Major Averages Drop On Rate-path Anxieties, New Orders Rise

Barry Adams
05 Dec, 2022
New York City

Rate path worries resurfaced on Wall Street and bond yields rose and crude oil traded volatile. 

Investors feared that the Federal Reserve may hike rates at a slower pace but rates may peak at levels above 5.25% and the economy may dip into a recession. 

New orders for goods in October were ahead of expectations and the service sector index rebounded in November, fueling worries that the economy is too strong for the Fed to ease from the aggressive rate hikes.  

The on-again-off-again recession and rate path worries gripped the market sentiment in the morning trading, dragging market indexes lower. 

 

Bond Yields Rise 

The yield on 2-year U.S. Treasury notes increased to 4.36%, 10-year Treasury notes inched higher to 3.58% and 30-year Treasury bonds edged up to 3.61%. 

 

Markets Overview 

The S&P 500 index fell 1.2% to 4,021.32 and the Nasdaq Composite index dropped 1.3% to 4,021.32. 

 

Volatile Crude Oil Rebounds 

Crude oil traded volatile with an upward bias after more cities in China relaxed coronavirus linked mobility restrictions, raising hopes of a rebound in China's import. 

In addition, premier Xi Jinping is scheduled to commence his travel to Saudi Arabia on Wednesday this week and hold a summit with Arab leaders in Riyadh on Friday. 

Crude oil increased 7 cents to $80.04 a barrel and natural gas fell 50 cents to $5.75 a thermal unit. 

 

U.S. New Orders for Goods Rise

The new orders for manufactured goods in October, up twelve of the last thirteen months, increased 1.0% to $556.6 billion, the U.S. Census Bureau reported today. 

This followed a 0.3%  September increase.

New orders for manufactured durable goods in October, up seven of the last eight months, increased 1.1% to $277.4 billion, up from the previously published 1.0 percent increase. 

This  followed a 0.2% September increase. 

Shipments increased 0.7% in October after rising 0.3% in September and  unfilled orders, up twenty-six  consecutive months, increased 0.6% to $1,144.0 billion.

 

U.S. Service Sector Growth Rebounds 

The ISM Services Purchasing Managers' Index unexpectedly jumped to 56.5 in November of 2022, rebounding from a more than two-year low of 54.4 reached in October. 

 

Stock Movers 

Tesla Inc dropped 5.7% to $183.11 on the reports that the company is looking to cut Model Y production by more than 20% in its Shanghai factory this month. The news was first reported by Bloomberg. 

China-linked stocks opened higher but gave up early gains on the hopes that China's relaxation of Zero-covid policy may revive travel and business activities.  

Alibaba soared 9% and Baidu gained 4.5%. 

China-based casino operators soared and Melco Resorts & Entertainment and Wynn Macau soared between 5% and 13%. 

Marriott International declined 1.4% to $163.28 after the company announced its plan to sell $500million convertible senior notes due in 2027 in a private offering.

VF Corp declined 10.4% to $29.77 after the company said its chief executive plans to retire. Steve Rendle retired immediately from the positions of Chairman, President and Chief Executive Officer. 

The apparel maker also lowered its sales growth outlook to between 3% and 4% in the second-half from the previous estimate of between 5% and 6% increase. 

The company blamed the weakness on a higher-than-expected promotional environment in the U.S. and ongoing weakness in China and higher inflation impacting retail sales in Europe. 

Activision Blizzard gained 0.9% to $76.44 on the news that Microsoft is ready to defend its $69 billion acquisition of the company against the U.S. antitrust ruling. 

 Science Applications International Corp increased 4.4% to $114.55 after the company reported quarterly results ahead of market expectations and the company lifted its estimate of sales and earnings for the full-year.