Market Update
U.S. Stocks Rally After Rate Hike On Soft Landing Hopes
Barry Adams
01 Feb, 2023
New York City
Stocks reversed morning losses and soared in the afternoon trading after the Federal Reserve slowed rate hike but signaled more increases to follow.
The Federal Reserve increased its key lending rate at a slower pace but held out for more hikes to combat elevated inflation.
In an unanimous decision, the Federal Open Market Committee raised federal funds target rate range by 25 basis points to 4.50% to 4.75%. the statement from the Federal Reserve showed.
Policymakers have been struggling in deciding the future rate path as the economy cools but labor market conditions remain tight and higher rates have a lagging effect on the economy.
With inflation falling but far from the Fed's desired level and the economy still growing, indicating that the rates are still not restrictive enough to bring down the inflation, making the Fed's balancing act between inflation and employment levels challenging.
Chairman Powell in a press conference after the rate decision stressed that the Federal Reserve is closely watching labor markets data.
With today's rate hike the Federal Reserve has raised rates eight times in the last ten months but inflation has stayed well above the Fed's target rate of 2%.
Some investors have been hoping for the Federal Reserve to pause on the hopes of cooling inflation.
“Given our outlook, I don’t see us cutting rates this year, if our outlook comes true, in a press conference after the decision, Chairman Jerome Powell clarified.
Across the Atlantic, the European Central Bank and the Bank of England are also scheduled to release rate decisions on Thursday.
U.S. Private Sector Job Growth Slowed In January
Private sector job growth slowed more than expected in January, according to a monthly report released by the payment processor ADP Wednesday.
Private sector net job additions declined to 106,000 in January from the upwardly revised 253,000 in December.
The employment in the service sector rose 109,000 after employment in leisure and hospitality expanded.
"In January, we saw the impact of weather-related disruptions on employment during our reference week. Hiring was stronger during other weeks of the month, in line with the strength we saw late last year," said ADP chief economist Nela Richardson.
Jobs in large businesses increased 128,000 and employment at mid sized businesses advanced 64,000 jobs, while employment at small businesses declined 75,000, the ADP report showed.
The U.S. Labor Department is scheduled to release its monthly non-farm payroll report on Friday and economists are anticipating job growth to slow to 175,000 from 223,000 in December.
Jobless rate in January is expected to advance to 3.6% from 2.5%.
U.S. Indexes Surge After Rate Decision
Benchmark indexes soared after the Federal Reserve raised rates as expected and signaled more rate hikes to follow at next meetings.
The S&P 500 index closed higher 1.2% to 4,119.21 and the Nasdaq Composite index advanced 2.0% to 11,816.32
Crude oil decreased $2.04 to $76.83 a barrel and natural gas futures fell 19 cents to $2.48 a thermal unit.
The yield on 2-year Treasury notes declined to 4.10%, 10-year Treasury notes inched lower to 3.41% and 30-year Treasury notes decreased to 3.57%.
European Markets Anticipate Aggressive Rates Hikes
European markets struggled to advance ahead of crucial rate decisions and investors reacted to local corporate earnings reports in cautious trading.
Euro Area Inflation Eased In January
The Euro Area inflation in January declined to an eight-month low to 8.5% from 9.2% in December.
Core inflation remained stable at 5.2%, Eurostat said in a preliminary statement on Wednesday.
Looking at the inflation components, inflation slowed across all factors but remained elevated.
Annual inflation rate for energy declined to 17.2% from 25.5% in December, followed by food, alcohol & tobacco eased to 14.1% from 13.8%, non-energy industrial goods to 6.9% from 6.4% and services to 4.2% from 4.4%.
The preliminary report used the estimate for the German inflation data after the Federal Statistics Office faced technical glitches and could not deliver the information before the release of this report.
European Indexes Trade In Tight Range
The DAX index increased 0.5% to 15,195.85, the CAC-40 index gained 0.2% to 15,195.85 and the FTSE 100 index edged up 0.01% to 7,772.77.
Euro Advanced ahead of Expected ECB Rate Hike
The euro inched higher to $1.089, the British pound advanced to $1.232 and the Swiss franc traded up to 91.68 U.S. cents.
Crude Oil Held Steady
Brent crude oil price decreased to 74 cents to $84.67 a barrel and the Dutch TTF natural gas futures rose 3.4% to €59.31 per MWh.
