Market Update
Weekly Jobless Claims Drops to 2-month Low
Brian Turner
15 Dec, 2022
New York City
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.
The largest increases in initial claims for the week ending December 3 were in California (15,306), New York (8,777), Texas (8,639), Georgia (7,806), and Illinois (5,083).
Connecticut was the only state registering a decline and claims fell 139.
Wall Street Selloff Intensifies With Growing Recession and Earnings Worries
Barry Adams
15 Dec, 2022
New York City
Stocks on Wall Street accelerated losses in early trading after retail sales fell and weekly jobless claims rose.
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 the rising rates in 2023 and slowing economy and worries that additional rate hikes may dip the economy into a recession.
Stock prices are reflecting higher rates but the upcoming earnings shortfall is not factored in. In addition, investors are still not sure the pace and magnitude of the likely earnings decline.
So far in 2022, earnings have held up and in many instances corporations have delivered earnings ahead of lowered expectations, but market focus has shifted to the 2023 earnings cycle.
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 2.2% to 3,910.75 and the Nasdaq Composite index dropped 2.5% to 10,895.22.
Bond Yields Hold Steady
The yield on 2-year Treasury notes edged lower to 4.24%, 10-year Treasury notes inched lower to 3.48% and 30-year Treasury bonds decreased to 3.48%.
Energy Prices Retain Upward Bias
Crude oil decreased $1.02 to $76.02 a barrel and natural gas futures added 25 cents to $6.69 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.
Global Investors Confront Slower Growth and Higher Rates
Barry Adams
14 Dec, 2022
New York City
Stocks gyrated on Wall Street after the latest rate hike and Fed's comments about the health of the economy.
The Federal Reserve lifted its lending rate range by 50 basis points, slower than 75 basis points increases for four times in a row.
The central bank also held out for higher rates in 2023 and said inflation is still too high and it may take some time before prices are more stable.
"The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time," the accompanying statement from the Federal Reserve noted.
The Federal Reserve also lowered its 2023 GDP growth outlook to 0.5% from the previous estimate of 1.2% in September and also indicated the median fed funds rate at 5.1%.
"Inflation is still too high and we have a long way to go before price stability, said Chairman Jay Powell at a press conference after the rate decision.
The additional data provided by the Federal Reserve also showed that the PCE inflation, an alternative measure of consumer inflation, is not expected to drop to 2% till 2025.
Market Indexes Struggle On Rate Worries
Market indexes gyrated after the widely anticipated rate hike moderation but investors were on the edge after Fed stressed the need to lift rates in 2023.
Major averages advanced 6.% and reversed earlier gains after the rate decision and closed down 0.6%.
The S&P 500 index decreased 0.6% to 3,995.32 and the Nasdaq Composite index fell 0.76% to 11,170.89.
Energy Prices Extend Weekly Gains
Energy prices continued to rebound in New York, Europe and Asia.
Crude oil prices rose amid optimism about China's reopening and above average winter conditions in the U.S. and colder temperatures in Northern Europe.
Crude oil increased $1.80 to $77.12 a barrel and natural gas prices eased 54 cents to $6.39 a thermal unit.
Bond Yields Inch Higher
Treasury bond yields lacked direction after the rate decision and short term yields perked up few ticks but long term yields declined.
The U.S. Fed is expected to increase rates at least by 50 basis points and investors are already looking ahead in 2023 and hoping that the Fed may pause rate hikes at its first meeting in 2023 in February.
The yield on 2-year Treasury notes eased to 4.23%, 10-year Treasury notes inched higher to 3.49% and 30-year Treasury bonds edged higher to 3.54%.
Import and Export Price Indexes Eased In October
U.S. import prices declined 0.6% in November and export prices eased 0.3% from the previous month, the fifth monthly fall in prices in a row, the U.S. Bureau of Labor Statistics said Wednesday.
The import price index for October was revised to a 0.4% decline.
The import prices fell after the cost of petroleum decreased 2.8% in November and non-fuel import prices declined 0.4% in the month, the largest decline since July.
