Wall Street Selloff Intensifies With Growing Recession and Earnings Worries

Barry Adams
15 Dec, 2022
New York City

Stocks on Wall Street accelerated losses in early trading after retail sales fell and weekly jobless claims rose. 

Market indexes were under pressure after retail sales dropped more than expected and consumers avoided discretionary purchases and limited purchases to basic items. 

Benchmark indexes traded lower as investors confront the rising rates in 2023 and slowing economy and worries that additional rate hikes may dip the economy into a recession. 

Stock prices are reflecting higher rates but the upcoming earnings shortfall is not factored in. In addition, investors are still not sure the pace and magnitude of the likely earnings decline. 

So far in 2022, earnings have held up and in many instances corporations have delivered earnings ahead of lowered expectations, but market focus has shifted to the 2023 earnings cycle. 

 

November U.S. Retail Sales Declined

Retail and food services sales fell 0.6% in November from the previous month and the sales decline was the largest in the year so far, the U.S. Census Bureau reported Thursday.  

The November month sales included Cyber Monday and Black Friday discount sales and the sales weakness suggested that a strong 1.3% increase in October pulled the sales forward. 

Retail sales data are adjusted for seasonal variations and holiday and trading day differences but not adjusted for price differences or inflation. 

Gasoline stations sales rose 16.2% from a year ago in November and food services sales increased 14.1% in the last 12 months to November. 

 

Industrial Production and Capacity Utilization Fell In November 

Industrial production in November declined 0.2% in November from the previous month following a 0.1% decrease in October, the Federal Reserve said Thursday. 

Manufacturing production declined 0.6%, mining output fell 0.7% and utility generation increased 3.6% after falling for three months in a row. 

Total industrial production increased 2.5% from a year ago. 

Capacity utilization eased 0.2 percentage point in November to 79.7%, a rate that is 0.1 percentage point above its 50-year long term average. 

 

Weekly Jobless Claims at 2-month Low 

Initial claims of weekly jobless benefits decreased 20,000 to 211,000 in the week ending December 10. 

The new claims were lower than the market expectations of 230,000 and dropped to the low last seen in September. 

The four-week moving average eased 3,000 to 227,250 and continuing jobless claims increased 1,000 to 1.671 million in the week ending December 3rd. 

 

Stock Market Indexes Drop 2%  

Market indexes intensified selloff in early trading on the recession worries. 

The S&P 500 index declined 2.2% to 3,910.75 and the Nasdaq Composite index dropped 2.5% to 10,895.22.

 

Bond Yields Hold Steady 

The yield on 2-year Treasury notes edged lower to 4.24%, 10-year Treasury notes inched lower to 3.48% and 30-year Treasury bonds decreased to 3.48%. 

 

Energy Prices Retain Upward Bias 

Crude oil decreased $1.02 to $76.02 a barrel and natural gas futures added 25 cents to $6.69 a thermal unit. 

 

ECB and BoE Lift Rates 

The European Central Bank lifted its key lending rate and held out for more rate increases citing elevated inflationary pressures in the currency union. 

The ECB lifted its deposit policy rate by 50 basis points to 2.0%, the refinancing rate to 2.5% and the marginal lending rate to 2.75%.

The Bank of England also lifted its rate for the ninth time in a row and signaled its readiness for "more forceful action" if price pressure did not ebb. 

Last month the central bank lifted its key rate by 75 basis points, the largest increase since 1989. 

The Bank of England raised its key lending rate by 50 basis points to 3.5% and held out for additional rate increases citing persistent inflationary pressures.

The CPI index increased 10.7% in November following an 11.1% rise in October, the Office for National Statistics said earlier in the week. 

The Swiss National Bank lifted its policy rate by 50 basis points to 1.0% and held its 2023 inflation outlook at 2.4%.

 

U.S. Stock Movers 

Tesla Inc inched up 0.5% to $157.44 after chief executive officer Elon Musk sold 22 million shares between Monday and Wednesday this week, according to a regulatory filing with the Securities and Exchange Commission. 

Lennar Corp declined 0.6% to $90.35 after the Miami, Florida-based home builder said revenue in the fiscal fourth quarter ending in November increased 21% to $10.2 billion from $8.4 billion a year ago. 

Net income in the fourth quarter increased to $1.3 billion or $4.55 a share from $1.2 billion or $3.91 a share in the quarter a year ago. 

Homes delivered increased 13% to 20,064 and new home orders decreased 15% to 13,200 and new orders dollar value decreased 24% to $5.5 billion.