Market Update
Stocks On Hold After China Lockdowns Spread
Barry Adams
25 Nov, 2022
New York City
Stocks on Wall Street lacked direction and closed mixed in shortened trading session.
Benchmark indexes generally closed down in thin trading a day after Thanksgiving holiday and investors reacted to the latest news from China.
The People's Bank of China lowered its bank reserve ratio by 25 basis points to a weighted average ratio of 7.8%, freeing as much as $70 billion in capital.
Investors grew worried after the resurgence of Covid19 virus forced more regions to lockdown conditions impacting about 20% economic activities, from 10% just a week ago.
The S&P 500 index decreased 1.14 points to 4,026.12 and the Nasdaq Composite index eased 0.5% or 58.96 points to 11,226.36.
For the week, the S&P 500 index gained 1.5% and the Nasdaq Composite increased 0.7%.
Crude oil price declined $1.70 to $76.38 a barrel and natural gas prices eased 38 cents to $6.79 a thermal unit.
The yield on 2-year Treasury noted closed at 4.47%, 10-year Treasury notes at 3.69% and 30-year Treasury bonds at 3.79%.
Investors also reviewed the latest minutes from the European Central Bank' rate setting meeting held on October 27.
The hawkish tone of the committee members suggested that interest rates are likely to go higher by at least 50 basis points at the next meeting scheduled November 30.
The dollar edged lower after the release of minutes and extended decline against the British pound and the euro for the fourth day in a row.
Stock Movers
Apple Inc declined 2% to $48.11 after the protest broke out at Foxconn's factories in China after months of lockdowns, a key contract-manufacturer of iPhone devices.
Activision Blizzard declined 4.1% to $73.47 after Politico reported that the Federal Trade Commission is likely to sue Microsoft and block its $69 billion acquisition of the company.
Coupa Software soared 6.4% to $62.69 following a 29% surge in the previous session on the Bloomberg News report that Vista Equity Partners is looking to acquire the company.
Grindr Inc declined 4.5% to $9.55 and extended weeklong losses from the high of $63.71 on November 18.
The, recently merged with a special purposed acquisition company Tiga Acquisition Corp., generated a profit of $5.1 million on $146 million in revenue, compared to a $13 million loss on $104 million in sales.
Tesla declined 0.2% to $182.86 after the electric vehicle maker recalled 80,000 vehicles in China to fix seat-belt and software issues.
European Markets Steady, Euro Extends 4-day Gains
Bridgette Randall
25 Nov, 2022
Frankfurt
Benchmark indexes in Europe closed mixed a day after the release of the latest minutes of the European Central Bank meeting struck a hawkish tone.
ECB Minutes Show Hawkish Tone, Actions Lag Rates Considerably
With inflation near a 4-decade high and showing no signs of abating, wholesale prices in the euro zone hovering above 40% and consumer price inflation close to 10%, more policymakers supported larger rate hikes.
Policy committee also noted the weakening economic backdrop but said labor markets are strong enough to withstand rapidly slowing economic activities.
"Members widely agreed that the outlook for euro area economic activity had deteriorated since the September monetary policy meeting. It was noted that all components of demand, including consumption, investment and exports, showed signs of weakening." the statement noted.
The euro extended gains for the fourth day after the release of the minutes of meeting and comments from the ECB officials.
"The incoming data so far suggest that the room for slowing down the pace of rate adjustments remains limited," said Isabel Schnabel on Friday.
After the last meeting of the ECB's Governing Council, rates were revised higher by 75 basis points to 2.0%, the highest since 2009 and markets are anticipating to go higher at its next meeting on November 30th by at least 50 basis points.
Markets also reacted to rising lockdown conditions covering regions generating about 20% of economic activities in China.
German Economic Growth Revised Higher, Confidence Index Marginally improves
Germany revised its third quarter economic growth estimate higher, a report from the Destatis showed Friday.
In the third quarter, the German economy expanded at a faster pace of 0.4%, higher than 0.3% estimated on October 28.
The economy expanded at a faster pace despite the rising inflation, supply bottlenecks and slowing global demand.
In addition, the forward looking consumer confidence index reported by GfK is expected to show an improvement.
The December index rose to -40.2 from -41.9 in November, despite the marginal improvement the index is deep in the negative territory.
China Lowers CRR for Banks
The People's Bank of China lowered its cash reserve ratio by 25 basis points to a weighted average ratio to 7.8%, freeing up capital of $70 billion for more commercial lending.
EU Diplomats Delay Russian Oil Cap Decision
European diplomats also delayed by a week its controversial decision to impose a price cap on Russia oil between $65 and $70 a barrel.
The cap sets Russia's crude price at a much higher level than the production cost and the limit is not expected to have a significant impact on Russia's ability in selling its energy products.
Weekly Advance In Stock Indexes
The DAX index increased 1.82 points to 14,541.38, the CAC-40 index increased 5.16 to 6,712.48 and the FTSE 100 index added 0.3% to 7,486.67.
For the week, the DAX index increased 0.7%, the CAC-40 index added 1.1% and the FTSE 100 index advanced 1.3%.
Brent crude oil declined 1.6% to $83.98 a barrel and Dutch TTF natural prices for the next month delivery rose 1.06% to 125.10 euros a MWh.
The yield on 10-year German government bonds inched up to 1.96%, French bonds to 2.42%, the UK Gilts to 3.11% and Italian bonds to 3.84%.