On an annual basis, import prices inflation eased to 2.7%, the smallest increase since January 2021.
Mortgage Applications Rebound
Mortgage applications rebounded 3.2% in the week ending on December 8, according to the latest survey results released by the Mortgage Bankers Association.
The seasonally adjusted Market Composite Index increased 3.2% from the previous week and rose 0.4% on an unadjusted basis.
The refinancing index increased 3% from the previous week but was still down a whopping 85% from a year ago.
U.S. Stock Movers
Delta Air Lines, Inc gained 2.9% to $34.34 after the company said demand for air travel remains strong and lifted its annual views.
For 2022, the airline estimated revenue between $45.5 billion and $45.6 billion and earnings per share between $3.07 and $3.12.
The company also estimated 2023 revenue to increase between 15% and 20% and earnings per share to fall between $5.0 and $6.05 and free cash flow to surpass $2.0 billion.
Aspen Group Inc increased 32% to 46 cents after the online education company reported better-than-expected quarterly results.
Revenue in the fiscal year second quarter 2023 ending in October declined to $17.1 million from $18.9 million a year ago.
Net loss in the quarter shrank to $2.3 million from $2.9 million or diluted loss per share fell to 9 cents from 11 cents a year ago.
European Markets Struggle Ahead of Rate Decisions
European markets closed down ahead of the widely anticipated rate hike in the U.S. today and in the eurozone and the U.K. tomorrow.
Investors were cautious ahead of rate decisions and major averages lacked direction. Resource stocks were also in focus for the second week in a row after crude oil prices extended recent gains.
After the close, the Federal Reserve lifted its key lending rate range by 50 basis points to 4.25% and 4.5% and held out for more rate hikes.
Europe Indexes Face Headwinds
Stock market indexes in the region opened lower and lacked direction and reacted to domestic corporate news.
Investors also awaited rate decisions in the eurozone tomorrow and worried that the higher rates may be needed for a prolonged period of time to bring down high inflation induced by supply constraints.
The DAX index edged down 0.2% to 14,460.20, the CAC-40 index dropped 0.2% to 6,730.79 and the FTSE 100 index declined 6.96 points to 7,495.93.
Oil Extends Weekly Gains to Third
Crude oil rose amid optimism about China reopening and the hopes of improving activities in the second largest economy.
Brent crude oil rose $2.32 to $83.03 a barrel and the futures of immediate month delivery of Dutch TTF natural gas dropped 4.4% to 131.50 per MWh.
Bond Yields Steady, Euro and Pound Advance
The yield on 10-year German Bunds increased to 1.94%, French bonds edged higher to 2.43%, the UK Gilts inched lower 3.32% and Italian bonds held steady at 3.87%.
The euro edged higher to $1.68 and the British pound to $1.242.
Eurozone Industrial Output Declined
The currency block's industrial production declined more-than-expected 1.5% after all sectors expected non-durable consumer goods contracted in October.
Eurozone industrial output declined for the first time in three months after rising for two months in a row. Output fell 2.0% in October from September, Eurostat said Wednesday.
On a yearly basis, industrial output declined 3.4%, matching expectations set by some economists.
Spain Consumer Inflation Slows
Spain's consumer price inflation slowed to 6.8% in November from 7.3% in October and continued to ease for the fourth month in a row after peaking at 10.8% in July, the INE reported Wednesday.
UK Inflation Eased but Stays Elevated
Consumer prices in the island nation edged lower from the 41-year high level in October, just a day ahead of the Bank of England's rate decision.
U.K.'s consumer price inflation slowed to 10.7% in November from 11.1% in October after transportation costs rose at a slower pace and monthly pace slowed to 0.4% from 2.0%, the ONS said Wednesday.
Italy Unemployment Eases Slightly
Italy jobless rate eased and total hours worked were unchanged in the third quarter.
Italy's seasonally adjusted jobless rate eased slightly to 7.9% in the third quarter from 8.1% in the second quarter, the statistical office Istat said Wednesday.
