U.S. Stocks Accelerate Losses On Inflation Worries, Global Markets On Edge

Barry Adams
09 Dec, 2022
New York City

Major averages accelerated market decline in late trading after higher-than-expected wholesale inflation rekindled hopes of rapid interest rate rises next week. 

Investors turned cautious in the afternoon trading and morning gains turned to losses and extended weekly losses ahead of consumer price inflation data on Tuesday and the Fed's rate decision on Wednesday. 

Hotter-than-expected wholesale inflation at 0.3% in November also raised fears that consumer price inflation may accelerate from a monthly increase of 0.4% in October. 

The widely watched consumer price index is expected to moderate in November from the annual pace of 7.7% in October but the deepening of inflation in services may surprise markets. 

 

U.S. Wholesale Inflation Stay Elevated 

The producer price index increased 0.3% in November from October and eased to 7.4% from a year ago on higher cost of services, the U.S. Bureau of Labor Statistics said.

Core rate of inflation in November accelerated to 0.4% from 0.1% in October but eased to 6.2% annual pace from 6.6% rate in October. 

 

Stock Market Indexes Trade Volatile 

Benchmark indexes opened higher but quickly lost direction lacking momentum after wholesale inflation data raised the prospect of higher terminal rates. 

The S&P 500 index fell 0.7% to 3,934.38 and the Nasdaq Composite index fell 0.7% to 11,004.62. 

For the week, the S&P 500 dropped 3.4% and the Nasdaq Composite index dropped 4.0%. 

Crude oil price decreased 5 cents to $71.40 a barrel and natural gas prices rose 33 cents to $6.29 a thermal unit. 

The yield on 2-year Treasury notes rose to 4.34%, 10-year Treasury notes increased to 3.59% and 30-year Treasury bonds to 3.57%. 

 

Brazil Inflation Drops to 20-month Low 

Brazil's inflation eased to an annual pace of 5.9% in November from 6.4% in October, the lowest since February 2021, after transportation and housing prices cooled, the statistical office said Friday.

 

U.S. Stock Movers 

Costco Wholesale Corporation eased 0.2% to $480.71 after the membership warehouse club operator said fiscal first quarter sales increased 8.1% to $53.4 billion. 

Net income increased to $1.36 billion from $1.32 billion or $3.07 from $2.98 a diluted share a year ago.

lululemon athletica Inc declined 12.5% to $328.01 after the company issued lighter guidance for the current quarter. 

The specialty apparel retailer said third quarter revenue increased 28% to $1.9 billion and net income soared to $255.5 million from $187.8 million or $2 from $1.44 a share a year ago.

For the fourth quarter of 2022, the company expects net revenue between $2.605 billion and $2.655 billion, representing a three-year compound annual growth rate of approximately 24%. 

Diluted earnings per share are expected to be in the range of $4.20 to $4.30 for the quarter.

DocuSign soared 12.8% to $49.37 after the company reported better-than-expected quarterly results. 

The only verification system provider said third quarter revenue increased 18% to $645.5 million and net loss widened to $29.8 million from $5.7 million or 15 cents from 3 cents a share from a year ago.

 

European Markets Look Ahead to Rate Decisions 

European markets halted weeklong slide after industrial and financial stocks led gainers and energy prices eased.

Investors shifted focus to upcoming policy meetings next week and markets are awaiting slower rate hikes in the U.S. and eurozone.

The U.S. Federal Reserve is set to announce its interest rate decision on Wednesday and markets are factoring at least 50 basis points increase after four 75 basis points increase in a row.

The European Central Bank is also scheduled to lift its deposit rate on Thursday and markets are anticipating a 50 basis points increase to 2.0%, matching the rate in 2009.

The Bank of England is expected to revise its key lending rate higher by 50 basis points to 3.5% on Wednesday following a 75-basis-point increase in November, the largest in three decades.

 

Europe Stock Market Halts Five-day Slide

Stocks rebounded on the final day of the week and halted five-day long slide ahead of rate decision next week.

Market indexes closed higher following a week of selloff on the worries of global economic slowdown and elevated inflation and ongoing Covid-curbs in China.

The DAX index increased 0.7% to 14,370.72, the CAC-40 index advanced 0.5% to 6,677.64 and the FTSE 100 index gained 4.46 points to 7,476.63.

For the week, the DAX index, the CAC-40 index and the FTSE 100 index and the Swiss Market index closed down 1%  

 

Oil Extends Weekly Loss to 10%.

Crude oil prices dropped about 10% in the week despite the supply worries.

OPEC+ confirmed its production cut of 2 millions barrels a day after last Sunday's meeting and the European Union placed its price cap of $60 a barrel on Russia oil transported using tankers registered in the region.

Despite the supply worries, oil prices dropped to this year's low on the global slowdown and slow rebound of activities in China.

Moreover, China's exports to the European Union dropped 10.6% in November, confirming demand slowdown in the region.

Brent crude oil increased 42 cents to $76.57 a barrel and Dutch TTF natural gas prices rose 0.1% to 139.11 euros per MWh.

 

Europe Bond Yields Rebound to 2-month Highs

Government bond yields rebounded in Friday's trading and closed at 2-month highs in anticipation of rate increases next week.

The yield on 10-year German Bunds increased to 1.94%, French bonds inched up to 2.39%, the UK Gilts to 3.18% and Italian bonds advanced to 3.81%.

 

France Fourth Quarter GDP Growth Slows

The French economy is expected to slow down further in the fourth quarter according to a monthly survey from the Bank of France.

The eurozone's second largest economy in the fourth quarter GDP is expected to expand 0.1% from the previous quarter following a 0.2% increase in the third quarter.

The estimate was prepared after surveying 8,500 French businesses between November 28 and December 5.

The European Commission estimated French GDP to slow down to 0.4% in 2023 from 2.6% increase in 2022.

 

Asian Markets 

In overnight trading, Asian market indexes closed higher, driven in cautious trading ahead of the U.S. inflation data later in the day and rate decisions next week. 

The Nikkei 225 average increased 1.1% to 27,901.01 after China relaxed stringent Covid-restrictions and permitted more mobility in cities around the nation. 

Investors also showed optimism and bid up tech stocks on the hopes that the U.S. Federal Reserve will continue to moderate its future rate hike beginning next week. 

The Shanghai Composite index inched up 0.3% to 3,206.95 and the Hang Seng index jumped 2.3% to 19,900.87 after China's inflation eased and the price increase was in-line with expectations. 

Stocks in Hong Kong soared after Sunac China Holdings said significant progress in its debt restructuring with foreign investors. 

The Sensex index declined 0.6% to 62,181.67 after leading tech services providers dropped following cautious comments from Credit Suisse. 

Four leading tech service giants, Tata Consultancy Services, Infosys, Tech Mahindra and Wipro dropped between 2% and 4%. 

 

China Inflation Eases 

 Consumer price index in China eased to 1.6% in November from 2.1% in October and declined by 0.2% from the previous month, the National Bureau of Statistics said Friday.

 

Resource Stocks Drive Australian Indexes Higher 

BHP and Rio Tinto gained between 2% and 3% on the hopes of demand revival after China reopening gathers steam. 

The benchmark S&P ASX 200 Index rose 0.5% to 7,213.20 and the broader All Ordinaries Index closed up 0.5% to 7,406.30.