Market Update
U.S. Stocks Lacked Direction, Treasury Yields and Dollar Advance
Barry Adams
26 Sep, 2022
New York City
Stocks on Wall Street opened higher after major averages fell more than 4% in the previous week.
Tech stocks led the gainers in early morning trading and widely held stocks including Apple, Microsoft, Amazon and Tesla jumped more than 2%.
Crude oil rose 73 cents to $79.42 a barrel and natural gas fell 24 cents to $6.58 a thermal unit.
The yield on 2-year notes edged up to a new 14-year high of 4.21%, 10-year notes inched higher to 3.77% and 30-year bonds advanced to 3.67%.
European Markets Lack Direction
Benchmark indexes in Europe lacked direction in early trading but traded marginally higher.
The DAX Index edged up 0.2% to 12,308.12, the CAC-40 index increased 0.3% to 5799.37 and the FTSE 100 index was nearly unchanged at 7.018.27.
The euro inched lower to 96.66 cents on the ongoing worries of high inflation and rate path and the British pound dropped to a new 4-decade low of $1.083 on the worries that the recently announced tax cuts may increase government deficit.
The yield on European bonds rose and Italian bod yields rose the most after the far-right party led coalition was ahead in the election.
Giorgia Meloni led Brothers of Italy and coalition partners are set to win a majority of seats in the Senate and form a government.
Italian bond yields rose to 4.5%, the highest since 2013 and spread with the German government bond yield widened to 235 basis points, approaching the record high of 250 basis points in 2020.
Meloni campaigned on a promise to renegotiate the terms of payments received from the European Union that could jeopardize or delay as much as 200 billion euros from Brussels.
Asian Markets Drop
In Asia, popular averages declined following the Friday's losses in the U.S. and Europe.
The Nikkei index dropped 2.6% to 26,475.33, the Shanghai Composite index declined 1.2% to 3,051.41, the Sensex index plunged 1.6% to 57,145.32.
The dollar continued its advanced against all major currencies in Asia.
The yen dropped to a new 25-year low 144.23, the yuan eased to 7.14 and the Indian rupee eased to a new low of 81.43
China Adjusts Rates, Allows Gradual Depreciation
The People's Bank of China set the renminbi rate below 7.00 for the first time since July 2020 and let the currency slide below the psychologically important range between 6.0 and 7.0.
The currency declined more after the central bank set the rate at 7.0298 but the tightly controlled currency dropped to 7.16, the level not seen since May 2008.
Most Chinese exporters are keeping the export revenues in foreign bank accounts and taking advantage of the rising rates in the U.S. and Europe and not converting to renminbi as rates are falling in China.
Stocks Nosedived On Fed and Looming Global Slowdown
Barry Adams
23 Sep, 2022
New York City
The sell-off on Wall Street intensified as investors grudgingly adjust to the new reality of higher interest rates and slowing economies around the world.
Three back-to-back large-size rate hikes are still not effective in combating elevated inflation, forcing the central bank to continue lifting rates.
The Fed has revised rates higher five times over the last six months but those sharp increases are not denting the sky-high inflation so far.
Rates are blunt tools and have lagging effects on the economy, and investors are worried that the economy may dip into a recession before inflation begins to cool.
The S&P 500 index plunged 2.9% and the Nasdaq Composite index 2.7% and extended weekly loss to 5.8%.
The S&P 500 index is set to close at a new 2022 low and the Nasdaq is flirting with the lows last seen on June 16.
Stock Movers
The sell-off on Wall Street was wide and deep and several popular stocks traded at multi-year lows.
All eleven sectors declined and energy led with a plunge of 7%.
Visa, Master Card, Salesforce.com, Nike and AMD dropped to the lows last seen in 2020,
Walgreens Boots Alliance plunged to the low last seen in 2012, Intel traded near 2015 level, 3M at 2013 low and Warner Brothers Discovery at 2009 low.
Among the widely held stocks, Apple, Amazon, Alibaba, Goldman Sachs, Exxon Mobil, Baker Hughes and Caterpillar dropped between 4% and 5%.
Apple, Microsoft, Meta, Alphabet and IBM dropped between 1.5% and 2%.
Energy Prices Extend Weekly Losses
Crude oil declined $4.90 to $78.53 a barrel and natural gas fell 25 cents to $6.83 a thermal unit.
For the week, crude oil dropped 7.1% and natural gas plunged 12.2%.
The yield on 2-year Treasury notes rose to 4.22%, 10-year Treasury notes rose to 3.69% and 30-year bonds edged up to 3.61%.
Europe: Weekly Loss Between 3% and 6%
Markets in Europe plunged more than 2% as businesses are grappling with soaring energy costs, rising interest rates and weakening economy.
Moreover, the 2-decade high-dollar is also stoking fears of inflation.
The U.K. pound dropped to a new 4-decade low $1.11 after the government's mini-budget offered more tax breaks to businesses
The yield on the U.K. 10-year government bond rose to 3.78% after the government released its mini-budget indicating a rising budget deficit ahead of the difficult winter ahead.
The government's budget deficit is likely to expand further in the current and the next quarter on the rising cost of energy imports and the government shouldering most of the price increase.
A separate survey indicated a deepening slowdown in the private business sector.
The S&P Global/CIPS flash Composite Purchasing Managers' Index declined to 48.4 from 49.6 in August.
The flash composite indicator of manufacturing and services for Germany declined to 45.9 from 46.9 in August.
The flash estimate for the French service sector increased to 53.0 from 51.2 in August.
Any reading above 50 indicates expansion and below 50 a contraction.