Total number of unemployed declined 2.6% to 1.98 million and the number of people not in the job market increased 0.2% to 12.85 million or edged up 0.1% to 34.5% in the age group between 15 and 64 years.
Europe Stock Movers
In Paris trading Arcelor Mittal and Carrefour SA dropped 3.5%.
LVMH gained 0.4% on China reopening hopes but financial stocks trended lower after AXA, Societe Generale and BNP declined between 1% and 2%.
TUI AG dropped 7.8% to 146 pence after the tours operator said it has agreed to repay its pandemic era debt of
European Markets Under Pressure, Eurozone Industrial Output Falls
Bridgette Randall
14 Dec, 2022
Frankfurt
European markets closed down ahead of the widely anticipated rate hike in the U.S. today and in the eurozone and the U.K. tomorrow.
Investors were cautious ahead of rate decisions and major averages lacked direction. Resource stocks were also in focus for the second week in a row after crude oil prices extended recent gains.
After the close, the Federal Reserve lifted its key lending rate range by 50 basis points to 4.25% and 4.5% and held out for more rate hikes.
"The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time," the accompanying statement noted.
The Federal Reserve also lowered its 2023 GDP growth outlook to 0.5% from the previous estimate of 1.2% in September and also indicated the median fed funds rate at 5.1%.
"Inflation is still too high and we have a long way to go before price stability, said Chairman Jay Powell at a press conference after the rate decision.
The additional data provided by the Federal Reserve also showed that the PCE inflation, an alternative measure of consumer inflation, is not expected to drop to 2% till 2025.
Stock Market Indexes Review
Stock market indexes in the region opened lower and lacked direction and reacted to domestic corporate news.
Investors also awaited rate decisions in the eurozone tomorrow and worried that the higher rates may be needed for a prolonged period of time to bring down high inflation induced by supply constraints.
The DAX index edged down 0.2% to 14,460.20, the CAC-40 index dropped 0.2% to 6,730.79 and the FTSE 100 index declined 6.96 points to 7,495.93.
Oil Extends Weekly Gains to Third Week
Crude oil rose amid optimism about China reopening and the hopes of improving activities in the second largest economy.
Brent crude oil rose $2.32 to $83.03 a barrel and the futures of immediate month delivery of Dutch TTF natural gas dropped 4.4% to 131.50 per MWh.
Bond Yields Steady, Euro and Pound Advance
The yield on 10-year German Bunds increased to 1.94%, French bonds edged higher to 2.43%, the UK Gilts inched lower 3.32% and Italian bonds held steady at 3.87%.
The euro edged higher to $1.68 and the British pound to $1.242.
Eurozone Industrial Output Declined
The currency block's industrial production declined more-than-expected 1.5% after all sectors expected non-durable consumer goods contracted in October.
Eurozone industrial output declined for the first time in three months after rising for two months in a row. Output fell 2.0% in October from September, Eurostat said Wednesday.
On a yearly basis, industrial output declined 3.4%, matching expectations set by some economists.
Spain Consumer Inflation Slows
Spain's consumer price inflation slowed to 6.8% in November from 7.3% in October and continued to ease for the fourth month in a row after peaking at 10.8% in July, the INE reported Wednesday.
UK Inflation Eased but Stays Elevated
Consumer prices in the island nation edged lower from the 41-year high level in October, just a day ahead of the Bank of England's rate decision.
U.K.'s consumer price inflation slowed to 10.7% in November from 11.1% in October after transportation costs rose at a slower pace and monthly pace slowed to 0.4% from 2.0%, the ONS said Wednesday.
Italy Unemployment Eases Slightly
Italy jobless rate eased and total hours worked were unchanged in the third quarter.
Italy's seasonally adjusted jobless rate eased slightly to 7.9% in the third quarter from 8.1% in the second quarter, the statistical office Istat said Wednesday.
Total number of unemployed declined 2.6% to 1.98 million and the number of people not in the job market increased 0.2% to 12.85 million or edged up 0.1% to 34.5% in the age group between 15 and 64 years.
Europe Stock Movers
In Paris trading Arcelor Mittal and Carrefour SA dropped 3.5%.
