Rate Anxieties and Recession Worries Dominate Market Sentiment

Barry Adams
04 Jan, 2023
New York City

Stocks struggled on the second day of trading this week and investors weighed the labor market strength against the Fed-induced economic slowdown worries.  

Tech stocks continued to drift lower on the worries that the rising rates will negatively impact future earnings and energy stocks traded lower after crude oil prices slumped towards a one-year low. 

Investors lowered goods inflation expectations after the crude oil and natural gas prices eased for the second week in a row but the labor market strength also raised concerns that inflation in wages and salaries may not subside soon. 

 

Indexes In Review 

Two popular benchmark indexes struggled to get traction after latest job data indicated strong labor market conditions but mortgage applications dropped to the lowest level since 1996. 

The S&P 500 index rose 0.45% to  3,841.49 and the Nasdaq Composite index increased 0.3% to 10,420.01. 

 

Crude Oil and Natural Gas Fall 

Crude oil prices fell for the second week in a row amid the rising supply and falling demand growth. 

Brent crude dropped near the one-year of $75.60 a barrel low last seen on December 9th on warmer than expected weather in Europe. 

WTI crude future for the immediate month delivery also fell near the one-year low $70.30 a barrel reached on December 9. 

WTI crude oil declined 4% or $3.08 to $73.88 a barrel and natural gas rose 1.8% or 6 cents to $4.05 a thermal unit. 

 

Treasury Yields Eased Again  

The yields on U.S. treasury bonds continued to drift lower as investors piled into government securities on the expectations that the Federal Reserve Bank will gradually slow its future rate hikes. 

The yield on 2-year Treasury notes decreased to 4.37% and 10-year Treasury notes fell to 3.70% and 30-year Treasury bonds dropped to 3.81%. 

 

U.S. Stock Movers 

China-linked stocks were in focus again today on the ongoing speculation on the rebound in business and travel activities after the abrupt ending of zero-covid restrictions. 

Tesla rose 3.3% to $111.49 on the hopes that China sales will revive soon. The company also extended 10,000 yuan ($1,388) offered in the last two weeks for vehicles made in Shanghai till the end of January. 

China's economic growth has dropped to its lowest pace in decades after the flare-up of Covid-infections and steep job losses in the tech sector. 

Rivian Automotive fell 0.2% to $17.37 after the electric vehicle maker missed its production target. 

 

Job Opening Eased In November 

Job openings in the U.S. fell slightly in November, indicating the job market strength, according to the latest data released by the Bureau of Labor Statistics. 

Job openings in November declined 54,000 to 10.5 million and have slowly eased after hitting 11.9million peak in March. 

 Over the month, the number of hires and total separations changed little at 6.1 million and 5.9 million, respectively. 

 

Mortgage Applications Down to 26-year Low

Mortgage applications dropped 13.2% from two weeks earlier in the week ending in December according to the latest survey released by the Mortgage Bankers Association. 

The Market Composite Index, a measure of mortgage loan application volume, decreased 13.2% on a seasonally adjusted basis from two weeks earlier.  

On an unadjusted basis, the Index decreased 39.4 percent compared with the two weeks ago