The euro extended gains for the fourth day in a row to close at $1.04 and the British pound increased to $1.20.
Europe Stock Movers
Devro Plc soared 60% to 307 pence after the Scotland-based sausage casing maker agreed to be acquired by Germany-based Saria for 540 million pounds.
About two-thirds of 2,200 company staff are based in the eurozone.
SSE PLC increased 1% to 1,734.0 pence after the electric utility company agreed to sell about 25% stake in its power grid to Ontario Teachers' Pension Plan Board.
LSL Property Services plc dropped 10.6% to 234.30 pence after the residential-property services company said 2022 results are likely to fall short of previous expectations.
Fed Considers Slowing Rate Increases, Guides Higher Rates for Longer
Barry Adams
23 Nov, 2022
New York City
Market indexes closed higher for the second day in a row and stocks picked up more gains after the release of the FOMC statement.
Policymakers debated the future course of rate increases and many committee members noted the lag between successive rate hikes and its impact on the broader economy.
To achieve the price stability and bring inflation down to 2% rate, members noted a slower pace of rate increase may allow the committee to judge the impact of recent rate increases on the economy.
However, some committee members also noted rates are not sufficiently restrictive to fully understand the impact of high rates in receding inflationary forces.
But policy makers also signaled rates are still not sufficiently restrictive and inflation forces have not abated despite multiple rate hikes.
"With inflation showing little sign thus far of abating, and with supply and demand imbalances in the economy persisting, their assessment of the ultimate level of the federal funds rate that would be necessary to achieve the Committee's goals was somewhat higher than they had previously expected," a number of participants noted.
"A substantial majority of participants judged that a slowing in the pace of increase would likely soon be appropriate. A slower pace in these circumstances would better allow the Committee to assess progress toward its goals of maximum employment and price stability.
The uncertain lags and magnitudes associated with the effects of monetary policy actions on economic activity and inflation were among the reasons cited regarding why such an assessment was important.
A few participants commented that slowing the pace of increase could reduce the risk of instability in the financial system. A few other participants noted that, before slowing the pace of policy rate increases, it could be advantageous to wait until the stance of policy was more clearly in restrictive territory and there were more concrete signs that inflation pressures were receding significantly." the FOMC statement noted.
In commodities markets, crude oil prices slid on the demand worries.
Demand from China is likely to remain depressed after Covid infections surged in the second largest economy and local authorities imposed stringent lockdowns in several cities including parts of Beijing.
Investors also reviewed the recent price cap announcements from G7 Group on Russian oil but many traders questioned the effectiveness of these sanctions.
The S&P 500 index inched up 0.6% to 4,027.26 and the Nasdaq Composite index advanced 1.1% to 11,285.32.
Crude oil declined $3.59 to $77.38 a barrel and natural gas added 51 cents to $7.29 a thermal unit.
The yield on 2-year U.S. Treasury notes traded at 4.48%, 10-year Treasury notes eased to 3.69% and 30-year bonds inched lower to 3.73%.
Durable Goods Orders Rise
Durable goods orders rose 1% in October from September when orders rose downwardly revised 0.3%, the U.S. Census Bureau reported Wednesday.
New orders jumped 10.9% from a year ago.
The orders rose the most in four months and the orders data are not adjusted for inflation.
Volatile transportation orders gained 2.1% and military orders jumped 21.7%.
Excluding transportation, orders increased 0.5% and excluding defense, new orders rose 0.8%, on a monthly basis and from a year ago rose 7.3% and 11.0% respectively.
October shipments increased 0.4% from the previous month and jumped 9.7% from a year ago.
New Home Sales Unexpectedly Rise In October
New home sales rose 7.5% in October from the previous month to an annual pace of 632,000 units and September sales were revised to 588,000 units.
New home sales fell 5.8% from the 671,000 rate a year ago.
Home sales in the Northeast soared 45.7% to 51,000 and in the South increased 16% to 399,000, outpacing the 34.2% decline to 50,000 in the Midwest and 0.8% drop to 132,000 in the West.
The media home price increased to $397,000 and the average home price increased to $544,000.
The seasonally-adjusted estimate of new houses for sale at the end of October was 470,000, representing a supply of 8.9 months at the current sales rate.
Weekly Jobless Claims Up
Initial jobless claims for the week ending November 19 increased to 240,00, the Department of Labor reported Wednesday.
Continuing claims also increased to 1.551 million, highest since the first week in March.
Stock Movers
Autodesk Inc fell 5.6% to $197.16 after the architectural and engineering software developer fell short of expectations for its annual outlook.
Autodesk said third quarter revenue increased 14% to $1.2 billion and net income rose to $198 million from $137 million or 91 cents from 62 cents a year ago.
HP Inc gained 1.1% to $29.71 after the company reported a less-than-expected decline in its latest quarterly sales.
HP said fiscal fourth quarter revenue fell 11.2% to $14.8 billion and net income fell to breakeven from $3.1 billion or $2.71 per share a year ago.
HP said the company plans to cut global staff between 4,000 and 6,000 over the next three years.
Nordstrom Inc declined 5.9% to $21.32 after the luxury retailer reported weaker-than-expected quarterly results.
Nordstrom third quarter revenue eased 2.9% to $3.5 billion and swung to a net loss of $20 m from a profit of $64 m or 13 cents from 39 cents a year ago.