LVMH gained 0.4% on China reopening hopes but financial stocks trended lower after AXA, Societe Generale and BNP declined between 1% and 2%.
TUI AG dropped 7.8% to 146 pence after the tours operator said it has agreed to repay its pandemic era debt of
Movers: Aspen Group, Charter Communications, Delta Air, SoFi Technologies, Tesla
Scott Peters
14 Dec, 2022
New York City
Delta Air Lines, Inc gained 2.9% to $34.34 after the company said demand for air travel remains strong and lifted its annual views.
For 2022, the airline estimated revenue between $45.5 billion and $45.6 billion and earnings per share between $3.07 and $3.12.
The company also estimated 2023 revenue to increase between 15% and 20% and earnings per share to fall between $5.0 and $6.05 and free cash flow to surpass $2.0 billion.
Aspen Group Inc increased 32% to 46 cents after the online education company reported better-than-expected quarterly results.
Revenue in the fiscal year second quarter 2023 ending in October declined to $17.1 million from $18.9 million a year ago.
Net loss in the quarter shrank to $2.3 million from $2.9 million or diluted loss per share fell to 9 cents from 11 cents a year ago.
SoFi Technologies Inc increased 5.9% to $4.70 after chief executive Anthony Noto purchased $5 million of company stock in the last three trading days according to a regulatory filing with the SEC.
Tesla Inc declined 2.8% to $156.32 on the worries that slower reopening of China's economy may limit expensive vehicle sales.
Moreover, Goldman Sachs lowered its price target on the electric vehicle maker's stock to $235 from $305 and the estimated fourth quarter deliveries of 420,000 from the previous estimate of 440,000.
Tesla delivered 343,830 vehicles in the third quarter.
Charter Communication Inc dropped 16.3% to $330.26 on the worries that capital expenses may impact cash flow over the next three years.
At an investor event, CEO Chris Winfrey said full year 2023 capital expenditures, excluding line extensions capital expenditures, to be between $6.5 billion and $6.8 billion and additional $4.0 billion for line extensions.
Fed Says More Hikes to Follow After 0.5% Rate Increase
Brian Turner
14 Dec, 2022
New York City
The Federal Reserve lifted its key lending rate and held out for more rate hikes and reiterated its commitment to bring down sky-high inflation.
The policy committee members in a unanimous decision agreed to slow the rate increase to 50 basis points and lift the federal funds range to between 4.25% and 4.50%.
"The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time," the accompanying statement noted.
The central bank moderated its rate hike to 50 basis points after lifting rates by 75 basis points for four times in a row.
The rates are now at the level last seen in 2007.
Despite some promising signs on the inflation front, inflation is still high and inflation has seeped deeper in the service sector of the economy and harder to dislodge.
Moreover, the labor market has remained strong and the economy continues to add jobs at a monthly pace of 392,000 till November, slower than 562,000 pace in all of 2021.
The Federal Reserve is also on track to lower its holding of government and agency securities by as much as $95 billion as the central bank continues with its plan in shrinking its balance sheet.
So far in the year since June, the central bank has let $332 billion of the government securities run off and shrink its balance sheet to $8.62 billion.
Projections
The Federal Reserve also lifted its 2022 GDP growth outlook to 0.5% from September's estimate of 0.2%.
But also lowered its estimate of 2023 economic growth to 0.5% from 1.2%.
More worrisome to the market was the central bank's upward revisions on inflation.
The Federal Reserve now estimates 2022 PCE inflation at 5.6% from its previous estimate of 5.4% in September and 2023 estimate to 3.1% from 2.8%.
2022 Core PCE inflation estimate was revised higher to 4.8% from 4.5% and 2023 to 3.5% from 3.1%.
The revised projections indicate the inflation is likely to stay above the Fed's target rate of 2.0% well beyond 2023, suggesting more rates are likely to follow and rates are likely to stay elevated for a prolonged period of time.
The median estimate of the fed funds in 2023 is 5.1% and 70% of confidence interval indicates rates may range between 6.0% and 3.75% in 2023.