The euro also dropped to a new 2-decade low of 97 cents against the resurgent dollar.
The DAX index dropped 1.8% to 12,306.76, the CAC-40 index declined 2.2% to 5,789.25 and the FTSE 100 index eased 1.97% to 7,019.61.
The Swiss Market Index declined 1.2% to 10,176.05 following the declines in Europe and on the worries that more rate hikes are likely to follow the recent rate hike.
For the week, the FTSE 100 index declined 3.1%, the DAX index fell 3.4%, the CAC-40 dropped 4.8% and the SMI decreased 4.2%.
The Russian index plunged nearly 13% in the week and Spain's benchmark index dropped 6% in the week.
Movers: Credit Suisse, EssilorLuxottica, SmithsGroup
EssilorLuxittica SA edged up 0.4% to 139.35 euros after the company launched a stock repurchase program to buy back up to 1.5 million of its shares between Sept 23, 2022 and March 31, 2023.
The program authorizes the company to buyback up to 10% of its share capital and not to exceed 200 euros a share price.
Smiths Group Plc closed up 1.1% to 1,486.0 pence after the engineering company posted mixed financial results.
Revenue in the fiscal year 2022 ending in July increased to 2.57 billion pounds from 2.4 billion pounds a year ago.
After-tax net income in the period from continuing operations declined to 13 million pounds from 157 million pounds a year ago.
Credit Suisse Group fell 12.3% to 4.08 Swiss francs on the news that the company is looking to shore up its balance sheet and searching for equity investors.
Asian Markets Fell On Global Recession Worries
Asian markets dropped as well on the worries that rising rates around the world will spark a global recession and taming elevated inflation may take another two years
The Nikkei 225 index declined 0.6%, the Hang Seng index dropped 1.2%, the Shanghai Composite fell 0.6% and the Sensex index eased 1.7%.
For the week, the Nikkei eased 2.6%, the Shanghai index declined 1.2%, the Sensex fell 1.3%, and the Hang Seng decreased 4.4%.
European Markets Accelerate Declines, Weekly Loss Between 3% and 6%
Bridgette Randall
23 Sep, 2022
Frankfurt
Market indexes in Europe accelerated declines on the final day of the week on the worries that the rising rates may dip the economy into a recession before cooling the inflation.
Markets in Europe plunged more than 2% as businesses are grappling with soaring energy costs, rising interest rates and weakening economy.
Moreover, the 2-decade high-dollar is also stoking fears of inflation.
The U.K. pound dropped to a new 4-decade low $1.11 after the government's mini-budget offered more tax breaks to businesses.
The yield on the U.K. 10-year government bond rose to 3.78% after the government released its mini-budget indicating a rising budget deficit ahead of the difficult winter ahead.
The government's budget deficit is likely to expand further in the current and the next quarter on the rising cost of energy imports and the government shouldering most of the price increase.
A separate survey indicated a deepening slowdown in the private business sector.
The S&P Global/CIPS flash Composite Purchasing Managers' Index declined to 48.4 from 49.6 in August.
The flash composite indicator of manufacturing and services for Germany declined to 45.9 from 46.9 in August.
The flash estimate for the French service sector increased to 53.0 from 51.2 in August.
Any reading above 50 indicates expansion and below 50 a contraction.
The euro also dropped to a new 2-decade low of 97 cents against the resurgent dollar.
The DAX index dropped 1.8% to 12,306.76, the CAC-40 index declined 2.2% to 5,789.25 and the FTSE 100 index eased 1.97% to 7,019.61.
The Swiss Market Index declined 1.2% to 10,176.05 following the declines in Europe and on the worries that more rate hikes are likely to follow the recent rate hike.
For the week, the FTSE 100 index declined 3.1%, the DAX index fell 3.4%, the CAC-40 dropped 4.8% and the SMI decreased 4.2%.
The Russian index plunged nearly 13% in the week and Spain's benchmark index dropped 6% in the week.
Movers: Credit Suisse, EssilorLuxottica, SmithsGroup
EssilorLuxittica SA edged up 0.4% to 139.35 euros after the company launched a stock repurchase program to buy back up to 1.5 million of its shares between Sept 23, 2022 and March 31, 2023.
The program authorizes the company to buyback up to 10% of its share capital and not to exceed 200 euros a share price.
Smiths Group Plc closed up 1.1% to 1,486.0 pence after the engineering company posted mixed financial results.
Revenue in the fiscal year 2022 ending in July increased to 2.57 billion pounds from 2.4 billion pounds a year ago.
After-tax net income in the period from continuing operations declined to 13 million pounds from 157 million pounds a year ago.
Credit Suisse Group fell 12.3% to 4.08 Swiss francs on the news that the company is looking to shore up its balance sheet and searching for equity investors.
Asian Markets Fell On Global Recession Worries
Asian markets dropped as well on the worries that rising rates around the world will spark a global recession and taming elevated inflation may take another two years
The Nikkei 225 index declined 0.6%, the Hang Seng index dropped 1.2%, the Shanghai Composite fell 0.6% and the Sensex index eased 1.7%.
For the week, the Nikkei eased 2.6%, the Shanghai index declined 1.2%, the Sensex fell 1.3%, and the Hang Seng decreased 4.4%.
Global Markets Sell-off Intensifies as U.S. Averages Extend Losses
Barry Adams
23 Sep, 2022
New York City
The sell-off on Wall Street intensified as investors are grudgingly adjusting to the new reality of higher interest rates and Fed's commitment to aggressively combat rapid price increases.
Three back-to-back large-size rate hikes are still not effective in combating elevated inflation, forcing the central bank to continue lifting rates.
