Market Update
S&P 500 and Nasdaq Extend Weekly and Monthly Gains
Barry Adams
26 Jan, 2023
New York City
U.S. stocks advanced after GDP growth was ahead of expectations, lifting hopes of avoiding hard landing but also stoked fears of aggressive rate hike.
GDP in the fourth quarter rose at a faster annual pace than expected on the strength in consumer spending, business inventories and fixed investments and stable government spending.
International goods deficit expanded in December after imports rose at a faster pace than exports.
Stocks retained upward bias after Tesla reported a surge in sales and profit but the electric vehicle maker cautioned that average selling price of the vehicle is expected to keep falling.
Tesla Inc's larger vehicle discounts in the U.S. are likely to have a ripple effect in the industry as the company is expected to cross two million vehicle sales in 2023.
Investors also digested the latest batch of earnings and American Airlines and Southwest were in focus after the release of diverging quarterly results.
Chevron also boosted its quarterly dividends and expanded its stock repurchase program.
Investors are also bracing for tough talk from the Federal Reserve after the rate decision on Wednesday February 1.
Most investors are anticipating a smaller rate increase of 25 basis points but the Fed Chairman Jay Powell is expected to reiterate the Fed's commitment in bringing down inflation rate to 2%.
Despite seven rate hikes in 2022, the economy continues to expand though at a slower pace and labor market conditions remained tight.
Weekly jobless rates fell in the week ending on January 21 to the low last seen in April.
The S&P 500 index rose 1.1% to 4,060.20 and the Nasdaq Composite index advanced 1.8% to 11,512.41.
The S&P 500 index is up 2% and the Nasdaq Composite is up more than 3% in the week so far.
For the year so far in 2023, the S&P 500 index is up 6.2% and the Nasdaq Composite index is higher by 10.8%.
Crude oil price increased 96 cents to $81.13 a barrel and natural gas prices fell 18 cents to $2.88 a thermal unit.
The yield on 2-year Treasury notes edged higher to 4.19%, 10-year Treasury notes increased to 3.49% and 30-year Treasury bonds rose to 3.62%.
U.S. GDP Growth Slowed In Fourth Quarter
The U.S. economy expanded at 2.9% annual pace in the fourth quarter, slower than 3.2% in the third quarter, the BEA said in a preliminary report.
For all of 2022, GDP expanded 2.1% following a 5.9% rise in 2021.
Economists are estimating a mild recession may drag the 2023 growth near zero after seven rate hikes in 2022 and interest rates running at highs not seen in nearly 40 years.
U.S. Durable Goods Orders Surged In December
U.S. durable goods orders soared 5.6% in December from previous month and orders, largest increase since July 2020.
Transportation orders increased 16.7% and new orders excluding transportation fell 0.1%.
Transportation equipment, also up four of the last five months, drove the increase, $15.5 billion or 16.7% to $108.1 billion.
New orders excluding defense orders rose 6.3%.
Shipments of manufactured durable goods in December, up nineteen of the last twenty months, increased $1.4 billion or 0.5% to $277.7 billion, following a 0.4% November increase.
Transportation equipment, up fourteen of the last fifteen months, drove the increase, $1.5 billion or 1.7% to $93.8 billion.
International Goods Trade Deficit Expanded In December
The international trade deficit expanded to $90.3 billion in December, up $7.3 billion from $82.9 billion in November.
Exports of goods for December fell $2.6 billion from November to $166.8 billion, $2.6 billion and imports fell $4.7 billion to $257.1 billion, $4.7 billion.
Weekly Jobless Claims Fall
U.S. weekly jobless claims fell 6,000 from the downwardly revised previous week to 186,000 in the week ending January 21. the lowest since April and the 4-week moving average fell 9,250 to 197,000.
American Air Reports Strong Holiday Sales
American Airlines advanced 1.6% in pre-market trading after the company reported better-than-expected earnings on higher holiday travel demand and rising prices for travel services.
American Airlines said the December quarter revenue soared 40% to $13.2 billion and swung to net income of $803 million from a loss of $931 million.
Diluted earnings per share in the latest quarter was $1.14 from a loss of $1.44 in the previous year.
Southwest Air Reports Quarterly Loss on Holiday Meltdown
Southwest Airlines fell 2.4% to $25.98 after the company swung to a quarterly loss following the cancellation of 1,6700 flights during the holiday period.
Southwest Airlines said revenue in the December quarter increased 22% to $6.2 billion and swung to a net loss of $220 million or 37 cents from a profit of $68 million or 11 cents a share.
