Major Averages Trim Gains After Inflation Moderated and Weak Retailers Earnings

Barry Adams
01 Dec, 2022
New York City

Stocks lacked direction a day after a market surge that lifted the Nasdaq Composite and the S&P 500 indexes above 4% and 3% respectively. 

Gasoline prices at pump stations dropped to the level last seen in February, before Russia's invasion of Ukraine, that set off a worldwide surge in energy prices. 

Retail stocks were under pressure after a flood of quarterly results suggested rising inventory and operating costs dampened quarterly performance.  

Retailers are still struggling to control costs and discount retailers are finding it difficult to pass full-increase in goods costs to consumers. 

Dollar General and Big Lots dropped more than 7%. 

Investors welcomed the moderating of October price consumption expenditure index and small but steady increases in personal speeding and income. 

Investors are looking ahead to non-farm payrolls data on Friday. 

The U.S. economy added 261,000 jobs in October and averaged 407,000 additions in the year to October and averaged 562,000 monthly additions in 2021.  

 

Personal Spending and Income Rose 

Personal spending in October rose 0.8% following 0.6% in September and personal income increased 0.7%, the most in a year, the U.S. BEA reported Thursday.

 

PCE Price Index Growth Slows 

The price consumption expenditure, the Federal Reserve's preferred measure of inflation which takes into account customers substituting higher-priced goods for cheaper alternatives, rose at the same rate in October but slowed to the lowest level from a year ago.  

The PCE price index increased 0.3% in October from September and rose 6.0% from a year ago, the lowest in the year so far. 

The monthly increase in the index in October matched the rates for the previous two months. 

Prices for goods increased 7.2% and services rose 5.4% from a year ago. 

The core PCE Index, which excludes food and energy, slowed to 5.0% from 5.2% in the previous month. 

 

Weekly Jobless Claims Decline 

Initial jobless claims for the week ending November 26 declined to 226,000 from the upwardly revised 241,000 in the previous week, the Department of Labor reported Thursday. 

The previous week's level was revised up by 1,000 from 240,000 to  241,000.

The 4-week moving average increased by 1,750 to 228,750 from the previous week's revised average by 250 from 226,750 to 227,000. 

 

Markets Overview, Gasoline Spike Reversed 

The S&P 500 index declined 3.54 points to 4,076.57 and the Nasdaq Composite closed up 0.1% to 11,482.45. 

The national average gasoline price dropped to $3.47 a gallon, below $3.54 average on February 24, the day Russia invaded Ukraine, said AAA.

The average regular gasoline price fell 12 cents in the last week and dropped 29 cents in the last month. 

The national average after reaching a high of $5.02 a gallon in the past June is now down by $1.55 and the price spike since Russia's invasion of Ukraine has been reversed. 

Crude oil increased 85 cents to $81.40 a barrel and natural gas decreased 13 cents to $6.79 a thermal unit. 

The yield on 2-year Treasury notes declined to 4.24%, 10-year Treasury notes eased to 3.52% and 30-year Treasury bonds traded at 3.60%. 

 

U.S. Stock Movers 

Salesforce Inc declined 9.5% to $145.11 after the company said co-CEO Bret Taylor has decided to step down from the company without giving any reasons. 

This is the second time in four years that the co-CEO has resigned from the company. 

The software developer said fiscal third quarter revenue increased 14% to $7.8 billion and earnings declined to $210 million from $468 million or 21 cents from 48 cents a year ago.

Victoria's Secret & Company fell 6.7% to $42.91 after the company reported weaker-than-anticipated quarterly results. 

Revenue in the fiscal third quarter fell 8.5% to $1.32 billion and earnings plunged to $24.4 million from $75.2 million or 29 cents from 81 cents a year ago.

Five Below soared 16.6% to $187.48 after the deep discount retailer reported stronger-than-anticipated quarterly results. 

Revenue in the fiscal third quarter increased 6.2% to $645 million but net income plunged to $16.2 million from $24.2 million or 29 cents from 43 cents a year ago.

Costco Wholesale Corporation declined 6.2% to $505.83 after the company reported weak November sales and e-commerce sales fell. 

Costco Wholesale said November sales increased 5.7% to $19.1 billion but e-commerce sales dropped 10.1% from a year ago.

 

European Markets Inch Closer to One-month High

European market indexes gained and closed near one-month high after investors digested the latest batch of economic news and dovish comments from the U.S. Federal Reserve Chairman.  

Investors welcomed the possibilities of rate hike moderation at the next policy meeting on December 14 and China's softening stance on zero-Covid strategy. 

In the region's economic news, investors digested the latest data on German retail sales and the jobless rate in the eurozone. 

 

German Retail Sales Drop 

Germany's retail sales in October declined 2.8% from September but still 1.8% ahead from pre-pandemic October 2019, Destatis said Thursday.

Retail sales declined 5.0% in October from a year ago. 

October retail sales in nominal terms increased 1.7% from the previous month and increased 6.2% from a year ago.

 

Eurozone Jobless Rate Drops to New Record Low

The Eurozone jobless rate eased to a new record low of 6.5% in October from 6.6% in September, Eurostat said Thursday.

 

Markets Overview 

The DAX index increased 0.7% to 14,490.30, the CAC-40 index added 0.2% to 6,753.97 and the FTSE 100 index fell 0.2% to 7,558.49.

 

Natural Gas Prices Trade Volatile 

Natural gas prices continue to soar in the euro zone and traded above