Europe Movers
Novartis AG declined 2.6% to 80.83 Swiss franc after the Swiss pharmaceutical company reported a sharp decline in fourth quarter profit.
Net sales in the December quarter fell 4% to $12.7 billion from $13.2 billion and net income plunged 91% to $1.5 billion from $16.3 billion a year ago.
Excluding the impact of Roche income, net income rose 2% and earnings per share rose 7% in constant currencies.
Novartis agreed to sell 53.3 million (approximately 33%) Roche bearer shares in a bilateral transaction to Roche for a total consideration of $20.7 billion in November 2021.
Vodafone Group fell 2.1% to 91.18 pence after the British telecom said growth slowed in its latest quarter.
Revenue in the fiscal third quarter ending in December declined 04% to €11.63 billion from €11.68 billion largely on the account of weakness in its German business.
The telecom operator reiterated its fiscal year 2023 guidance for adjusted EBITDA and leased assets between €15.0 and 15.2 billion and adjusted free cash flow of €5.1 billion.
Hannover Re decreased 5% to €176.85 after the German reinsurance company said it has increased its 2023 major net loss to €1.725 billion to account for higher net loss expectations from natural disasters.
Halma Plc increased 1.4% to 2,178.64 pence after the fire detection safety company agreed to acquire Bradford, UK based Thermocable (Flexible Elements) Ltd for £22 million.
Thermocable in the year ending in March 2022 generated sales of £6 million with return on sales above the "Halma's target range of 18% to 22%."
Asian Markets
Asian markets paused ahead of rate decisions in the U.S. and Europe and a private survey showed manufacturing in China shrank at a slower pace in January but stayed strong in India.
The Nikkei 225 index increased 0.07% to 27,346.88 and the yen edged lower to 129.57 against the U.S. dollar.
The Shanghai Composite Index increased 0.9% to 3,284.92 and the Hang Seng index advanced 1.1% to 22,072.18.
India's Budget to Expand Rail and Highway Networks
Stocks in Mumbai traded mixed after the central government released the Union Budget with a focus on improving transportation investment and accelerating manufacturing industry growth.
Central government estimated spending in fiscal year 2024 ending in March to increase 7.5% to ₹45 lakh crore, including ₹5.94 lakh crore for defense and increase railways spending by 48% to ₹2.4 lakh crore.
The Finance Ministry is expecting the fiscal year 2024 nominal growth to slow down to 11% from the estimated 15.4% in the fiscal year 2023.
The Sensex in Mumbai traded higher 0.3% or 158.18 points to 59,708.08 but the Nifty index declined 0.3% or 45.85 points to 17,616.30.
The Indian rupee edged slightly lower to 81.74 against the U.S. dollar.
After the market closed, Adani Enterprises announced its plan to cancel its $2.5 billion stock offering in a filing with the stock exchange.
In a stunning setback, billionaire Gautam Adani decided to pull the plug after the stock resumed its decline for the second day following the critical report from Hindenburg Research.
"However, today the market has been unprecedented, and our stock price has fluctuated over the course of the day. Given these extraordinary circumstances, the Company’s board felt that going ahead with the issue will not be morally correct.
The interest of the investors is paramount and hence to insulate them from any potential financial losses, the Board has decided not to go ahead with the FPO," the company said in a filing with the Bombay Stock Exchange.
The offering cancellation is not expected to have any material near-term impact on the company's operations but the rise of the company in recent years was seen by many as the emergence of India's economy on the global stage.
"Our balance sheet is very healthy with strong cash flows and secure assets, and we have an impeccable track record of servicing our debt. This decision will not have any impact on our existing operations and future plans," Chairman Gautam Adani added in the statement.
Europe Movers: Entain, Halma, Hannover Re, Novartis, Vodafone
Bridgette Randall
01 Feb, 2023
Frankfurt
Novartis AG declined 2.6% to 80.83 Swiss franc after the Swiss pharmaceutical company reported a sharp decline in fourth quarter profit.
Net sales in the December quarter fell 4% to $12.7 billion from $13.2 billion and net income plunged 91% to $1.5 billion from $16.3 billion a year ago.
Excluding the impact of Roche income, net income rose 2% and earnings per share rose 7% in constant currencies.