Chevron Hikes Dividends and Expands Stock Buyback Plan
Chevron Corp rose 3.5% to $185.40 after the oil explorer and refiner increased its quarterly dividends and expanded its stock repurchase program.
Chevron Corp said its board authorized a new $75 billion stock repurchase program with no expiry date from April 1 after the ending of the $25 billion plan that will be completed at the end of March.
Chevron Corp increased quarterly dividend by 6% to $1.51 a share payable on March 10 to shareholders on record February 16, 36th consecutive year of increase in annual dividend payout per share.
Tesla Reports Stellar Quarterly Results, Average Price Drops
Tesla Inc soared 8.5% to $156.49 after the electric vehicle maker reported record quarterly revenues and profit and record production and deliveries of vehicles despite the market struggles in China.
Tesla Inc said electric vehicles production surged 44% from a year ago to 439,701 in the December quarter and deliveries rose 31% to 405,278.
Tesla Inc said revenue in the December quarter increased 37% to $24.3 billion and net income soared 59% to $3.7 billion and diluted earnings per share rose to $1.07 from 68 cents a year ago.
European Markets Turn Higher On Earnings and Rates Hopes
European indexes advanced following upbeat earnings updates and hopes of softer rate hike in the U.S. supported the positive mood.
STMicroelectronics, Thales, Worldline, Sartorius, Infineon Technologies and Zalando advanced after the release of earnings updates.
Pernod Ricard and Essilor Luxottica fell on earnings worries.
Investors also digested the stronger-than-expected fourth quarter GDP increase of 2.6% and durable goods orders also suggested a strong demand from consumers and businesses.
The stronger U.S. economy bodes well for the exports from the Euro Area but also rekindled fears of aggressive rate hike by the Federal Reserve, negatively impacting the euro.
The U.S. Federal Reserve is set to announce its rate decision after a two-day meeting on February 1 and the European Central Bank is scheduled to announce its rate decision on February 2.
UK Automobile Production Plunged to 6-decade Low
Passenger car production in the UK dropped the most in 2022 after manufacturers struggled with chip supply shortages.
December total production declined 17.9% after domestic demand fell 25.0% and exports dropped 15.4%.
For 2022, total production dropped 9.8% to 775,014 units from 859,575 in the previous year, which was the lowest level since 1956.
The data were released by the Society of Motor Manufacturers and Traders.
Production for domestic demand increased 9.4% but exports fell 14.0%.
Norway's 2022 Jobless Rate Fell
Norway's jobless rate increased to 3.4% in December from 3.4% in September and for 2022 fell to 3.2% from 4.4% a year ago.
December data is an average of three months between November and January and September data is an average between August and November.
The number of unemployed persons increased to 101,000 in December from 97,000 in September, Statistics Norway reported today.
The number of employed people increased to 2.852 million in December from 2.848 million in September.
Europe Indexes closed Higher
The DAX index increased 0.34% to 15,132.95, the CAC-40 index rose 0.7% to 7,095.99 and the FTSE 100 index inched up 0.2% to 7,761.11.
Euro Swings Higher
The euro closed at a fresh 9-month high and currency investors bet that the smaller rate hikes in the U.S. will keep the dollar in the downward trend at least for the next four weeks.
The euro traded at $1.0889, the British pound edged up to $1235 and the Swiss franc advanced to 91.94 U.S. cents.
Energy Prices Trade Stable
Crude oil lacked direction but followed a slight rebound in energy prices in New York after fourth quarter GDP rose more than expected.
Natural gas prices traded near a 16-month low amid elevated storage and warm weather conditions in the region for third week in a row.
Brent crude oil rose 6 cents to $86.75 a barrel and the Dutch TTF natural gas futures increased a fraction to 56.71 per MWh.
European Government Bond Yields Trend Lower
European bond yield traded in a tight range and investors braced for an aggressive rate hike in the Euro Area and hoped for a smaller rate increase by the Federal Reserve next week.
The yield on 10-year German Bunds traded at 2.18%, French bonds at 2.64%, UK Gilts at 3.45% and Italian bonds at 4.14%.
Europe Stock Movers
STMicroelectronics soared 8.2% to €42.68 after the advanced semiconductor equipment maker reported better-than-expected earnings.
Fourth quarter revenue increased 24.4% to $4.4 billion and net income soared 66.4% to $1.25 billion from $750 million a year ago.
Diluted earnings per share rose to $1.32 from 82 cents a year ago.
The company guided first quarter revenue to increase 18.5% from a year ago and decline 5.1% from the previous quarter to $4.2 billion.