The Fed has revised rates higher five times over the last six months but those sharp rate increases are not denting the sky-high inflation so far.
Rates are blunt tools and have a lagging effect on the economy, and investors are worried that the economy may dip into a recession before inflation begins to cool.
The S&P 500 dropped 1.4% and the Nasdaq Composite index 1.35%.
Crude oil declined $2.60 to $80.93 a barrel and natural gas fell 16 cents to $6.93 a thermal unit.
The yield on 2-year Treasury notes rose to 4.16%, 10-year Treasury notes rose to 3.71% and 30-year bonds edged up to 3.65%.
Markets in Europe plunged more than 2% as businesses grapple with soaring energy costs, rising interest rates and weakening economy.
Moreover, the 2-decade high-dollar is also stoking fears of inflation.
The U.K. pound dropped to a new 4-decade low $1.11 after the government's mini-budget offered more tax breaks to businesses.
The euro also dropped to a new 2-decade low of 97 cents against the resurgent dollar.
The DAX index dropped 2.1% to 12,285.72, the CAC-40 index declined 1.9% to 5,805.65 and the FTSE 100 index eased 1.9% to 7,022.41.
Asian markets dropped as well on the worries that rising rates around the world will spark a global recession and taming elevated inflation may take another two years
The Nikkei 225 index declined 0.6%, the Hang Seng index dropped 1.2%, the Shanghai Composite fell 0.6% and the Sensex index eased 1.7%.
Yields Rise, Stocks Fall On Worries of Recession Before Breaking Inflation
Barry Adams
22 Sep, 2022
New York City
U.S. market averages declined for the third day in a row as recession worries resurfaced.
Three back-to-back large-size rate hikes have stoked fears of economic slowdown deepening to a recession and lasting longer than previously anticipated.
The Fed's five rate hikes over six months have not dented high inflation and investors are worried that the planned additional rate hikes may push the economy into a recession without appreciably taming inflation.
Following the footsteps of the U.S. Federal Reserve, central banks in Norway, U.K. and Switzerland also lifted key rates as policymakers intensified efforts to combat 4-decade high inflation and end the era of negative rates.
However, the Bank of Japan held its negative 0.1% rate and Turkey lowered its key repo rate by 1.0% to 12.0% despite the annual inflation raging at 80%.
The S&P 500 index fell 0.8% to 3,767.99 and the Nasdaq Composite index eased 1.4% to 11,066.81.
Crude oil advanced 55 cents to $83.41 a barrel and natural gas edged down56 cents to $7.21 a thermal unit.
The yields on U.S. Treasuries continued to advance as investors factor in future rate hikes as rate increases over the last six months are having a minimal impact on sky-high inflation.
The yield of 2-year Treasury notes inched up to 4.12%, 10-year notes increased to 3.71% and 30-year bonds rose to 3.64%.
Weekly Jobless Claims
Initial unemployment claims increased to 213,000 for the week ended Sept 17 and claims for the previous week were revised down to 210,000.
Movers: Accenture, Darden, FedEx, KB Home, Lennar, Steelcase
Accenture Plc edged down 1.2% after the information services company reported in-line revenues and earnings and increased its quarterly dividend and stock repurchase.
Darden, the parent of Olive Garden and Seasons 52, dropped 4.4% after the company reported revenue increase largely reflecting price increase and reiterated its fiscal year 2023 outlook.
FedEx Corporation increased 0.9% after the company announced fiscal cost savings between $2.2 billion and $2.27 billion and added that it plans to hike parcel delivery rates by 6.9%.
KB Home declined 5% after the company reported lower than expected quarterly revenues but net income rose after the company delivered 6% more homes.
Lennar Corp rose 1.9% after the home builder reported mixed quarterly results and net income increased at a slower pace of 4% despite the company delivering 13% more homes.
Steelcase Inc plunged 10% after the company said it plans to cut $20 million annual costs and lay off up to 180 salaried staff.
European Markets Drop On Future Rate Hike Worries
European markets opened lower and accelerated declines following the lower U.S. stocks after the Federal Reserve delivered its third large-size rate hike.
The Bank of England in a 3-way split decision lifted its rate and the Norges Bank revised its rate higher in a unanimous decision.
European markets are not only facing higher energy costs but also confronting positive real rates for the first time after more than a decade of negative rates.
Investors are worried that the central banks, despite the recent rate hikes and hawkish rhetoric, are lagging inflation by a wide margin.
Real rates are still very low and the euro zone and the UK are still operating at real negative rates.
The DAX index fell 1.4% to 12,593.40, the CAC-40 index dropped 0.8% to 5,981.60 and the FTSE 100 index declined 5.11 points or 0.07% to 7,232.54.
Switzerland Ends Negative Rate Era
The Swiss National Bank raised its key lending rate by 75 basis points and ended the era of negative rates prevailing since early 2015.
The central bank also forecasted rates are likely to go higher as inflation is hovering near a three-decade high.
The SNB lifted its inflation outlook to 3.0% from 2.8% for 2022, and to 2.4% from 1.9% in 2023 and to 1.7% from 1.6%in 2024.
Consumer inflation in August jumped 3.5%, record high since August 1993.
Bank of England Lifts Rates by 0.5%
The Bank of England lifted its key lending rate by 50 basis points as the central bank intensified its efforts to tame sky-high inflation.
The reference lending rate was revised to 2.25% from 1.75%, the seventh rate hike in a row lifted the rate to the highest not seen since November 2008.
The central bank lowered its third quarter economic growth estimate to a decline of 0.1% from the 0.4% growth estimated in August.
