates have a lagging impact on economic activities and inflation may have peaked but rates are likely to climb higher and stay elevated for a prolonged period.
So far analysts have not revised 2023 corporate earnings and the S&P 500 index is trading at 20.2, lower than 22 at the start of 2022 and sharply lower than 39 in December 2020.
Investors are expecting earnings to fall between 10% and 15% in 2023, and the current price to earnings multiple does not reflect the weaker economic outlook.
November U.S. Retail Sales Declined
Retail and food services sales fell 0.6% in November from the previous month and the sales decline was the largest in the year so far, the U.S. Census Bureau reported Thursday.
The November month sales included Cyber Monday and Black Friday discount sales and the sales weakness suggested that a strong 1.3% increase in October pulled the sales forward.
Retail sales data are adjusted for seasonal variations and holiday and trading day differences but not adjusted for price differences or inflation.
Gasoline stations sales rose 16.2% from a year ago in November and food services sales increased 14.1% in the last 12 months to November.
Industrial Production and Capacity Utilization Fell In November
Industrial production in November declined 0.2% in November from the previous month following a 0.1% decrease in October, the Federal Reserve said Thursday.
Manufacturing production declined 0.6%, mining output fell 0.7% and utility generation increased 3.6% after falling for three months in a row.
Total industrial production increased 2.5% from a year ago.
Capacity utilization eased 0.2 percentage point in November to 79.7%, a rate that is 0.1 percentage point above its 50-year long term average.
Weekly Jobless Claims at 2-month Low
Initial claims of weekly jobless benefits decreased 20,000 to 211,000 in the week ending December 10.
The new claims were lower than the market expectations of 230,000 and dropped to the low last seen in September.
The four-week moving average eased 3,000 to 227,250 and continuing jobless claims increased 1,000 to 1.671 million in the week ending December 3rd.
Stock Market Indexes Drop 2%
Market indexes intensified selloff in early trading on the recession worries.
The S&P 500 index declined 2.5% to 3,895.75 and the Nasdaq Composite index dropped 3.2% to 10,810.53.
Bond Yields Hold Steady
The yield on 2-year Treasury notes edged lower to 4.22%, 10-year Treasury notes inched lower to 3.45% and 30-year Treasury bonds decreased to 3.50%.
Energy Prices Retain Upward Bias
Crude oil decreased $1.02 to $76.01 a barrel and natural gas futures added 49 cents to $6.92 a thermal unit.
ECB and BoE Lift Rates
The European Central Bank lifted its key lending rate and held out for more rate increases citing elevated inflationary pressures in the currency union.
The ECB lifted its deposit policy rate by 50 basis points to 2.0%, the refinancing rate to 2.5% and the marginal lending rate to 2.75%.
The Bank of England also lifted its rate for the ninth time in a row and signaled its readiness for "more forceful action" if price pressure did not ebb.
Last month the central bank lifted its key rate by 75 basis points, the largest increase since 1989.
The Bank of England raised its key lending rate by 50 basis points to 3.5% and held out for additional rate increases citing persistent inflationary pressures.
The CPI index increased 10.7% in November following an 11.1% rise in October, the Office for National Statistics said earlier in the week.
The Swiss National Bank lifted its policy rate by 50 basis points to 1.0% and held its 2023 inflation outlook at 2.4%.
U.S. Stock Movers
Tesla Inc inched up 0.5% to $157.44 after chief executive officer Elon Musk sold 22 million shares between Monday and Wednesday this week, according to a regulatory filing with the Securities and Exchange Commission.
Lennar Corp declined 0.6% to $90.35 after the Miami, Florida-based home builder said revenue in the fiscal fourth quarter ending in November increased 21% to $10.2 billion from $8.4 billion a year ago.
Net income in the fourth quarter increased to $1.3 billion or $4.55 a share from $1.2 billion or $3.91 a share in the quarter a year ago.
Homes delivered increased 13% to 20,064 and new home orders decreased 15% to 13,200 and new orders dollar value decreased 24% to $5.5 billion.
More Rate Hikes and Lower Growth In Europe
Benchmark indexes plunged after central banks in the region raised rates and lifted the inflation outlook.
The European Central Bank and the Bank of England lifted rates by 50 basis points as widely anticipated but their views on inflation and rate path put markets on edge.
Despite the four rate hikes, the ECB has more work ahead and inflation shows few signs of significantly declining.
The Bank of England also lifted its lending rate and revised higher its estimate of GDP contraction.
ECB Signals Additional Rate Hikes
The European Central Bank lifted its key lending rate and held out for more rate increases citing elevated inflationary pressures in the currency union.
The ECB lifted its deposit policy rate by 50 basis points to 2.0%, the refinancing rate to 2.5% and the marginal lending rate to 2.75%.
The widely expected fourth rate hike lifted the rate from nominal negative rates to 2.0% after inflation surged to a 4-decade high.
The central bank raised its lending rate by 75 basis points in October following rate hikes of 50 basis points in September and July and pushed the nominal rate in the positive territory for the first time since 2014.