Novartis agreed to sell 53.3 million (approximately 33%) Roche bearer shares in a bilateral transaction to Roche for a total consideration of $20.7 billion in November 2021.
Vodafone Group fell 2.1% to 91.18 pence after the British telecom said growth slowed in its latest quarter.
Revenue in the fiscal third quarter ending in December declined 04% to €11.63 billion from €11.68 billion largely on the account of weakness in its German business.
The telecom operator reiterated its fiscal year 2023 guidance for adjusted EBITDA and leased assets between €15.0 and 15.2 billion and adjusted free cash flow of €5.1 billion.
Hannover Re decreased 5% to €176.85 after the German reinsurance company said it has increased its 2023 major net loss to €1.725 billion to account for higher net loss expectations from natural disasters.
Halma Plc increased 1.4% to 2,178.64 pence after the fire detection safety company agreed to acquire Bradford, UK based Thermocable (Flexible Elements) Ltd for £22 million.
Thermocable in the year ending in March 2022 generated sales of £6 million with return on sales above the "Halma's target range of 18% to 22%."
Entain Plc increased 2% to 1,518.50 pence after the sports betting company lifted its profit outlook.
Net gaming revenue in the fourth quarter increased 11% and rose 7% in constant currency and active customers rose 14% from a year ago to record levels.
2022 full-year revenue in the company's U.S. joint venture BetMGM surged 71% or rose 51% on the same state basis to $1.44 billion.
European Markets Await Rate Hikes from ECB and BoE
Bridgette Randall
01 Feb, 2023
Frankfurt
European markets struggled to advance ahead of crucial rate decisions and investors reacted to local corporate earnings reports in cautious trading.
Euro Area Inflation Eased In January
The Euro Area inflation in January declined to an eight-month low to 8.5% from 9.2% in December.
Core inflation remained stable at 5.2%, Eurostat said in a preliminary statement on Wednesday.
Looking at the inflation components, inflation slowed across all factors but remained elevated.
Annual inflation rate for energy declined to 17.2% from 25.5% in December, followed by food, alcohol & tobacco eased to 14.1% from 13.8%, non-energy industrial goods to 6.9% from 6.4% and services to 4.2% from 4.4%.
The preliminary report used the estimate for the German inflation data after the Federal Statistics Office faced technical glitches and could not deliver the information before the release of this report.
European Indexes Trade In Tight Range
The DAX index increased 0.5% to 15,195.85, the CAC-40 index gained 0.2% to 15,195.85 and the FTSE 100 index edged up 0.01% to 7,772.77.
Euro Advanced ahead of Expected ECB Rate Hike
The euro inched higher to $1.089, the British pound advanced to $1.232 and the Swiss franc traded up to 91.68 U.S. cents.
Crude Oil Held Steady
Brent crude oil price decreased to 74 cents to $84.67 a barrel and the Dutch TTF natural gas futures rose 3.4% to €59.31 per MWh.
Europe Movers
Novartis AG declined 2.6% to 80.83 Swiss franc after the Swiss pharmaceutical company reported a sharp decline in fourth quarter profit.
Net sales in the December quarter fell 4% to $12.7 billion from $13.2 billion and net income plunged 91% to $1.5 billion from $16.3 billion a year ago.
Excluding the impact of Roche income, net income rose 2% and earnings per share rose 7% in constant currencies.
Novartis agreed to sell 53.3 million (approximately 33%) Roche bearer shares in a bilateral transaction to Roche for a total consideration of $20.7 billion in November 2021.
Vodafone Group fell 2.1% to 91.18 pence after the British telecom said growth slowed in its latest quarter.
Revenue in the fiscal third quarter ending in December declined 04% to €11.63 billion from €11.68 billion largely on the account of weakness in its German business.
The telecom operator reiterated its fiscal year 2023 guidance for adjusted EBITDA and leased assets between €15.0 and 15.2 billion and adjusted free cash flow of €5.1 billion.
Hannover Re decreased 5% to €176.85 after the German reinsurance company said it has increased its 2023 major net loss to €1.725 billion to account for higher net loss expectations from natural disasters.
Halma Plc increased 1.4% to 2,178.64 pence after the fire detection safety company agreed to acquire Bradford, UK based Thermocable (Flexible Elements) Ltd for £22 million.