The Bank of England also lowered its inflation projection to 10% for the next few months before easing after the government issued the Energy Price guarantee .
Norway Signals Nearing Rate Peak
The Norges Bank of Norway lifted its reference rate by 50 basis points to 2.25%, the level last seen in 2011.
The central bank however said future rate hikes are likely to be "moderate" as the higher rates are having an impact on the economy.
The bank is likely to lift rates again at its next meeting in November and rates are likely to stay there for a while.
The rates are likely to stay near 3% through out the winter as high inflation is expected to persist for a while.
Darden, Parent of Olive Garden and Seasons 52, Same Store Sales Up 4.2%
Scott Peters
22 Sep, 2022
New York City
Darden Restaurants, Inc dropped 4.4% to $125.65 after the parent of Olive Garden reported weaker than expected quarterly results and held out for higher price increases.
Consolidated same store sales increased 4.2% in its fiscal year 2023 first quarter ending on August 28, compared to 47.5% jump a year ago.
Revenue in the fiscal year first quarter increased 6.1% to $2.44 billion from $2.31 billion a year ago.
Net income declined $193 million from $230.9 million a year ago and diluted earnings per share declined to $1.56 from $1.75.
Same store sales at Olive Garden restaurants increased 2.3%, Longhorn Steakhouse rose 4.2% and the fine dining segment surged 7.6%.
Darden owns full-restaurants including Olive Garden, LongHorn Steakhouse, Cheddar's Scratch Kitchen, Yard House, The Capital Grille, Seasons 52, Bahama Breeze and Eddie V's.
Segment Profit
Segment profit represents sales, less costs for food and beverage, restaurant labor, restaurant expenses and marketing expenses and excludes non-cash real estate related expenses.
Olive Garden restaurants revenue increased to $1.1 billion from $1.09 billion and segment profit declined $216.1 million from $253.3 million a year ago.
LongHorn Steakhouse revenue increased to $604.6 from $567.1 and segment profit dropped to $92 million from $107.5 million a year ago.
Fine Dining segment, which includes Seasons 52 and The Capital Grille, revenue jumped to $183.4 million from $168.8 million and segment profit declined to $30 million from $33.5 million a year ago.
Other businesses, including Cheddar's, Yard House, Bahama Breeze and Yard House, revenue jumped $527.4 million from $479.7 million and segment profit declined to $72.3 million from $84.8 million a year ago.
Dividend Outlook
The board of directors declared a quarterly cash dividend of $1.21 a share payable on November 1, 2022 to shareholders of record at the close of business on October 10, 2022.
Stock Repurchase
During the quarter, Darden repurchased approximately 1.7 million shares of its common stock for $199 million compared to $186 million repurchase a year ago.
As of the end of the fiscal first quarter, the company had approximately $912 million remaining under the current $1 billion repurchase authorization.
Reiterated Fiscal 2023 Outlook and Guidance
The company reiterated its fiscal year 2023 annual sales to fall in range of $10.2 billion and $10.4 billon and consolidated same store sale growth between 4% and 6%.
The company plans to open between 55 and 60 new restaurants and capital spending between $500 million and $550 million.
The company said "total inflation" meaning price increase across all brands to average 6% from 4% in the fiscal 2022.
The restaurant operator estimated net earnings per share from continuing operations between $7.40 and $8.0 on approximately 124 million weighted average diluted shares outstanding.
Movers: Accenture, Darden Restaurants, FactSet, HB Fuller, KB Home, Lennar, Steelcase
Barry Adams
22 Sep, 2022
New York City
U.S. stocks opened lower a day after the Federal Reserve delivered its third large-size rate hike and signaled more increases to follow.
The S&P 500 index fell 0.7% to 3,762.27 and the Nasdaq Composite index eased 1.1% to 11,102.95.
Crude oil advanced $1.87 to $84.81 a barrel and natural gas edged down 8 cents to $7.69 a thermal unit.
The yields on U.S. Treasuries continued to advance as investors factor in future rate hikes as rate increases over the last six months are having a minimal impact on sky-high inflation.
The yield of 2-year Treasury notes inched up to 4.08%, 10-year notes increased to 3.56% and 30-year bonds rose to 3.52%
Accenture Plc eased 1.1% to $262.43 after the technology services provider said the fiscal year fourth quarter revenues increased 15% in the U.S. dollars and 22.4% in local currency to $15.4 billion compared to $13.4 billion a year ago.
In the quarter ending in August, net income increased 10.7% to $1.69 billion from $1.44 billion a year ago and diluted earnings per share rose to $2.60 from $2.20.
New bookings in the quarter increased 31% in local currencies and 22% in U.S. dollars to $18.4 billion from a year ago.
Darden Restaurants, Inc dropped 4.2% to $125.74 after the parent of Olive Garden said consolidated same store sales increased 4.2% in its latest quarter ending on August 28.
Revenue in the fiscal year first quarter increased 6.1% to $2.44 billion from $2.31 billion a year ago.
Net income declined $193 million from $230.9 million a year ago and diluted earnings per share declined to $1.56 from $1.75.
FactSet Research Systems Inc declined 8.7% to 393.12 after the financial information systems developer reported revenue in the fiscal year fourth quarter 2022 increased 21.2% to $499.2 million from $411.9 million a year ago.
Net income in the quarter ending in August rose 3.3% to $104.4 million from $101.0 million and diluted earnings per share increased to $2.69 from $2.63 a year ago.
The number of clients generating more than $10,000 in annual subscription revenues increased 219 to 7,538.
