Bear Market Rally On Wall Street Meets Earnings Reality

Barry Adams
17 Jan, 2023
New York City

U.S. stocks lacked direction in early trading investors focused on corporate earnings and the international news dominated news cycle. 

Goldman Sachs said fourth quarter earnings plunged but Morgan Stanley earnings declined but were ahead of expectations. 

Investors also digested the latest report from the OPEC indicating a demand recovery of oil 2023. 

Moreover, China reported a sharp slowdown in economic growth in the fourth quarter and in 2022 on the account of zero-covid policy. 

The economic growth fell to the lowest level in nearly five decades after retail sales and industrial production declined

Three years of lockdowns in China has devasted small businesses and several medium sized businesses in retail, construction and manufacturing are struggling to survive.   

 

U.S. Indexes Lack Direction 

Benchmark indexes on Wall Street struggled to get traction ahead of the pick up in earnings season. 

The S&P 500 index declined 3.85 points to 3,995.19 and the Nasdaq Composite index fell 5.01 points to 11,074.15. 

 

Demand Recovery Hope Lifts Oil Price 

Crude oil prices advanced to the highest level since early December after OPEC said oil demand is expected to rise 2.2% to 22.2 million barrels a day on the hopes of economic recovery in advanced economies and rising demand from China. 

"US crude imports followed seasonal trends, falling to an eight-month low of 6.2 mb/d in December. 

US crude exports  remained above 4 mb/d for the third-consecutive month. 

US product flows were broadly steady, despite a cold wave  that shut-in US refineries and disrupted travel," noted the report. 

Crude oil price increased $1.75 to $80.73 a barrel and natural gas immediate month futures contract price rose 9 cents to $3.76 a thermal unit. 

 

Treasury Yields Hover Near 4-month Low 

The yield on 2-year Treasury notes increased to 4.22%, 10-year Treasury notes inched higher to 3.54% and 30-year Treasury bonds inched up to 3.67%. 

 

U.S. Stock Movers 

Goldman Sachs fell 2.4% to $365.11 after the financial services provider reported a sharp decline in revenues and earnings. 

Goldman Sachs said fourth quarter revenue fell 16% from a year ago to $10.6 billion and net income plunged to $1.2 billion from $3.8 billion or diluted EPS fell to $3.32 from $10.81 from a year ago.

Morgan Stanley rose 5.4% to $96.37 after the financial services provider reported better-than-expected quarterly results. 

Fourth quarter revenue fell to $12.7 billion from $14.5 billion a year ago and diluted earnings per share dropped to $2.2 billion from $3.7 billion or $1.26 from $2.01 a year ago.

 

Whirlpool Sells Europe Business 

Whirlpool Corporation increased 2.2% to $157.70 after the household equipment maker said it plans to sell its Europe, Middle East and Africa business and form a partnership with Turkey-based Arcelik AS. 

Whirlpool will contribute its European domestic appliance business, and Arcelik will contribute its domestic appliance, consumer electronics, air conditioning, and small domestic appliance businesses into the newly formed entity. 

Whirlpool will own 25% and Arcelik 75% of the newly formed company and Arcelik will retain full-ownership of its Turkish business. 

 

European Indexes Near 11-month Highs 

European markets edged lower but hovered near 11-month highs after oil, gas and mining stocks advanced following the hopes of demand recovery in advanced economies and in China. 

The DAX index fell 9.4 points to 15,124.66, the CAC-40 index was nearly unchanged at 7,043.77 and the FTSE 100 index fell 0.1% to 7,850.83. 

The euro traded higher at $1.085, the British pound edged higher to $1.227 and the Swiss franc inched lower to 91.96 U.S. cents. 

 

Energy Prices Trade Higher In Europe 

Energy prices rose in Europe following the optimistic report from the OPEC. 

"Preliminary figures show crude imports into OECD Europe remaining at healthy levels through the end of the year, despite imports of Russian crude falling to near zero excluding flows to Turkey. 

OECD Europe product imports are also seen to be higher in anticipation of the impending February sanctions on Russian oil product imports," the report from the OPEC highlighted. 

Brent crude oil rose $1.94 to $86.32 a barrel and the Dutch TTF natural gas futures price rose 5% to €58.63 per MWh. 

The yield on 10-year German Bunds traded lower to 2.16%, French bonds declined to 2.63%, UK Gilts to 3.40% and Italian bonds inched higher to 4.002%. 

 

Japan Awaits Rate Decision

Stocks in Japan rebounded, after two days of heavy losses, ahead of the Bank of Japan's decision tomorrow after the conclusion of a two-day policy meeting.

The Nikkei 225 average advanced 1.2% to 26,138.68 and the yen traded near 128.70 against the U.S. dollar after the Japanese government bond yields rose above the upper limit set by the Bank of Japan for the third day in a row. 

 

China's GDP Growth Slows to Near 5-decade Low

Stocks in Shanghai traded nearly unchanged after the statistics bureau reported weakest economic growth in about 45 years. 

China's GDP growth in the fourth quarter 2022 slowed to 2.9% from 3.9% in the third quarter. 

For the full-year 2022, the economy expanded at 3%, the slowest pace since 1976 excluding 2.2% advance in 2020 during the onset of the coronavirus pandemic. 

Retail sales declined 1.8% from a year ago in December and fell 0.2% in full-year 2022. 

Industrial production increased 3.6% in full-year 2022 and advanced 1.3%. 

The Shanghai Composite index decreased 0.1% to 3,224.24 and the Hang Seng index fell 0.8% to 21,577.64. 

Chinese government said deaths outnumbered births in 2022, marking the beginning of the long forecasted ageing and the decline of Chinese population. 

Total number of births declined to 9.56 million in 2022 from 10.62 million in 2021 and deaths increased to 10.41 in 2022 from 10.1 million in 2021, the National Bureau of Statistics said in a report Tuesday. 

Total births declined for the sixth year in a row. 

China's elderly population, those 60 years of age and older, expanded by 13 million to 280 million or one fifth of its 1.4 billion population.  

 

India Stocks Rebound After Two Days of Losses 

The Sensex index advanced 0.9% to 60,655.72 and the rupee held at 81.57 against the U.S. dollar in international trading. 

Investors bid up stocks focused on the domestic economy in cautious trading after the international price of crude oil advanced, stoking fears of higher inflation.