S&P, Nasdaq Advance 1%, Mortgage Rates Continue to Rise

Barry Adams
23 Jun, 2022
New York City

U.S. stocks opened higher and in volatile trading advanced after investors added positions in all sectors.  

Investors disregarded fears of economic recession and elevated energy prices.  

U.S. weekly jobless claims declined 2,000 to a seasonally adjusted 229,000 in the week ended June 18, the Labor Department said today.

The previous week's claims were revised 2,000 higher to 231,000.  

The 4-week moving average was 223,500, an increase of 4,500 from the previous week's revised average.

The 4-week moving average of insured unemployment remained near 1%, historic multi-decade low. 

The S&P 500 increased 0.8% to 3,789.79 and the Nasdaq Composite advanced 1.3% to 11,196.28. 

The yield on 10-year Treasury notes declined 14 basis points to 3.018% but mortgage rates stayed increased to 5.81%, a 14-year high according to the latest weekly data from Freddie Mac survey.  

30-year fixed-rate mortgage averaged 5.81% with an average 0.8 point as of June 23, 2022, up from last week when it averaged 5.78%. 

A year ago at this time, the 30-year fixed-rate averaged 3.02%.

Futures of crude oil fell 61 cents to $105.51 a barrel and natural gas fell 43 cents to $6.41 a unit. 

The S&P 500 and the Nasdaq Composite indexes opened higher and advanced in a volatile pattern as investors snapped up beaten down and leading tech stocks. 

Apple Inc, Microsoft Corp, Alphabet Inc, Meta Platforms, and Amazon added between 1% and 1.8%.  

Occidental Petroleum Corp gained 1.3% to $56.47 after Berkshire Hathaway increased investment by $529 million and lifted its stake to 16.3% in the oil refiner and explorer. 

 Berkshire now owns 152.7 million shares worth $8.5 billion in the company after adding a total of 9.5 million shares in the last week. 

Berkshire also controls a large stake in Chevron 

On Wednesday, President Joe Biden is expected to ask Congress to drop federal gasoline and diesel taxes for three months. 

Weaker oil prices dragged down stocks in the energy complex. 

Chevron and Marathon Oil dropped more than 1.5%, Exxon Mobil declined 1.6% and Schlumberger NV fell 3.7% after president Biden's administration urged Congress to drop federal tax on gasoline and diesel sales for the next three months.

Federal tax on regular gasoline is 18 cents and diesel 24 cents a gallon. 

Lower tax at the pump could provide relief to consumers but it can also lift the fuel demand worsening tight supply.   

KB Home surged 8.7% to $28.49 and yesterday after the market closed the company reported sales in the second quarter ending in May increased 19% to $1.72 billion and net income soared 47% to $210 million. 

The home builder delivered 3,469 homes, matching the deliveries in the quarter a year ago and average selling price increased 21% to $494,300. 

The home builder guided sales in the fiscal year between $7.3 billion and $7.5 billion and average home selling price of $500,000. 

 

Growth Worries Plague European Markets 

 

European markets extended losses for the second day in a row on the worries that the region's economy is slowing faster than anticipated. 

The eurozone private sector expanded at the slowest pace in a year after service sector growth eased and the manufacturing sector contracted for the first time in two years. 

The flash composite output index dropped to a 16-month low of 51.9 in June from 54.8 in the previous month, the preliminary data from S&P Global.  

Separate surveys also showed a sharp decline in business activities in France and Germany, two largest economies in the currency block. 

The DAX index fell 1.04% to 13,027.62, the CAC-40 index declined 0.2% to 5,907.52, and the FTSE 100 index dropped 0.5% to 7,055.07.

Oil companies extended losses after crude oil prices declined 2% in the region.

In volatile trading BP Plc and Shell Plc traded sideways with a negative bias. 

Mining companies declined for the second day on the recession worries in the U.S. 

Antofagasta Glencore, Anglo American declined between 1% and 4%. 

Siemens Energy dropped 3.2% to 15.27 euros and Air Liquid edged down 0.5% to 129.56 euros after the two companies announced a joint venture to make industrial scale hydrogen electrolyzers. 

Siemens Gamesa Renewable Energy SA was nearly unchanged at 17.85 euros after the wind turbine maker won an order of 60 turbines to supply Moray West Wind Farm located in Scotland. 

 Assicurazioni Generali gained 0.2% to 19.99 euros after the Italian insurance company announced a group organization structure. 

 

Asian Markets Extend Gains

 

Across Asia, market indexes closed higher after energy prices eased. 

Crude oil prices in Asia declined for the second day and extended 2-day losses to 5.5% and natural gas prices dropped 0.6% in the region on the worries of a global recession.

Indexes in China gained on local media reports suggesting that the government is considering extending the tax break for electric vehicles. 

Separately, an executive committee also approved a plan for fintech and large digital payment network operators. 

The Nikkei index in Japan closed marginally higher and resource stocks led the decliners. 

The Nikkei index in Tokyo added 0.08% to 26,171.25 and indexes in Hong Kong gained 1.3% to 21,273.34 and in Shanghai rose 1.6% to 3,320.15.

Sumitomo Metal Mining dropped 6% and Inpex Corp fell 2.6%. 

In Mumbai, stocks advanced for the second day after the latest minutes of a meeting from the monetary policy committee stressed the direction of inflation rather than its level.  

The Sensex index gained 709.54 or 0.9% to 52,265.23 and the Nifty 50 index advanced 0.93% to 15,556.65.

Automakers led the gainers on earnings optimism in the current quarter.