H B Fuller Company increased 0.6% to $60.18 after the maker of adhesives and sealants said fiscal third quarter revenues increased 13.8% to $941.20 million from a year ago.
Net income in the quarter increased to $46.5 million from $31.6 million and diluted earnings per share rose to 84 cents from 58 cents a year ago.
The company lifted its adjusted earnings per share estimate in the fourth quarter in the range of $1.15 to $1.30, resulting in fiscal 2022 adjusted earnings per share increasing 19% to 23% from a year ago.
KB Home plunged 4.9% to $26.63 after revenues in the third quarter ending in August rose 26% to $1.84 billion from $1.46 billion a year ago.
Net income in the quarter rose to $255 million from $150.1 million and diluted earnings per share rose to $2.86 from $1.60 a year ago.
In the quarter, homes delivered increased 6% to 3,615 and average selling price rose 19% to $508,700.
The company guided fourth quarter revenues between $1.95 billion and $2.05 billion with average home selling price of $503,000.
Lennar Corporation rose 2.2% to $77.65 after the home builder said third quarter revenues increased 29% to $8.9 billion from $6.9 billion a year ago.
In the quarter, net income increased 4% to $1.5 billion from $1.4 billion and diluted earnings per share rose to $5.03 from $4.52 a year ago.
Homes delivered in the quarter increased 13% to 17,248 and new home orders decreased 12% to 14,366 units and in dollar value decreased 11% to $6.7 billion.
Steelcase Inc fell 8.5% to $8.46 after the company said revenue in the fiscal second quarter 2023 increased 19% to $863.3 million from $724.8 million a year ago.
In the quarter ending on August 26, 2022, net income declined to $19.6 million from $24.7 million and diluted earnings per share fell to 17 cents from 21 cents a year ago.
The steel furniture maker forecasted third quarter revenue between $825 million and $850 million, representing organic growth between 13% and 16%.
The company also announced its plan to cut up to 180 salaried positions and cut annual expense by $20 million after orders through the first three weeks of the third quarter declined approximately 20% from a year ago.
European Markets Drop 2%, Switzerland, Norway, UK Lift Rates
Bridgette Randall
22 Sep, 2022
New York City
European markets opened lower and accelerated declines following the lower U.S. stocks after the Federal Reserve delivered its third large-size rate hike.
The Bank of England in a 3-way split decision lifted its rate and the Norges Bank revised its rate higher in a unanimous decision.
European markets are not only facing higher energy costs but also confronting positive real rates for the first time after more than a decade of negative rates.
Investors are worried that the central banks, despite the recent rate hikes and hawkish rhetoric, are lagging inflation by a wide margin.
Real rates are still very low and the euro zone and the UK are still operating at real negative rates.
The DAX index fell 1.4% to 12,593.40, the CAC-40 index dropped 0.8% to 5,981.60 and the FTSE 100 index declined 5.11 points or 0.07% to 7,232.54.
Switzerland Ends Negative Rates Era
The Swiss National Bank raised its key lending rate by 75 basis points and ended the era of negative rates prevailing since early 2015.
The central bank also forecasted rates are likely to go higher as inflation is hovering near a three-decade high.
The SNB lifted its inflation outlook to 3.0% from 2.8% for 2022, and to 2.4% from 1.9% in 2023 and to 1.7% from 1.6%in 2024.
Consumer inflation in August jumped 3.5%, record high since August 1993.
Bank of England Lifts Rates by 0.5%
The Bank of England lifted its key lending rate by 50 basis points as the central bank intensified its efforts to tame sky-high inflation.
The reference lending rate was revised to 2.25% from 1.75%, the seventh rate hike in a row lifted the rate to the highest not seen since November 2008.
The central bank lowered its third quarter economic growth estimate to a decline of 0.1% from the 0.4% growth estimated in August.
The Bank of England also lowered its inflation projection to 10% for the next few months before easing after the government issued the Energy Price guarantee .
Norway Signals Nearing Rate Peak
The Norges Bank of Norway lifted its reference rate by 50 basis points to 2.25%, the level last seen in 2011.
The central bank however said future rate hikes are likely to be "moderate" as the higher rates are having an impact on the economy.
The bank is likely to lift rates again at its next meeting in November and rates are likely to stay there for a while.
The rates are likely to stay near 3% through out the winter as high inflation is expected to persist for a while.
U.S. Stocks Look Down as Yields Stay Above 4%
Barry Adams
22 Sep, 2022
New York City
U.S. stocks opened lower a day after the Federal Reserve delivered its third large-size rate hike and signaled more increases to follow.
Central banks in Norway, England and Switzerland also lifted key rates as policymakers intensified efforts to combat 4-decade high inflation and end the era of negative rates.
However, the Bank of Japan held its negative 0.1% rate and Turkey lowered its key repo rate by 1.0% to 12.0% despite the annual inflation raging at 80%.
The S&P 500 index fell 0.7% to 3,762.27 and the Nasdaq Composite index eased 1.1% to 11,102.95.
Crude oil advanced $1.87 to $84.81 a barrel and natural gas edged down 8 cents to $7.69 a thermal unit.
The yields on U.S. Treasuries continued to advance as investors factor in future rate hikes as rate increases over the last six months are having a minimal impact on sky-high inflation.
The yield of 2-year Treasury notes inched up to 4.08%, 10-year notes increased to 3.56% and 30-year bonds rose to 3.52%.
Weekly Jobless Claims
Initial unemployment claims increased to 213,000 for the week ended Sept 17 and claims for the previous week were revised down to 210,000.
Switzerland Ends Negative Rate Era
The Swiss National Bank raised its key lending rate by 75 basis points and ended the era of negative rates prevailing since early 2015.