Movers: Delta Air, JetBlue, Lennar, Netflix, Roblox, Tesla
Scott Peters
15 Dec, 2022
New York City
Tesla Inc inched up 0.5% to $157.44 after chief executive officer Elon Musk sold 22 million shares between Monday and Wednesday this week, according to a regulatory filing with the Securities and Exchange Commission.
Musk still holds 424 million shares in the electric vehicle maker, excluding management options, of the 3.15 billion outstanding shares.
Lennar Corp declined 0.6% to $90.35 after the Miami, Florida-based home builder said revenue in the fiscal fourth quarter ending in November increased 21% to $10.2 billion from $8.4 billion a year ago.
Net income in the fourth quarter increased to $1.3 billion or $4.55 a share from $1.2 billion or $3.91 a share in the quarter a year ago.
Homes delivered increased 13% to 20,064 and new home orders decreased 15% to 13,200 and new orders dollar value decreased 24% to $5.5 billion.
Netflix Inc fell 8.8% to $290.23 after a report from Digiday highlighted early struggles of the company's ad-supported streaming service.
The report quoting advertising executives noted that the company is struggling to deliver the audience it promised and has lowered its ad rate to $55 per thousand impressions from $65 rate.
JetBlue Airways Corporation dropped 2.1% to $6.86 and extended this week[s losses to 15% after the airline said on Tuesday its December traffic is below its expectations.
Delta Air Lines fell 2.7% to $33.40 following a sharp jump in the stock in the previous session after the company cited robust demand of air travel services.
Roblox Corp plunged 16.5% to $27.67 after the video game company said daily active users in November rose 15% to 56.7 million, slower than 35% growth in the year ago month.
The company said revenue or bookings in November increased between 5% and 7% to between $222 million and $225 million, slower than 22% to 24% increase in the month a year ago.
The company blamed the weakness on the strength of the U.S. dollar and macroeconomic environment.
Smaller and Prolonged Rate Hikes In Europe
Bridgette Randall
15 Dec, 2022
Frankfurt
The European Central Bank lifted its key lending rate and held out for more rate increases citing elevated inflationary pressures in the currency union.
The ECB lifted its deposit policy rate by 50 basis points to 2.0%, the refinancing rate to 2.5% and the marginal lending rate to 2.75%.
The widely expected fourth rate hike lifted the rate from nominal negative rates to 2.0% after inflation surged to a 4-decade high.
The central bank raised its lending rate by 75 basis points in October following rate hikes of 50 basis points in September and July and pushed the nominal rate in the positive territory for the first time since 2014.
European Markets Plunged 3%, Central Banks Signaled More Pain Ahead
Bridgette Randall
15 Dec, 2022
Frankfurt
Benchmark indexes plunged after central banks in the region raised rates and lifted the inflation outlook.
The European Central Bank and the Bank of England lifted rates by 50 basis points as widely anticipated but their views on inflation and rate path put markets on edge.
Despite the four rate hikes, the ECB has more work ahead and inflation shows few signs of significantly declining.
The Bank of England also lifted its lending rate and revised higher its estimate of GDP contraction.
ECB Signals Additional Rate Hikes
The European Central Bank lifted its key lending rate and held out for more rate increases citing elevated inflationary pressures in the currency union.
The ECB lifted its deposit policy rate by 50 basis points to 2.0%, the refinancing rate to 2.5% and the marginal lending rate to 2.75%.
The widely expected fourth rate hike lifted the rate from nominal negative rates to 2.0% after inflation surged to a 4-decade high.
The central bank raised its lending rate by 75 basis points in October following rate hikes of 50 basis points in September and July and pushed the nominal rate in the positive territory for the first time since 2014.
November U.S. Retail Sales Declined
Brian Turner
15 Dec, 2022
New York City
Retail and food services sales fell 0.6% in November from the previous month and the sales decline was the largest in the year so far, the U.S. Census Bureau reported Thursday.
The November month sales included Cyber Monday and Black Friday discount sales and the sales weakness suggested that a strong 1.3% increase in October pulled the sales forward.
Retail sales data are adjusted for seasonal variations and holiday and trading day differences but not adjusted for price differences or inflation.
Gasoline stations sales rose 16.2% from a year ago in November and food services sales increased 14.1% in the last 12 months to November.
November retail sales were $689.4 billion, down 0.6% from the previous month, but up 6.5% from a year ago.
Industrial Production and Capacity Utilization Fell In November
Brian Turner
15 Dec, 2022
New York City
Industrial production in November declined 0.2% in November from the previous month following a 0.1% decrease in October, the Federal Reserve said Thursday.
Manufacturing production declined 0.6%, mining output fell 0.7% and utility generation increased 3.6% after falling for three months in a row.
Total industrial production increased 2.5% from a year ago.
Capacity utilization eased 0.2 percentage point in November to 79.7%, a rate that is 0.1 percentage point above its 50-year long term average.