Market Volatility Returns, Oil Drips to New Low, Freight Rates Plunge

Barry Adams
07 Dec, 2022
New York City

Stocks on Wall Street lacked direction as investors shifted focus to weakening economic conditions abroad and rising rate worries at home. 

Investors are in a holding pattern ahead of rate decisions next week from the U.S. Federal Reserve, European Central Bank and the Bank of England. 

Central banks around the world slowed or halted the pace of rate hikes and policymakers are worried about the upcoming global economic slowdown. 

The Bank of Canada lifted its key lending rate by 50 basis points to 4.25% and the Reserve Bank of India raised its rate at a slower pace of 35 basis points to 6.25% but the Banco Central Do Brasil left its Selic rate at 13.75%.   

The central bank in Canada at its last meeting in 2022 pushed the rates to the highest level since 2008 and increased rates by 400 basis points since March. 

 

Container Freight Rates Plunge  

In another sign of a global slowdown, the Baltic Dry Index, a measure of container freight rate, plunged 90% from a year ago, reflecting the falling demand for container traffic from China to the U.S. West Coast.  

Freight rates to the West Coast from China are approaching pre-pandemic levels but rates are still 32% higher for shipments from China to the U.S. East Coast ports.   

 

Volatile Stock Market Indexes 

Stock market indexes traded sideways in choppy trading and took cue from the trading in bond and energy markets. 

The S&P 500 index declined 0.2% to 3,933.92 and the Nasdaq Composite index fell 0.5% to 10,958.55.

 

Recession Worries Depress Bond Yields

The yield on U.S. Treasuries drifted lower as rate-path worries and economic slowdown worries overshadowed elevated inflation anxieties. 

The yield on 2-year Treasury notes decreased to 4.30%, 10-year Treasury notes eased to 3.47% and 30-year Treasury bonds declined to 3.47%. 

 

Crude Oil Drops to One-year Low 

Crude oil prices eased for the fourth day in a row amid global slowdown worries. The price dropped to a one-year low on demand worries from China and rising supply from the shale gas producers. 

Crude oil traded near a 11-month low as investors debated the rising prospects of a global economic slowdown. 

Crude oil dropped $1.72 to $72.46 a barrel and natural gas edged up 33 cents to $5.80 a thermal unit. 

 

Mortgage Rates Ease 

The average mortgage rate fell 8 basis points to 6.41% for 30-year fixed-rate mortgages for conforming loan balances with 20% down payment, the Mortgage Bankers Association said Wednesday.

 

U.S. Stock Movers 

Lowe's announced a new $15 billion stock repurchase program with no expiration date in addition to the previous program's balance of $6.4 billion as of December 6, 2022.

 Toll Brothers rose 1.6% to $46.70 after the luxury home builder said the fiscal fourth quarter sales increased 23.3% to $3.7 billion and net income rose to $640.5 million from $374.3 million or $5.63 from $3.02 a share from a year ago.

Thor Industries increased 3.5% to $87.10 after the recreation vehicle maker said net sales in the fiscal first quarter increased 21.5% to $3.11 billion and net income declined to $136.2 million from $242.2 million or $2.53 from $4.34 a year ago.

MongoDB soared 27% to $184.32 after the database developer said the fiscal third quarter revenue increased 47% to $333.6 million and net income rose to $84.8 million from $81.3 million or $1.23 from $1.22 a diluted share a year ago.

Non-GAAP net income increased to $18.7 million or $0.23 per share based on 80.4 million diluted weighted-average shares outstanding from $2.6 million or $0.03 per share in the year-ago period.

 

European market indexes declined for the fourth session in a row on the rising prospects of a global recession in 2023 and weak resource stocks led the decliners.

Resource stocks led the decliners on the worries that rising interest rates and ongoing inflation pressures spreading to the service sector are expected to keep consumer demand in check. 

 

European Bond Yields at 3-month Lows 

Bond yield across the eurozone and the UK dropped and German yields neared a 3-month low. 

Interest rates will rise but are "very near" the neutral level, said ECB policymaker Constantinos Herodotou on Tuesday and adding to the chorus of policymakers suggesting higher rates. 

The European Central Bank and the Bank of England are expected to announce rate decisions next week. 

The yield on 10-year German Bunds declined to 1.77%, French bonds fell to 2.2%, the UK Gilts eased to 3.04% and Italian bonds inched lower to 3.6%. 

 

German Industrial Production Eases 

German industrial production eased 0.1%after adjusting for seasonal factors and calendar in October from the previous month, the preliminary data from Destatis showed.  

In September, production rose 1.1% from the previous month. 

Industrial production was unchanged in October from a year ago. 

 

Natural Gas Based Electricity Production Rises In Germany 

Germany stepped up its electricity production using coal, renewable sources and natural gas in the third quarter, a separate report from Destatis showed Wednesday. 

About 36% of the electricity produced and fed into the grid in Germany in the third quarter of 2022 came from coal-fired power plants compared to 31.9% in a similar period a year ago.  

Electricity production from natural gas, too, rose despite high gas prices., an increase of 4.5% from a year ago and accounted for 9.2% of the electricity compared to 8.8% a year ago. 

This was the first time since the second quarter of 2021 that more electricity was produced from natural gas than in the same period a year earlier.

 

UK Home Price Fall Extend to Third Month

Home prices in the U.K. declined for the third month in a row in November, according to an index tracked by S&P Global, Lloyds Bank and Halifax.  

Home price index dropped 2.3% on a monthly basis, the steepest decline in 14 years, and annual pace of increase slowed to 4.7% from 8.2% 

Home prices fell in all regions and the average home price declined 2.3% to