The central bank also forecasted rates are likely to go higher as inflation is hovering near a three-decade high.
The SNB lifted its inflation outlook to 3.0% from 2.8% for 2022, and to 2.4% from 1.9% in 2023 and to 1.7% from 1.6%in 2024.
Consumer inflation in August jumped 3.5%, record high since August 1993.
Bank of England Lifts Rates by 0.5%
The Bank of England lifted its key lending rate by 50 basis points as the central bank intensified its efforts to tame sky-high inflation.
The reference lending rate was revised to 2.25% from 1.75%, the seventh rate hike in a row lifted the rate to the highest not seen since November 2008.
The central bank lowered its third quarter economic growth estimate to a decline of 0.1% from the 0.4% growth estimated in August.
The Bank of England also lowered its inflation projection to 10% for the next few months before easing after the government issued the Energy Price guarantee .
Norway Signals Nearing Rate Peak
The Norges Bank of Norway lifted its reference rate by 50 basis points to 2.25%, the level last seen in 2011.
The central bank however said future rate hikes are likely to be "moderate" as the higher rates are having an impact on the economy.
The bank is likely to lift rates again at its next meeting in November and rates are likely to stay there for a while.
The rates are likely to stay near 3% through out the winter as high inflation is expected to persist for a while.
European Stocks
European markets opened lower and accelerated declines following the U.S. stocks after the Federal Reserve delivered its third large-size rate hike.
The Bank of England in a 3-way split decision lifted its rate and the Norges Bank revised its rate higher in a unanimous decision.
European markets are not only facing higher energy costs but also confronting the rate increases and positive real rates after a decade of negative rate regime.
The DAX index fell 1.4% to 12,593.40, the CAC-40 index dropped 0.8% to 5,981.60 and the FTSE 100 index declined 5.11 points or 0.07% to 7,232.54.
Stocks On Wall Street Plunge After Rate Hike and Projections
Barry Adams
21 Sep, 2022
New York City
Stocks turned lower and accelerated the declines in the final fifteen minutes of trading two hours after the Federal Reserve lifted key lending rates.
As expected, the Fed lifted the fed fund target rate range by 75 basis points to 3% and 3.25% and held out for more hikes in the rest of the year.
Rates are expected to increase at least another 125 basis points in the rest of the year, according to the projections released by the Fed.
The Fed also lowered its projection for 2022 economic growth to 0.2% from the previous estimate of 1.7% in June and lifted jobless rate projection to 3.8% from 3.7%.
The Federal Open Market Committee statement also confirmed that the central bank is on target to drain liquidity and sell Treasury securities and mortgage bonds as outlined in its plan in May.
According to that plan, the Fed increased its sale of Treasury securities to $60 billion and mortgage securities to $35 billion a month from September 1.
The fifth rate increase and third rate hike of 75 basis points in a row is still not having the desired effect that the policymakers had hoped for.
After six months of rate hikes and cooling of economic activities, inflation is still running near 4-decade high and showing no signs of cooling.
Fed Chair Powell stressed that the "core PCE is still high" and running near 4.5% and the measure of inflation is not likely to ease to the targe rate of 2% till 2025.
The supply-driven inflation is well entrenched in the economy and gasoline powered inflation has spread wide and deep.
Chairman Powell also highlighted the difficulty of taming elevated inflation, driven by supply chain issues beyond the control of the central bank, and said shelter price inflation is likely to stay high for some time to come.
Stocks on Wall Street plunged and the major averages turned the morning rise of 0.6% to a loss of 1.8%.
Inflation has been running ahead of the Fed's target rate of 2% for 24 months in a row and the Fed has been lagging in its response in tackling rapid price increases.
In many ways, the Fed is not only battling high inflation but also fighting to restore its diminished credibility for failing to spot and tackle inflation early on.
The Fed's aggressive money printing in the last decade is the largest contributor in creating conditions for rapid price increases.
Since 2008, the Federal Reserve has created and added $9 trillion of new money to the financial system and increased the money supply by 40% just in the last three years.
The yield on the 2-year Treasury notes soared to 4,1%, a level last seen in 2007 and 10-year notes increased to 3.51% and 30-year bonds to 3.49%.
The S&P 500 index fell 1.7% to 3,789.93 and the Nasdaq Composite index declined 1.8% to 11,220.19.
Energy prices traded higher after Russia mobilized 300,000 reserve troops to bolster its military presence in Ukraine raising the prospects of a prolonged war.
Crude oil traded down 95 cents to $83.03 a barrel and natural gas edged up 4 cents to $7.75 a thermal unit.
Existing Home Sales Fall in August
Existing home sales edged down 0.4% in August from the previous month to a seasonally adjusted annual rate of 4.8 million units, according to the data released by the National Association of Realtors.
Home sales were the lowest since May 2020, and July sales were downwardly revised to 5.7% decline.
The median price of a home gained 7.7% from a year ago to $389,000. Unsold home inventories declined to 1.28 million, or equivalent to 3.2 months of supply at the current sales rate.
European Markets Set to Fall On Thursday
European markets are set to fall at the opening on Thursday after the U.S. Fed lifted its key lending rate and held out for more gains in the year and beyond.
European bourses traded near flat-line in cautious morning trading ahead of the Fed's rate-hike decision after the market-close.
Market indexes scaled higher after the U.S. markets advanced with the presumed 75 basis points rate increase later in the day.
The Bank of England, the Swiss National Bank, the Norges Bank of Norway and the Bank of Japan are also expected to announce their rate decisions on Thursday.