The equipment maker estimated a gross margin of 48.0% and capital expenditure in 2023 of $4.0 billion.
Sartorius AG increased 3.6% to €354.0 after the biotech holding company reported stronger-than-expected financial results.
Fiscal 2022 revenue increased 21% or 15% in constant currencies to €4.1 billion.
The company benefited from orders related to Covid-19 and underlying operating earnings rose 20% to €1.4 billion and operating margin declined to 33.8% from 34.1% in the prior year.
The company guided 2023 consolidated revenue to increase in the " low single-digit percentage range."
SAP SE declined 0.9% to close at €105.0 after the software company reported a sharp decline in profit.
Revenue in the December quarter increased 6% to €8.4 billion from €7.98 billion a year ago.
Net income plunged 77% to €332 million from €1.4 billion and diluted earnings per share dropped 66% to 47 euro cents from €1.23 a year ago.
The company also confirmed that it is looking to sell its stake in Qualtrics.
The company also plans to reduce its current workforce of 110,000 by 2.5% or about 3,000 and take a restructuring charge between €250 million and €300 million.
Asian Markets Trade Higher
Financial markets in Asia opened higher and benchmark indexes in Tokyo trimmed losses but indexes in Seoul and Hong Kong soared.
Market sentiment was positive in the region on the hopes that the U.S. Federal Reserve may slow rate hike pace on the waning wage and price inflation and optimism about the latest U.S. economic data scheduled to be released later in the day.
Investors are awaiting the release of fourth quarter GDP and durable goods orders data.
The Nikkei 225 average declined 0.1% to 27,362.75 and the yen eased to 129.81 against the U.S. dollar.
Toyota Motor Corp fell 0.6% to ¥1,893.0 after the company said founder's grand-son Akio Toyoda stepped down from the leadership role to make way for a younger leader.
Exporters traded higher after the yen weakened.
Canon edged up 0.2% to ¥2,945.50 and Panasonic Holdings Corp increased 2.2% to ¥1,197.50.
Softbank Corp closed unchanged and Fast Retailing, the parent of Uniqlo, edged down 0.1%.
Japan's Wholesale Inflation Eased
Producer price index, a measure of wholesale inflation, increased at a slower pace of 1.5% in December after rising at 1.7% in November, said the Bank of Japan.
On a monthly basis, the wholesale inflation slowed to 0.1% from 0.2$ rise in November.
In 2022, producer prices increased 1.7%.
Toyota Motor Akio Toyoda Steps Down
Toyota Motor appointed Lexus President Koji Sato as the next chief executive of the company, after Akio Toyoda decided to step down and assume chairman role.
Hang Seng Index Rebounds, India Markets Closed
Financial markets in India were closed for the Republic Day holiday and markets in mainland China and Taiwan are closed to celebrate Lunar New Year.
The Hang Seng index soared 2.4% to 22,566.78 after the market reopened and on the hopes that the ending of the "zero-Covid" policy will revive domestic demand.
The Kospi Index in Seoul increased 40 points or 1.60% to close at 2,468.65 and traded between 2,426.40 and 2,468.65.
U.S. New Home Sales Recovered In December but Plunged in 2022
Brian Turner
26 Jan, 2023
New York City
New single-family home sales rose for the third month in December but plunged in 2022
Home buyers returned after mortgage rates eased in the last ten weeks but elevated rates in the year impacted sales in the overall year.
December new home sales increased 2.3% to 616,000 annual pace, the U.S. Census Bureau and the U.S. Department of Housing and Urban Development jointly announced today.
Home sales increased from the revised November sales but dropped 26.6% from the annual pace of 839,000 in the corresponding month a year.
An estimated 644,000 new homes were sold in 2022, 16.4% below 771,000 homes sold in 2021.
The median sales price of new homes sold in December 2022 was $442,100 and average sales price was $528,400.
The seasonally‐adjusted estimate of new homes for sale at the end of December was 461,000, representing a supply of 9 months at the current sales rate.
Europe Movers: STMicroelectronics, Sartorius, SAP
Bridgette Randall
26 Jan, 2023
Frankfurt
STMicroelectronics soared 8.2% to €42.68 after the advanced semiconductor equipment maker reported better-than-expected earnings.
Fourth quarter revenue increased 24.4% to $4.4 billion and net income soared 66.4% to $1.25 billion from $750 million a year ago.
Diluted earnings per share rose to $1.32 from 82 cents a year ago.
The company guided first quarter revenue to increase 18.5% from a year ago and decline 5.1% from the previous quarter to $4.2 billion.
