Stocks Inch Higher, Oil Drops On China Worries

Barry Adams
15 Aug, 2022
New York City

Stocks on Wall Street stretched the market rally for the fifth week in a row and investors look ahead to a week of earnings from retailers. 

Children's Place and Walmart are scheduled to release earnings on Tuesday, Bed Bath & Beyond, Lowe's, and Target on Wednesday. BJ's, Kohl's, Ross Stores on Thursday, and Buckle and Footlocker on Friday. 

The Federal Reserve is scheduled to release its latest minutes of meetings on Wednesday.    

Stocks opened lower on Monday and lacked direction in early trading but managed to climb above the flat-line. 

Tech stocks advanced after Tesla reported a surge in production and investors shook off weak economic data from China. 

Energy stocks continued to trade lower in the session after crude oil prices dropped 3% and extended a decline to 27% from the peak on March 8. 

However, futures of natural gas prices climbed higher on the growing uncertainties about the Russian gas delivery to customers in Europe. 

The S&P 500 and the Nasdaq Composite index closed at the highs of the session. 

The S&P 500 index increased 0.4% or 16.99 to 4,297.14 and the Nasdaq Composite index rose 0.6% or 80.87 to 13,128.05. 

Futures of crude oil declined $3.12 a barrel to $88.92 and natural gas prices rose 8 cents to $8.84. 

The yield on 10-year U.S. Treasury notes eased to 2.78% and 2-year notes declined to 3.201%. 

Tesla Inc gained 3.1% to $927.96 after the electric vehicle maker's chief executive said the Shanghai plant has produced one million vehicles since its inception in 2018. 

Musk also said a total of 3 million Tesla vehicles have been produced with 2 million at its facility in Fremont, California.   

Retailers closed higher as investors look ahead to a big week of earnings for the sector. 

Walmart, Target, BJ's, Costco, Ross Stores, and Children's Place closed up between 0.3% and 1%. 

Home builders were under pressure after the industry association said that the housing recession is well underway. 

The National Association of Home Builders said builders' confidence declined for the eighth month in a row as "elevated interest rates, ongoing supply chain problems and high home prices continue to exacerbate housing affordability challenges."

The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index fell six points to 49 in August, the first decline below the key break-even measure of 50 since May 2020. 

The index measures builders' confidence for the newly built single-family home.  

Lennar Corporation, D R Horton, NVR, Pulte Group fell between 0.5% and 1% and extended this year's loss to more than 20%. 

 

German wholesale Inflation Eases in July 

European markets closed higher tracking the advance in New York. 

Energy prices in the region declined after China reported a flurry of economic data indicating sluggish economy. 

The DAX index increased 0.2% to 13,816.61, the CAC 40 index increased 0.3% to 6,569.95, and the FTSE 100 index added 0.1% to 7,509.15. 

Energy prices were weak after China unexpectedly lowered key lending rates. 

Brent crude oil prices fell $3.12 a barrel to $95.08 but natural gas prices rose 11% to 234.90 euros per MWh for October delivery on the ICE.  

German wholesale inflation declined for the third month in a row but remained elevated, Germany's statistics office said today. 

Wholesale price index increase slowed to 19.5% in July after rising at 21.2% in June, the Destatis reported Monday. 

Resource stocks were traded lower after the release of weak economic data from China. 

Anglo American, Antofagasta, and Glencore fell between 1% and 2.5%. 

Energy companies were among the leading decliners. 

BP Plc, Shell Plc, and TotalEnergies SE fell between 2% and 4%. 

 Henkel AG rose 1.1% 65.34 euros and the consumer products company reported weak first-half results on rising costs. 

Hellofresh SE increased as much as 8% before closing up 2.7% to 30.82 euros after the meal kit provider  reported record quarterly revenues. 

Uniper SE surged as much as 12% before closing up 4% to 7.75 euros ahead of the German government's decision on the size of the federal government price levy. 

 

Japan's GDP Expands and China Lowers Rates On Slower Rebound 

Asian markets closed higher after a day of choppy trading and investors digested the latest mixed economic data from China, Japan and the U.S. 

The Nikkei 225 index increased 1.1% to 28,871.78 following the market advance in New York. 

Investors bid up stocks in Tokyo after a U.S. private survey showed consumers are lowering inflation expectations after gasoline prices declined for 58 days on a row. 

The weaker gasoline prices also supported growing expectations that consumer inflation may have peaked, easing pressures on the U.S. Federal Reserve in lifting rates by a larger amount of 75 basis points. 

Japan's economy expanded in the second quarter ending in June but the growth was slower than expected. 

The economy expanded at an annual rate of 2.2%, the Cabinet Office said in a preliminary reading on Monday. 

After adjusting for seasonality factors, the economy expanded at 0.5%. 

The economic contraction in the first quarter was upwardly revised to 0.5% from 1.0% on an annual basis and revised higher to 0.1% contraction from the previous estimate of 0.2% on a monthly basis. 

Daiichi Sankyo soared 14.5% to 4,211.0 yen after the company won an arbitration rule against the biotech firm Seagen. 

Pan Pacific International Holdings rose 11.5% to 2,408.0 yen after the operator of discount store Don Quijote lifted its annual income outlook. 

The company estimated first-half ending in December 2022 sales to increase 4.4% and sales in the full-year ending in June 2023 to increase 3.3%. 

Net income per share in the first-half is estimated at 55.34 yen and for the full-year at 95.42 yen.   

The Shanghai Composite Index closed nearly unchanged at 3,276.09 and the Hang Seng Index to 20.040.86.. 

The People's Bank of China lowered its 7-day short term lending rate and medium term one-year rate by 10 basis points to 2.0% and 2.75% respectively.  

A barrage of economic data from the statistics bureau painted a mixed but weak economic picture. 

 Rates have been lowered for the first time since January after the latest industrial production and retail sales data showed persistent weakness in the economy.    

Industrial production rose at a slower pace of 3.8% in July after rising at 3.9% in June, the National Bureau of Statistics said Monday.    

On a monthly basis, industrial production increased 0.38%.    

Retail sales of consumer goods rose at a slower pace of 2.7% in July after rising at 3.1% in June, the NBS data showed. Retail sales rose 0.27% on a monthly basis.    

However, international trade activities were one of the brighter aspects of the economy.    

International trade shot up 16.6% from a year ago in July after rising 14.3% in June,     

Specifically, exports surged 23.9% to 2,244.6 billion yuan and imports jumped 7.4% to 1,561.9 billion yuan. The trade surplus increased to 682.7 billion yuan.    

The unemployment rate in July declined to 5.4% from a year ago in July from 5.5% in June.    

Consumer prices accelerated at 2.7% rate in July after rising at 2.5% in June.  

Markets in India were closed to celebrate the 75th Independence Day holiday ending a century of exploitation and devastation during the U.K's colonial rule. 

In cautious trading, Australian market indexes closed higher, reacting to mixed corporate news and ahead of the release of minutes of meetings of the Reserve Bank of Australia's August policy meeting. 

The ASX 200 Index rose 0.5% to 7,064.30, while the broader All Ordinaries Index gained 0.5% to end at 7,324.90.

BHP Billiton edged up a fraction and Santos declined 1.1% ahead of the earnings release later in the week.