Stocks Extend Rally, Oil Under Pressure, Home Builders Sentiment Drops

Barry Adams
18 Oct, 2022
New York City

Major averages on Wall Street advanced on earnings optimism but bond yields remained near 14-year highs. 

Goldman Sachs reported lower but better-than-expected earnings supported by bond trading activities. 

Salesforce was also in focus after activist investor Starboard took a position in the company. 

Colgate Palmolive added more than 2% after activist investor Dan Loeb controlled Third Point acquired a stake in the company. 

The activist investor investments were reported by CNBC without citing sources.   

Microsoft erased morning gains of 2.7% after the company confirmed it cut about 1,000 jobs as revenue growth slows. The news was first reported by Axios and independently verified by ticker.com.

Semiconductor stocks also declined on the worries that the current slowdown in personal computing devices may last longer than anticipated. 

Home builders were in focus after the industry sentiment extended its recent plunge to a 12-year low, excluding a brief period during the start of the coronavirus pandemic in March 2020. 

The National Association of Home Builders/Wells Fargo Housing Market Index declined 8 points to 38 in October from the previous month. 

Any reading below 50 indicates negative sentiment.   

The S&P 500 index jumped 0.9%or 32.53 to 3,710.81 and the Nasdaq Composite index increased 0.8% or 81.17 to 10,756.32. 

Crude oil fell $2.93 to $82.43 a barrel and natural gas dropped 6 cents to $5.93 a thermal unit. 

The yield on 2-year Treasury notes edged down to 4.42%, 10-year Treasury notes eased to 3.99% and FTSE 100 index dropped to 4.03%. 

 

European Markets Advance, Natural Gas Drops to 4-month Low 

European markets extended gains as natural gas price dropped to a 4-month low. 

Natural gas declined for the fourth day in a row on milder than usual weather conditions across Europe and a large stockpile eased shortage worries. 

Germany ordered two nuclear power plants to continue operating till mid-2023 and Spain's national gas grid operator Enagas said it may reject the next shipment of LNG on the account of lack of storage capacity.

Italy's trade account swung to a deficit in August and Spain's trade deficit widened in the month. 

German business sentiment improved in October by 2.7 points to -59.2, from the previous month's 14-year low of 61.9, the Center for Economic Research said Tuesday.   

Brent crude fell $2.66 to $88.94 a barrel and natural gas TTF futures dropped 11.7% to 113.11 euros MWh. 

The DAX index jumped 1.75% or 221.99 to 12,869.00, the CAC-40 index increased 1.06% or 63.82 to 6,104.48. 

The euro edged down to 98.28 U.S. cents and the British pound inched lower to $1.129. 

The yield on 10-year German Bunds declined to 2.23%, French bonds edged lower to 2.817%, British Gilt to 3.92% and Italian bonds to 4.61%. 

 

Asian Markets Extend Rally On Earnings Optimism 

Stocks in Asia closed higher as investors focused on domestic earnings and the Hang Seng index soared. 

BYD, the maker of electric vehicles, reported third quarter earnings  soared more than three-fold. 

The People's Bank of China pumped 500 billion renminbi or $70 billion of liquidity into the financial system on Monday. 

The new medium term lending facility offered loans at 2.75%, the key rate that acts as a base for the prime lending rate. 

The PoB is set to announce its rate decision on October 20 and rates are expected to be left unchanged. 

The Nikkei 225 average rose 1.4% or 382.35 to 27,156.14, the Hang Seng index increased 1.8% or 301.68 to 16,914.58 and the Sensex index rose 0.9% or 549.62 to 58,960.60. 

The Kospi gained 1.4% to close at 2,249.95 ahead of earnings from Hyundai Motor and several other large conglomerates. 

Hyundai Motor added 0.6% and SK Telecom increased 2.5%. 

Stocks in Mumbai advanced after the Reserve Bank of India highlighted resilient economic activities. 

L&T Tech Services said fiscal second quarter revenue increased 24% and net income jumped 23% from a year ago. 

Adani Defence & Aerospace agreed to acquire the largest independent air services contractor Air Works for 400 crore rupees or $50 million.  

The yield on 10-year Japanese bonds held firm at 0.25%, Chinese bonds at 2.70% and Indian bonds at 7.42%. 

The yen traded near a 32-year low of 149.11 against a dollar, the Indian rupee at 82.20 and  Chinese yuan at 7.22.