Central Banks Across Atlantic Fight High inflation and Low Credibility

Barry Adams
18 Nov, 2022
New York City

Benchmark indexes rebounded in the final hour of trading after crude oil traded higher from the 4% loss in the morning. 

The latest comments from the Fed officials suggested that rapid rate hikes are likely to continue and interest rates are likely to stay elevated longer than previously estimated.  

However, the ongoing debate continued about the size of the next rate hike at the December meeting of Fed's policymakers. 

Market participants are divided about the future rate path after the release of the CPI index a week ago. 

The sharp market rally last week suggested that investors are estimating  a smaller rate hike of 0.50% but elevated inflation seeping in the housing market and services sector of the economy also suggest that higher rates for longer may be needed to dislodge the sky-high inflation. 

The S&P 500 index increased 0.5% to 3,965.34 and the Nasdaq Composite index was nearly unchanged to close at 11,146.06. 

For the week, the S&P 500 index declined 0.7% and the Nasdaq Composite index fell 1.6%. 

Crude oil declined as much as 4% for the second day in a row and extended 2-day decline to 10% after focus shifted from supply worries to demand concerns. 

Resurgent coronavirus infections in China dashed hopes of the rebound in economic activities and weakened the outlook for an increase in oil imports.     

Crude oil declined $1.82 to $80.27 a barrel and natural gas was unchanged at $6.37 a thermal unit. 

Treasury yields rose on the back of hawkish comments from Federal Reserve officials for three days in a row, but cryptic messages and mixed-signals have kept investors on the edge.   

Investors are increasingly factoring that higher rates may not succeed in lowering inflation to the target range of 2%, without significantly impacting the economy and labor markets. 

The yield on 2-year Treasury notes rose to 4.53%, 10-year Treasury notes inched up to 3.83% and 30-year bonds edged up to 3.93%. 

 

Home Sales Lowest In Eleven Years 

Existing home sales fell 5.9% to a seasonally adjusted rate of 4.43 million from September, the ninth monthly sales decline in a row. 

Home sales  fell to the lowest level since December 2011, excluding a brief decline during the onset of the pandemic, on elevated home prices and surge in mortgage rates. 

"More potential homebuyers were squeezed out from qualifying for a mortgage in October as mortgage rates climbed higher. 

The impact is greater in expensive areas of the country and in markets that witnessed significant home price gains in recent years", said NAR chief economist Lawrence Yun.

 

U.S. Stock Movers 

Gap Inc jumped 2.9% to $13.10 after the struggling retailer reported unexpected quarterly profit and higher-than-expected sales. 

Third quarter net sales increased 2% to $4.04 billion and comparable sales increased 1% from a year ago. 

Online sales increased 5% from a year ago and represented 35% of total sales. 

Third quarter income swung to $282 million compared to a loss of $252 million and diluted earnings per share was 77 cents compared to a loss of 40 cents a year ago. 

Foot Locker, Inc jumped 7.4% to  $35.51 after the retailer reported higher-than-expected sales and earnings and comparable store sales rose faster-than-expected. 

The retailer also lifted its annual outlook. 

Williams Sonoma, Inc declined 6.80% to  $121.61 after the housewares retailer reported better-than-expected quarterly sales and results. 

The retailer reiterated " mid-to-high single digit annual net revenue growth and operating margins relatively in-line with our fiscal year 2021 operating margin."

The stock has been on the slide after hitting the record high above $215 on November 19, 2021. 

Ross Stores, Inc jumped 11.4% to $109.31 after the discount retailer lifted its fourth quarter guidance.