The equipment maker estimated a gross margin of 48.0% and capital expenditure in 2023 of $4.0 billion.
Sartorius AG increased 3.6% to €354.0 after the biotech holding company reported stronger-than-expected financial results.
Fiscal 2022 revenue increased 21% or 15% in constant currencies to €4.1 billion.
The company benefited from orders related to Covid-19 and underlying operating earnings rose 20% to €1.4 billion and operating margin declined to 33.8% from 34.1% in the prior year.
The company guided 2023 consolidated revenue to increase in the " low single-digit percentage range."
SAP SE declined 0.9% to close at €105.0 after the software company reported a sharp decline in profit.
Revenue in the December quarter increased 6% to €8.4 billion from €7.98 billion a year ago.
Net income plunged 77% to €332 million from €1.4 billion and diluted earnings per share dropped 66% to 47 euro cents from €1.23 a year ago.
The company also confirmed that it is looking to sell its stake in Qualtrics.
The company also plans to reduce its current workforce of 110,000 by 2.5% or about 3,000 and take a restructuring charge between €250 million and €300 million.
Earnings Optimism Drives European Indexes Higher Ahead of Rate Decisions
Bridgette Randall
26 Jan, 2023
Frankfurt
European indexes advanced following upbeat earnings updates and hopes of softer rate hike in the U.S. supported the positive mood.
STMicroelectronics, Thales, Worldline, Sartorius, Infineon Technologies and Zalando advanced after the release of earnings updates.
Pernod Ricard and Essilor Luxottica fell on earnings worries.
Investors also digested the stronger-than-expected fourth quarter GDP increase of 2.6% and durable goods orders also suggested a strong demand from consumers and businesses.
The stronger U.S. economy bodes well for the exports from the Euro Area but also rekindled fears of aggressive rate hike by the Federal Reserve, negatively impacting the euro.
The U.S. Federal Reserve is set to announce its rate decision after a two-day meeting on February 1 and the European Central Bank is scheduled for its rate decision on February 2.
UK Automobile Production plunged to 6-decade Low
Passenger car production in the UK dropped the most in 2022 after manufacturers struggled with chip supply shortages.
December total production declined 17.9% after domestic demand fell 25.0% and exports dropped 15.4%.
For 2022, total production dropped 9.8% to 775,014 units from 859,575 in the previous year, which was the lowest level since 1956.
The data were released by the Society of Motor Manufacturers and Traders.
Production for domestic demand increased 9.4% but exports fell 14.0%.
Norway's 2022 Jobless Rate Fell
Norway's jobless rate increased to 3.4% in December from 3.4% in September and for 2022 fell to 3.2% from 4.4% a year ago.
December data is an average of three months between November and January and September data is an average between August and November.
The number of unemployed persons increased to 101,000 in December from 97,000 in September, Statistics Norway reported today.
The number of employed people increased to 2.852 million in December from 2.848 million in September.
Europe Indexes closed Higher
The DAX index increased 0.34% to 15,132.95, the CAC-40 index rose 0.7% to 7,095.99 and the FTSE 100 index inched up 0.2% to 7,761.11.
Euro Swings Higher
The euro closed at a fresh 9-month high and currency investors bet that the smaller rate hikes in the U.S. will keep the dollar in the downward trend at least for the next four weeks.
The euro traded at $1.0889, the British pound edged up to $1235 and the Swiss franc advanced to 91.94 U.S. cents.
Energy Prices Trade Stable
Crude oil lacked direction but followed a slight rebound in energy prices in New York after fourth quarter GDP rose more than expected.
Natural gas prices traded near a 16-month low amid elevated storage and warm weather conditions in the region for third week in a row.
Brent crude oil rose 6 cents to $86.75 a barrel and the Dutch TTF natural gas futures increased a fraction to 56.71 per MWh.
European Government Bond Yields Trend Lower
European bond yield traded in a tight range and investors braced for an aggressive rate hike in the Euro Area and hoped for a smaller rate increase by the Federal Reserve next week.
The yield on 10-year German Bunds traded at 2.18%, French bonds at 2.64%, UK Gilts at 3.45% and Italian bonds at 4.14%.
Europe Stock Movers
STMicroelectronics soared 8.2% to €42.68 after the advanced semiconductor equipment maker reported better-than-expected earnings.
Fourth quarter revenue increased 24.4% to $4.4 billion and net income soared 66.4% to $1.25 billion from $750 million a year ago.
Diluted earnings per share rose to $1.32 from 82 cents a year ago.