The DAX index added 0.6% to 12,741.19, the CAC-40 index gained 0.7% to 6,022.49 and the FTSE 100 index increased 0.5% to 7,230.87.
Energy prices traded higher after Russia mobilized 300,000 reserve troops to bolster its military presence in Ukraine raising the prospects of a prolonged war.
However, in Europe, TTF natural gas price advanced 4% to 202.50 euros a megawatt hour.
Brent crude oil traded down 65 cents to $89.93 a barrel.
Resource stocks were in focus after crude oil and commodities prices advanced.
Antofagasta, BHP Limited, Anglo American and Glencore gained between 1% and 3%.
Homebuilders in the U.K. gained on the hopes that the recently appointed Prime Minister Liz Truss may lower stamp duty in the government's mini-budget this week.
Taylor Wimpey, Persimmons and Barratt Developments increased between 2% and 4%.
Uniper SE plunged 31.2% to 2.38 euros after Germany nationalized the natural gas importer and the electric utility.
A German government agency acquired the company stake held by Fortum Oyj for 1.70 euros a share.
Vallourec SA increased 6.1% to 10.37 euros after the maker of premium casing and tubing products signed a 10-year sales agreement with Saudi Arabia based Aramco.
Schneider Electric SE increased 1.5% to 117.80 euros after the company agreed to acquire stakes held by minority shareholders in Aveva Plc for 3,100 pence a share.
The offer price is 41% premium to the last closing price of 2,192 pence before the commencement of the offer period.
Aveva Group Plc rose 1.8% to 3,108 pence.
Fed Hikes Rates by 75 Basis Points, Third Large-size Increase
Brian Turner
21 Sep, 2022
New York City
The Federal Reserve lifted its key lending rate by 75 basis points and reiterated its commitment to fight sky-high inflation.
"The Committee decided to raise the target range for the federal funds rate to 3 to 3.25% and anticipates that ongoing increases in the target range will be appropriate," noted the Fed statement released Wednesday.
The Federal Reserve lifted its key lending rate for the fifth time and the third large-size increase in a row as inflation hovers significantly above the Fed's target range of 2%.
In an unanimous vote, a 12-member committee voted to increase the rate by 75 basis points as the Fed lags sky-high inflation by a wide margin.
Policymakers are belatedly lifting rates in an effort to slow down tame inflation by curbing demand but much of the inflation is driven by rising prices of energy, intermediate products and services.
The Fed is caught between a difficult choice of lifting rate too slow and inflation accelerates even more and too fast and the economy cools down faster and dips into a recession.
In a press conference after the rate decision, Fed Chair Powell highlighted that inflation is too high and core PCE is still running at or above 4.5% and the recent rate increases are not having desired effects in cooling inflation.
"Shelter inflation is going to remain high for some time," chairman Powell stated towards the end of a question answer session.
The Fed's belated action is less likely to impact supply-driven inflation and may dip the economy into a deeper recession and impair robust labor markets.
The estimate for the U.S. economic growth in 2022 was lowered to 0.2% from the previous estimate of 1.7% released in June, according to the projections released by the FOMC.
The 2023 growth projection was lowered to 1.2% from 1.7% and 2024 growth to 1.7% from 1.9% and the 2025 rate was estimated at long-term rate growth of 1.8%.
Live Press Conference Link
https://www.youtube.com/watch?v=ukFnKCtptX4
Movers: Apogee, Aurora Cannabis, Beyond Meat, Chemours, General Mills, Stitch Fix
Barry Adams
21 Sep, 2022
New York City
Apogee Enterprises Inc added 0.7% to $41.73 and the company said revenue in the fiscal year 2023 increased 14% to $372.1 million from $325.8 million a year ago.
The architectural products and services provider swung in the quarter ending on August 27 to a net income of $37.4 million from a loss of $2.1 million.
Diluted earnings per share was $1.68 compared to a loss of 8 cents a year ago.
The company lifted its guidance for full-year adjusted earnings to a range of $3.75 to $4.05 per diluted share, up from the previously announced range of $3.50 to $3.90.
The company expects full-year revenue growth of 8% to 10%, primarily driven by growth in Architectural Framing Systems and full-year capital expenditures of approximately $40 million.
Aurora Cannabis Inc dropped 7.5% to $1.30 after the company reported break-even quarterly earnings on an adjusted basis.
Net loss in the fourth quarter ending in June was $618.8 million compared to $134.0 million a year ago.
The increase in net loss was primarily due to non-cash impairment charges of $505.1 million driven by the write down of goodwill, intangible assets and property and plant assets.
Revenue in the quarter was nearly unchanged at $50.2 million compared to $50.4 million a year ago.
Beyond Meat Inc added 1.6% to $16.29 after the company said it has suspended Chief Operating Officer Doug Ramsey after he was arrested for an altercation at a football game.
Jonathan Nelson, senior vice president was appointed as interim COO.
Chemours Company declined 4.3% to $29.41 after the advanced performance materials and Titanium technologies developer lowered its adjusted operating earnings outlook for the full-year.
The company lowered its adjusted operating earnings in the range of $1.4 billion to $1.45 billion from the previous estimate between $1.475 billion and $1.575 billion.
Changes to the Titanium Technologies segment outlook drove the entirety of the change in the company
Europe Movers: AstraZeneca, Schneider Electric, Taylor Wimpey, Uniper, Vallourec
Bridgette Randall
21 Sep, 2022
Frankfurt
European bourses traded near flat-line in cautious morning trading ahead of the Fed's rate-hike decision after the market-close.