Thermocable in the year ending in March 2022 generated sales of £6 million with return on sales above the "Halma's target range of 18% to 22%."
Fed Slows Rate Hike and Signals More Increases
Brian Turner
01 Feb, 2023
New York City
The Federal Reserve increased its key lending rate at a slower pace but held out for more hikes to combat elevated inflation.
In an unanimous decision, the Federal Open Market Committee raised federal funds target rate range by 25 basis points to 4.50% to 4.75%. the statement from the Federal Reserve showed.
Policymakers have been struggling in deciding the future rate path as the economy cools but labor market conditions remain tight and higher rates have a lagging effect on the economy.
With inflation falling but far from the Fed's desired level and the economy still growing, indicating that the rates are still not restrictive enough to bring down the inflation, making the Fed's balancing act between inflation and employment levels challenging.
With today's rate hike the Federal Reserve has raised rates eight times in the last ten months but inflation has stayed well above the Fed's target rate of 2%.
"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," Fed's statement noted.
U.S. and Global Markets Await Rate Decisions
Barry Adams
01 Feb, 2023
New York City
Benchmark indexes were in a holding pattern ahead of the rate decision this afternoon from the Federal Reserve.
Financial markets are expecting policymakers to increase rate by 25 basis points after seven rate increases in 2022.
Despite multiple rate hikes last year, the economy continues to expand and employment keeps growing and inflation remains far above the Fed's preferred target rate of 2%.
The European Central Bank and the Bank of England are also expected to release rate decisions on Thursday.
U.S. Private Sector Job Growth Slowed In January
Private sector job growth slowed more than expected in January, according to a monthly report released by the payment processor ADP Wednesday.
Private sector net job additions declined to 106,000 in January from the upwardly revised 253,000 in December.
The employment in the service sector rose 109,000 after employment in leisure and hospitality expanded.
"In January, we saw the impact of weather-related disruptions on employment during our reference week. Hiring was stronger during other weeks of the month, in line with the strength we saw late last year," said ADP chief economist Nela Richardson.
Jobs in large businesses increased 128,000 and employment at mid sized businesses advanced 64,000 jobs, while employment at small businesses declined 75,000, the ADP report showed.
The U.S. Labor Department is scheduled to release its monthly non-farm payroll report on Friday and economists are anticipating job growth to slow to 175,000 from 223,000 in December.
Jobless rate in January is expected to advance to 3.6% from 2.5%.
U.S. Indexes On Pause Ahead of Rate Decision
The S&P 500 index edged lower 0.2% to 4,068.91 and the Nasdaq Composite index fell 0.04% to 11,579.75.
Crude oil increased 6 cents to $78.93 a barrel and natural gas futures fell 9 cents to $2.58 a thermal unit.
The yield on 2-year Treasury notes declined to 4.19%, 10-year Treasury notes inched lower to 3.48% and 30-year Treasury notes decreased to 3.61%.
European Markets
European markets traded down ahead of rate decisions across the Atlantic.
The Euro Area inflation in January declined to an eight-month low to 8.5% from 9.2% in December.
Core inflation remained stable at 5.2%, Eurostat said in a preliminary statement on Wednesday.
The DAX index increased 0.5% to 15,195.85, the CAC-40 index gained 0.2% to 15,195.85 and the FTSE 100 index edged up 0.01% to 7,772.77.
The euro inched higher to $1.089, the British pound advanced to $1.232 and the Swiss franc traded up to 91.68 U.S. cents.
Brent crude oil price decreased to 74 cents to $84.67 a barrel and the Dutch TTF natural gas futures rose 3.4% to €59.31 per MWh.
Asian Markets
Asian markets paused ahead of rate decisions in the U.S. and Europe and a private survey showed manufacturing in China shrank at a slower pace in January but stayed strong in India.
The Nikkei 225 index increased 0.07% to 27,346.88 and the yen edged lower to 129.57 against the U.S. dollar.
The Shanghai Composite Index increased 0.9% to 3,284.92 and the Hang Seng index advanced 1.1% to 22,072.18.
Stocks in Mumbai traded mixed after the central government released the Union Budget with a focus on improving transportation investment and accelerating manufacturing industry growth.
Central government estimated spending in fiscal year 2024 ending in March to increase 7.5% to ₹45 lakh crore, including ₹5.94 lakh crore for defense and increase railways spending by 48% to ₹2.4 lakh crore.
