A Pop In Bond Yields Dragged Down Tech Stocks and Indexes

Barry Adams
27 Dec, 2022
New York City

Benchmark indexes closed down after tech stocks fell and bond yields rose. 

A surge in bond yield dragged tech stocks lower and China sales worries also dragged Apple and Tesla stocks to one-year lows. 

Moreover, wholesale inventories growth accelerated in November and the monthly international goods trade deficit dropped to the smallest level in two years. 

In holiday-shortened trading, bond yields rose and investors weighed 2023 economic outlook and China reopening. 

Chinese health regulators said international passengers arriving in China will no longer require mandatory quarantine from January 8. 

The National Health Commission also said Chinese citizens will be allowed to resume international travel without specifying the date. 

Health regulators are also bracing for a surge in travel in two weeks ahead of Chinese Lunar New Year and at least 255 million people are expected to travel to the countryside. 

 

Tech Weakness Drags Indexes 

Stocks lacked direction and energy prices rose on the expectations of higher demand from China as social mobility resumes. 

The S&P 500 index fell 0.4% to 3,829.25 and the Nasdaq Composite index fell 1.4% to 10,353.23. 

Crude oil price increased 5 cents to $79.61 a barrel and natural gas prices rose 11 cents to $5.19 a thermal unit. 

Copper futures price rose to a six-month high of $3.09 per pound the expectations of rising demand from China. 

The yield on 2-year Treasury notes increased to 4.41%, 10-year Treasury notes rose to 3.84% and 30-year  Treasury bonds advanced to 3.92%. 

 

Smallest International Goods Trade Deficit In Nearly Two Years 

International goods trade deficit declined 15.6% or $15.5 billion from a month ago to $83.3 billion, the U.S. Census Bureau reported Tuesday in its preliminary estimates.

The November deficit was the smallest since December 2020.

Goods trade deficit in October was $98.8  billion. 

November exports were $168.9 billion, a decline of $5.3 billion from October. 

November imports were $252.2 billion, a decline of $20.8 billion from October. 

 

Wholesale Inventories Growth Accelerated In November 

Wholesale inventories in November increased 1.0% from October to $933.6 billion after adjusting for seasonal factors and trading days in the period, the U.S. Census Bureau reported Tuesday. 

November inventories jumped 21.0% from a year ago. 

October inventories increase from September were revised higher to 0.6% from the previous estimate of 0.5%. 

Retail inventories at the end of November increased 0.1% to f $738.7 billion and rose 18.4% from a year ago, after adjusting for seasonal factors and trading day difference. 

Retail inventories in October were downwardly revised to a decline of 0.4% from the previous estimate of a decline of 0.2%. 

 

U.S. Stocks In Review 

Tesla Inc declined 8.7% to $112.62 on the worries of falling sales in China despite the year-end discounts. 

Tesla China sales were between 10,000 and 13,000 in the first three weeks of December and fell just below 9,000 in the week ending December 25, according to CnEVPost. 

China's total new energy vehicle sales in the week ending on December 25 were about 182,000 units, an increase of 48.1% from a year ago and 12.6% from the previous week. 

Tesla dropped to a new 52-week low. 

Apple Inc dropped  1.3% to $130.07 and fell to its 52-week low after tech  stocks continued to slide in Tuesday's trading. 

Despite the weakness in tech stocks, some consumer staples and healthcare stocks traded at multi-year highs. 

JM Smucker jumped 0.9% to $159.85 and traded at all-time high and Merck & Co advanced 0.3% to a multi-year high of $112.20. 

Nio Inc ADR dropped 9.0% to $9.98 after the electric vehicle maker in China lowered its fourth quarter sales outlook to 39,000 from the previous estimated range between 43,000 and 48,000. 

The company blamed a sales shortfall to supply chain disruptions due to Covid outbreaks in major cities in China. 

China-linked stocks were also in favor after China relaxed travel restrictions. 

Las Vegas Sands Corp increased 4.4% to $48.51 and Wynn Resorts jumped 4.6% to $84.44. 

Alibaba Group Holding Ltd increased 3.7% to $88.95. 

Southwest Airlines Co declined 4.7% to $34.37 after the company canceled 70% of its scheduled flights and warned of flight disruptions for the next several days. 

 

China Optimism Lifts European Markets Higher 

European markets traded higher on China optimism and a rise in resource stocks. 

China's health regulator said international visitors will no longer need mandatory quarantine from January 8. The quarantine requirement was in place for three years. 

Chinese officials also plan to lift international travel for Chinese citizens but did not announce the date. 

Resource companies also traded higher after crude oil prices rose on the expectations of rising demand from China. 

 

European Stock Indexes Advance, Bond Yields Rise

The DAX index increased 0.4% to 13,995.10, the CAC-40 index added 0.7% to 6,550.66 and the FTSE 100 index advanced 3.73 points to 7,473.01. 

The yield on 10-year German Bunds increased to 2.51%, French bonds rose to 3.06%, UK gilts to 3.64% and Italian bonds to 4.61%. 

Copper price increased to a 6-month high of $3.90 a pound on hopes of rising demand from China as social mobility resumes and business activities gather pace.

Crude oil traded higher but natural gas prices dropped to a six-month low on milder winter weather, above average wind power and ample gas supplies. 

Natural gas storage facilities in the European Union were at 83.1% as of December 25th, according to Gas Infrastructure Europe. 

Brent crude oil price increased 29 cents to $84.20 a barrel and the TTF natural gas futures price for immediate month delivery fell 3.5% to $80.04 per MWh. 

 

Norway Retail Sales Rebound 

Norway's retail sales adjusted for seasonal factors increased 0.9% in November reversing a 0.2% decline in October, according to preliminary data from Statistics Norway  released on Tuesday. 

The increase in total retail sales was driven by a rise in automotive fuel sales of 3.4% and non-store sales increased 3.2%. 

Retail sales in November declined 3.6% from a year ago. 

 

European Stock Movers 

Tech stocks led the decliners following the rise in bond yields and a weakness in the U.S. tech stocks. 

Infineon, Technologies, Hellofresh SE and ASML Holding declined between 2% and 3%. 

Daimler Truck Holding, Mercedes Benz, Porsche Automobil advanced on the hopes of rising sales in China. 

HSBC Holdings Plc increased 0.5%. 

Glencore, Anglo American and Antofagasta advanced between 0.5% and 1%.  

TotalEnergies, Shell, BP, Repsol and Eni gained between 0.3% and 1.5%. 

China optimism also lifted French luxury stocks higher. 

Hermes International and LVMH 1.9% and 2.5% respectively in Paris trading.