Market indexes scaled higher after the U.S. markets advanced with the presumed 75 basis points rate increase later in the day.
The DAX index added 0.6% to 12,741.19, the CAC-40 index gained 0.7% to 6,022.49 and the FTSE 100 index increased 0.5% to 7,230.87.
Energy prices traded higher after Russia mobilized 300,000 reserve troops to bolster its military presence in Ukraine raising the prospects of a prolonged war.
Crude oil was nearly unchanged at $84 a barrel and natural gas price held near $7.90 a thermal unit.
However, in Europe, TTF natural gas price advanced 4% to 202.50 euros a megawatt hour.
Brent crude oil traded up 60 cents to $91.25 a barrel.
Resource stocks were in focus after crude oil and commodities prices advanced.
Antofagasta, BHP Limited, Anglo American and Glencore gained between 1% and 3%.
Homebuilders in the U.K. gained on the hopes that the recently appointed Prime Minister Liz Truss may lower stamp duty in the government's mini-budget this week.
Taylor Wimpey, Persimmons and Barratt Developments increased between 2% and 4%.
AstraZeneca plc increased 0.2% to 10,097.0 pence and the company said its Tezspire (tezepelumab) has been approved for the treatment of severe asthma in the European Union.
Schneider Electric SE increased 1.5% to 117.80 euros after the company agreed to acquire stakes held by minority shareholders in Aveva Plc for 3,100 pence a share.
The offer price is 41% premium to the last closing price of 2,192 pence before the commencement of the offer period.
The acquisition values the entire capital of Aveva at approximately
European Stocks Extend Gains, Energy Prices Jump
Bridgette Randall
21 Sep, 2022
Frankfurt
European bourses traded near flat-line in cautious morning trading ahead of the Fed's rate-hike decision after the market-close.
Market indexes scaled higher after the U.S. markets advanced with the presumed 75 basis points rate increase later in the day.
The Bank of England, the Swiss National Bank, the Norges Bank of Norway and the Bank of Japan are also expected to announce their rate decisions on Thursday.
The DAX index added 0.6% to 12,741.19, the CAC-40 index gained 0.7% to 6,022.49 and the FTSE 100 index increased 0.5% to 7,230.87.
Energy prices traded higher after Russia mobilized 300,000 reserve troops to bolster its military presence in Ukraine raising the prospects of a prolonged war.
Crude oil was nearly unchanged at $84 a barrel and natural gas price held near $7.90 a thermal unit.
However, in Europe, TTF natural gas price advanced 4% to 202.50 euros a megawatt hour.
Brent crude oil traded up 60 cents to $91.25 a barrel.
Resource stocks were in focus after crude oil and commodities prices advanced.
Antofagasta, BHP Limited, Anglo American and Glencore gained between 1% and 3%.
Homebuilders in the U.K. gained on the hopes that the recently appointed Prime Minister Liz Truss may lower stamp duty in the government's mini-budget this week.
Taylor Wimpey, Persimmons and Barratt Developments increased between 2% and 4%.
Uniper SE plunged 31.2% to 2.38 euros after Germany nationalized the natural gas importer and the electric utility.
A German government agency acquired the company stake held by Fortum Oyj for 1.70 euros a share.
Vallourec SA increased 6.1% to 10.37 euros after the maker of premium casing and tubing products signed a 10-year sales agreement with Saudi Arabia based Aramco.
Schneider Electric SE increased 1.5% to 117.80 euros after the company agreed to acquire stakes held by minority shareholders in Aveva Plc for 3,100 pence a share.
The offer price is 41% premium to the last closing price of 2,192 pence before the commencement of the offer period.
Aveva Group Plc rose 1.8% to 3,108 pence.
Stocks Advance as Fed Battles Inflation and Diminished Credibility
Barry Adams
21 Sep, 2022
New York City
Stocks on Wall Street traded higher as investors await the Fed's rate-hike decision and comments on the economy and future rate path.
The Federal Reserve is expected to lift the key lending rate by 75 basis points as inflation is running near 4-decade high.
Benchmark indexes are likely to close higher if the Fed lifts rates as expected but the market advance could come to a screeching halt if the Fed delivers larger or smaller than expected rate hike.
Inflation has been running ahead of the Fed's target rate of 2% for 24 months in a row and the Fed has been lagging in its response in tackling rapid price increases.
In the last one year, the gasoline price inflation has seeped wide and deep in the broader economy, making the Fed's job tougher in lowering inflation to the Fed's preferred rate 2%.
In many ways, the Fed is not only battling rapid price rise but also fighting its diminished credibility with investors for failing to spot and tackle inflation early on.
The Fed actions are also the largest contributors in creating conditions for rapid price increases.
Since 2008, the Federal Reserve has created and added $9 trillion of new money to the financial system.
The S&P 500 index advanced 0.6% to 3,877.56 and the Nasdaq Composite index added 0.3% to 11,466.32.
Energy prices traded higher after Russia mobilized 300,000 reserve troops to bolster its military presence in Ukraine raising the prospects of a prolonged war.
Crude oil was nearly unchanged at $84 a barrel and natural gas price held near $7.90 a thermal unit.
However, in Europe, TTF natural gas price advanced 4% to 202.50 euros a megawatt hour.
European bourses traded flat in cautious trading ahead of the Fed's rate-hike decision after the market-close.
The Bank of England, The Swiss National Bank and Norges Bank of Norway are also expected to announce their rate decisions on Thursday.
The DAX index added 0.3% to 12,710.09, the CAC-40 index gained 0.5% to 6,005.31 and the FTSE 100 index increased 0.3% to 7,210.27.