Volatile Indexes Closed Higher Ahead of Inflation Report

Barry Adams
10 Jan, 2023
New York City

Stocks lacked direction but steady buying in the afternoon trading lifted benchmark indexes in the positive territory. 

Investors are awaiting the release of consumer prices index report on Thursday and big bank earnings on Friday and digested latest comments from Fed Chairman Powell. 

 

Powell Highlighted Institutional Independence and Economic Focus 

Chairman Powell stressed the need for the central bank's independence from political interference at the Symposium on Central Bank Independence, Sveriges Riksbank, Stockholm, Sweden.

"The case for monetary policy independence lies in the benefits of insulating monetary policy decisions from short-term political considerations," Powell added. 

The Federal Reserve's mandate is to maintain price stability and generate maximum employment but that also requires making decisions that are not always popular. 

"But restoring price stability when inflation is high can require measures that are not popular in the short term as we raise interest rates to slow the economy.

The absence of direct political control over our decisions allows us to take these necessary measures without considering short-term political factors," Powell said at the gathering in Sweden. 

The Federal Reserve is planning to conduct additional stress tests in evaluating financial readiness of banks in the event of a major hurricane or climate disaster but will refrain from pursuing climate goals and imposing them on banks.

 

U.S. Indexes In Review 

Stocks meandered in early trading after two days of upward trajectory as investors weighed economic slowdown against higher rates in the months to come and awaited the release of the inflation report on Thursday.

Consumer price index in November rose 7.1% on an annual basis and core inflation excluding food and energy jumped 6.0%,the Bureau of Labor Statistics reported last month. 

The December month inflation is expected to hover near 7% and core inflation is expected to edge slightly lower.  

The S&P 500 index increased 0.7% to 3,919.25 and the Nasdaq Composite index added 1.0% to 10,742.63.

Crude oil futures contract increased 7 cents to $74.70 a barrel and natural gas futures contract fell 32 cents to $3.58 a thermal unit.

Bond yields were fairly stable as investors shifted focus to the upcoming corporate earnings and movements in energy markets after China opened its borders and social mobility and gathering restrictions. 

The yield on 2-year Treasury notes increased to 4.24%, 10-year Treasury notes hovered near 3.60% and 30-year Treasury bonds traded near 3.74%. 

 

U.S. Stock Movers 

Coinbase Global Inc increased 4.0% to $39.79 after the cryptocurrency exchange said it plans to lay off additional 950 staff according to a blog post. 

Coinbase said the new layoffs are expected to cost between $149 million and $163 million in the first quarter, according to a regulatory filing. 

The cryptocurrency exchange laid off about 1,000 employees in June 2020. 

Coinbase listed its stock through a direct listing on the Nasdaq on April 14, 2021 at a price of $250and closed at $328.55 valuing the company at close to $86 billion. 

Bed Bath & Beyond Inc soared 30% to $2.12 after the struggling retailer reported wider-than-expected loss. 

Revenue in the fiscal third quarter ending on November 26 declined 33% to $1.26 billion and comparable store sales declined 34% from  a year ago. 

Net loss in the quarter jumped to $392.6 million from $276.4 million or diluted loss per share rose to $4.33 from $2.78 a year ago. 

Sotera Health Company soared 93% to $16.63 after the company said it agreed to settle more than 870 cases pending in two court cases in Illinois related to the release of carcinogen ethylene oxide 

Under the agreements, the company and its subsidiary Sterigenics will pay $408 million to settle the claims. 

 

European Markets Rest After Strong Start In 2023 

European markets traded lower from the recent 7-month highs and investors weighed the possibilities of a soft-landing scenario in the event of continual decline in inflation driven by the fall in energy prices. 

Market indexes were under pressure after two officials at the U.S. Federal Reserve supported the rate to rise above 5% in public comments.

Moreover, Fed chairman Jerome Powell delivered his comments at a gathering organized by the Sverige Riksbank in Stockholm, Sweden. 

Powell stressed the independence of the central bank and added that the Federal Reserve is not interested in pursuing any social goals including climate change and limit its focus in keeping prices stable and creating maximum employment. 

Social goals are best handled by politicians who are empowered by the election results and the central bank's mandate is to focus on keeping inflation in its target range. 

 

French Industrial Output Advanced In November 

France's industrial production increased 2.0% in November, faster-than-expected pace after workers returned from strike, according to data released by the statistical agency INSEE. 

Industrial output increased 2.0% from October when it fell by a revised 2.5% and manufacturing output, a component of total output, increased 2.4% from 2.1% decrease a month ago.

Mining production decline moderated to 0.6% in November after falling sharply at 5.3% in October.  

Refined petroleum and coke production shot up 90.6% after normal production activity resumed following the end of the strike. 

 

Higher Prices Lift British Retail Sales In December

Retail sales in December rose according to the survey released by the British Retail Consortium and accounting firm KPMG.

Comparable December retail sales rose 6.9% compared to 4.2% in November driven by higher prices but unit volumes declined. 

Consumers are battling 4-decade high inflation and are limiting their purchases to essential items.

Prices for food items edged slightly lower to 14.4% in December from 14.6% in November.  

 

European Indexes Edge Lower 

The DAX index fell 0.1% to 14,774.60, the CAC-40 index declined 0.6% to 6,869.14 and the FTSE 100 index decreased 0.4% to 7,694.49. 

The yield on 10-year German Bunds rose to 2.284%,French bonds increased to 2.788%, UK Gilts to 3.58% and Italian bonds to 4.20%. 

Brent crude oil futures contract for immediate month delivery increased 28 cents to $79.95 a barrel and the Dutch TTF natural gas fell 7.9% to