The company guided first quarter revenue to increase 18.5% from a year ago and decline 5.1% from the previous quarter to $4.2 billion.
The equipment maker estimated a gross margin of 48.0% and capital expenditure in 2023 of $4.0 billion.
Sartorius AG increased 3.6% to €354.0 after the biotech holding company reported stronger-than-expected financial results.
Fiscal 2022 revenue increased 21% or 15% in constant currencies to €4.1 billion.
The company benefited from orders related to Covid-19 and underlying operating earnings rose 20% to €1.4 billion and operating margin declined to 33.8% from 34.1% in the prior year.
The company guided 2023 consolidated revenue to increase in the " low single-digit percentage range."
SAP SE declined 0.9% to close at €105.0 after the software company reported a sharp decline in profit.
Revenue in the December quarter increased 6% to €8.4 billion from €7.98 billion a year ago.
Net income plunged 77% to €332 million from €1.4 billion and diluted earnings per share dropped 66% to 47 euro cents from €1.23 a year ago.
The company also confirmed that it is looking to sell its stake in Qualtrics.
The company also plans to reduce its current workforce of 110,000 by 2.5% or about 3,000 and take a restructuring charge between €250 million and €300 million.
U.S. GDP Growth Slowed In Fourth Quarter and In 2022
Brian Turner
26 Jan, 2023
New York City
Despite the multiple rate hikes last year, the U.S. economy continues to pace ahead on the back of resilient consumer spending and business investments.
The U.S. economy expanded at a real 2.9% annual pace in the fourth quarter, slower than 3.2% in the third quarter, the Bureau of Economic Analysis said in a preliminary report.
Compared to the third quarter, the deceleration in real GDP in the fourth quarter primarily reflected a slowdown in exports and decelerations in nonresidential fixed investment, state and local government spending, and consumer spending.
Current‑dollar GDP increased 6.5% at an annual rate, or $408.6 billion, in the fourth quarter to a level of $26.13 trillion.
In the third quarter, GDP increased 7.7% or $475.4 billion.
The price index for gross domestic purchases increased 3.2% in the fourth quarter, compared with an increase of 4.8% in the third quarter.
The PCE price index increased 3.2%, compared with an increase of 4.3%.
Excluding food and energy prices, the PCE price index increased 3.9%, compared with an increase of 4.7%.
2022 Real and Current GDP Growth Slowed
For all of 2022, real GDP expanded 2.1% following a 5.9% rise in 2021.
Current-dollar GDP increased 9.2%, or $2.15 trillion, in 2022 to a level of $25.46 trillion, compared with an increase of 10.7%, or $2.25 trillion, in 2021.
The price index for gross domestic purchases increased 6.8% in 2022, compared with an increase of 4.2% in 2021.
The PCE price index increased 6.2%, compared with an increase of 4.0%.
Excluding food and energy prices, the PCE price index increased 5.0%, compared with an increase of 3.5%.
Looming Recession in 2023
Economists are estimating a mild recession may drag the 2023 growth near zero after seven rate hikes in 2022 and interest rates running at highs not seen in nearly 40 years.
Durable Goods Orders and Shipments Rise In December
Brian Turner
26 Jan, 2023
New York City
U.S. durable goods orders soared 5.6% in December from previous month and orders, largest increase since July 2020.
Transportation orders increased 16.7% and new orders excluding transportation fell 0.1%.
Transportation equipment, also up four of the last five months, drove the increase, $15.5 billion or 16.7% to $108.1 billion.
New orders excluding defense orders rose 6.3%.
Shipments of manufactured durable goods in December, up nineteen of the last twenty months, increased $1.4 billion or 0.5% to $277.7 billion, following a 0.4% November increase.
Transportation equipment, up fourteen of the last fifteen months, drove the increase, $1.5 billion or 1.7% to $93.8 billion.
Critically watched, nondefense new orders for capital goods in December increased $16.2 billion or 19.2% to $100.6 billion.
Shipments increased $0.2 billion or 0.2% to $85.2 billion.
Weekly Jobless Claims Fall to 9-month Low
Brian Turner
26 Jan, 2023
New York City
U.S. weekly jobless claims fell 6,000 from the downwardly revised previous week to 186,000 in the week ending January 21, the Department of Labor reported Thursday.
The weekly claims fell to the lowest since April and the previous week' level was revised up by 2,000 from 190,000 to 192,000.
The 4-week moving average was 197,500, a decrease of 9,250 from the previous week's revised average.
The previous week's average was revised up by 750 from 206,000 to 206,750.