The Finance Ministry is expecting the fiscal year 2024 nominal growth to slow down to 11% from the estimated 15.4% in the fiscal year 2023.
The Sensex in Mumbai traded higher 0.3% or 158.18 points to 59,708.08 but the Nifty index declined 0.3% or 45.85 points to 17,616.30.
The Indian rupee edged slightly lower to 81.74 against the U.S. dollar.
Movers: AMD, Corning, Franklin Resources, Match Group, Moody's, PayPal, Peloton, Sanmina, Snap
Scott Peters
01 Feb, 2023
New York City
Advanced Micro Devices traded 3% higher after the company's quarterly results were supported by the chip sales for data centers and specialty chips in its recent acquisition Xilinx.
Advanced Micro Devices said the company swung to a quarterly loss in the fourth quarter on $1.4 billion amortization charge for intangibles linked to Xilinx acquisition.
AMD said revenue in the fourth quarter increased 16% to $5.6 billion and net income dropped 98% to $21 million from $974 million and diluted EPS dropped to 1 cent from 80 cents a year ago.
Corning Inc declined 4% after the company reported a sharp fall in earnings largely on the account of restructuring charges and financial hedging costs.
Corning said revenue in the Q4 decreased 7% to $3.4 billion and the company swung to a net loss of $36 million from a profit of $287 million and diluted EPS was (0.04) compared to 56 cents a year ago.
Corning Inc said fourth quarter loss was primarily driven by restructuring charges and non-cash, mark-to-market adjustments associated with the currency hedging contracts and yen denominated debt.
Franklin Resources, Inc declined 1% after the investment management company said assets under management declined 12% to $1.4 trillion and long-term net asset outflow was $10.9 billion compared to inflow of $24.1 billion a year ago.
Franklin Resources said revenue in the fiscal first quarter 2023 rose 1% to $1.97 billion and net income dropped 29% to $165 .6 million and diluted EPS fell to 32 cents from 46 cents a year ago.
Match Group dropped 9% after the online dating sites operator reported a decline in paying subscribers.
Match Group said fourth quarter revenue declined 2% to $786 million and swung to a net income of $84.5 million from $168.7 million and diluted EPS was 31 cents from 60 cents a loss.
Match Group said Tinder direct revenue was flat over the prior year quarter with a 3% increase in paying subscribers to 10.8 million and fell 1% to 16.1 million across all sites.
Moody's Corp gained 2.2% after the bond rating agency said weak financial market conditions negatively impacted its quarterly results.
Moody's Corp said revenue in the fourth quarter fell 16% to $1.3 billion and net income plunged 71% to $246 million and diluted EPS dropped to $1.34 from $2.28 a year ago.
"Credit market activity remained muted across all sectors due to ongoing market uncertainty, central bank actions, high levels of corporate cash, as well as persistent inflationary and recessionary concerns," the company said in the earnings release.
Moody's Corp board increased quarterly dividend by 10% to 77 cents a share payable to shareholders on record February 24 on March 17.
PayPal Inc rose more than 3% after the payment processor said it plans to lower its staffing levels.
PayPal Inc said it plans to lay off 2,000 or about 7% of its staff amid rising economic uncertainties.
Peloton Interactive Inc jumped 5% after the fitness equipment maker reported quarterly sales improvement and narrower loss.
Revenue in the fiscal second quarter ending in December fell 30% from a year ago but rose 29% from the previous quarter to $793 million.
Net loss in the quarter shrank 24% to $335.4 million from $439.4 million and diluted loss per share fell to 98 cents from $1.39 a year ago.
Sanmina Corp said revenue in the fiscal first quarter 2023 ending in December rose 41% to $2.4 billion and net income soared 51% to $88.4 million and diluted EPS rose to $1.48 from 89 cents a year ago.
Snap Inc declined as much as 15% after the social media company reported a decline in revenue for third quarter in a row and sees no end in sight for the recent advertising revenue weakness.
Snap said daily active users increased 17% to 375 million including 2 million paying subscribers in the fourth quarter and the company generated a second full-year of free cash flow of $55 million.
Snap said Q4 revenue rose 0.1% to $1.3 billion and the company swung to a net loss of $288 million from a profit of $23 million and diluted EPS was 18 cents loss compared to 1 cent profit a year ago.