Gains On Friday Trim Weekly Losses, Google Joins Other Tech Leaders With Layoffs

Barry Adams
20 Jan, 2023
New York City

Stocks on Wall Street advanced as Fed officials supported smaller rate hikes. 

Stocks edged higher in volatile fashion after Google parent Alphabet announced a plan to eliminate thousands of jobs and existing homes sales dropped for the eleventh month in a row. 

Fed Reserve Governor Christopher Wallace said at a gathering in New York that rates have a long way to go and supported a smaller rate hike of 25 basis points at the next policy meeting scheduled in ten days. 

Yesterday at an industry gathering in New York, Federal Reserve Bank of New York President John Williams also supported the case for raising rates and reiterated the central bank's commitment in bringing down inflation to the target rate of 2%. 

However, Williams did not express any view about the size of the rate hike and the level of terminal rates, according to two event attendees. 

Federal Reserve policy makers are set to  hike rates at the end of a two-day meeting on February 1 and investors are factoring an increase of 25 basis points, smaller than the previous 50 basis points increase last month. 

 

Existing Home Sales Dropped Eleven Months In a Row  

Existing homes sales in December declined for the eleventh month in a row and dropped to the lowest level not seen since November 2010 to 4.02 million units, 34% lower than a year ago.

 

S&P 500and Nasdaq Trade Higher 

Benchmark indexes traded higher on Friday but are set to close down for the week. 

The S&P 500 index increased 0.9% to 3,931.95 and the Nasdaq Composite index added 1.5% to 11,012.27.

Crude oil was unchanged at $80.59 and natural gas futures increased 3 cents to $3.30 a thermal unit. 

The yield on 2-year Treasury notes increased to 4.19%, 10-year Treasury notes inched higher to 3.49% and 30-year Treasury bonds advanced to 3.66%. 

 

U.S. Stock Movers 

Google parent Alphabet Inc soared 4.8% to $97.50 after CEO Sundar Pichai said the company is planning to eliminate 12,000 worldwide jobs. 

The company will begin layoffs immediately in the U.S and may take longer to trim staff in other countries reflecting local laws and practices. 

Netflix Inc increased 7.1% to $337.99 after the streaming services provider reported higher-than-expected increase in new subscribers. 

Netflix said fourth quarter revenues increased 1.9% to $7.85 billion but net income plunged to $55 million from $607 million and diluted earnings per share fell to 12 cents from $1.33 a year ago.

Netflix added 7.6 million net new subscribers in the fourth quarter and ended the year 2022 with 230.75 million subscribers.

Nordstrom Inc increased 0.5% to $17.53 after the company posted weak holiday sales citing the "promotional" retail environment forced the retailer to offer larger-than-usual discounts.

Nordstrom said 9-week holiday period sales fell 3.5% from a year ago and lowered its fiscal year earnings per share outlook to between $1.33 and $1.53 from the previous range between $2.13 and $2.43.

Sales at namesake stores declined 1.7% and fell 7.6% at discount Rack stores. 

 

Ocean Freight Prices Plunged

Baltic Exchange's Dry Bulk Index, a measure of worldwide ocean freight cost, plunged 8.8% to a 30-month low to 801 ahead of the Lunar New Year holiday period in China.

 

European Markets 

Germany's wholesale price inflation declined for the third month in a row and dropped to the lowest level in just over a year after energy price inflation receded, the Federal Statistics Office said Friday.

Wholesale price inflation in Germany slowed to 21.6% in December from 28.2% in November and fell to the lowest level in thirteen months, the Federal Statistical Office said Friday.

Retail sales in the UK unexpectedly declined in December despite the Christmas holiday period. 

December sales fell 1.0% after falling revised 0.5% in November, the Office for National Statistics said Friday.   

The DAX index increased 0.8% to 15,033.56, the CAC-40 index added 0.6% to 6,995.99 and the FTSE !00 index closed up 0.3% to 7,770.59. 

The euro inched higher to $1.084, the British pound edged up to $1.238 and the Swiss franc increased to 92.18 U.S. cents. 

Brent crude oil advanced $1.25 to $87.37 a barrel and the Dutch TTF natural gas futures rose 11.3% to $67.55 per MWh. 

 

Asian Markets

Asian markets advanced after rate hike worries in the U.S. eased and China left its key lending rates unrevised. 

The Nikkei 225 index inched up 0.6% to 26,553.53 and the yen eased to 129.50 against the U.S. dollar. 

Japan's inflation in December surged to 4.0% from a year ago to the highest level since 1991 on the yen weakness and a surge in international commodities prices.

Airline and travel stocks were in demand after Prime Minister Fumio Kishida  announced a plan to downgrade Covid-19 disease to a seasonal influenza in the spring.  

The major policy change since nearly three years of pandemic, Japan will end mask requirements, review border controls and end quarantine requirements.  

The shift in policy comes after three years of strict social mobility restrictions as the nation prepares to live with the virus despite hundreds of deaths daily linked to coronavirus infections. 

Japan's international arrivals surged 15-fold to 3.1 million in 2022 from the previous year, but the number of arrivals are significantly down from the pre-pandemic level of 32 million in 2019.  

Stocks in China gained after vice premier Sun Chunlan, the leader for the implementation of Covid-19 policy for the last three years, said new infections are at "low level." 

Chunlan sought to reassure residents ahead of the Lunar New Year but infections are expected to surge after the holiday period. 

Stocks also advanced after the People's Bank of China left its key lending rates unchanged for the fifth month in a row. 

One-year Loan Prime Rate was left at 3.65% and five-year rate used for the mortgage market was held at 4.3%. 

The Shanghai Composite index advanced 0.8% to 3,264.81 and the Hang Seng index jumped 1.8% to 22,044.65. 

Hong Kong stocks advanced after the city's jobless rate declined for the eighth month in a row. 

Stocks in Mumbai traded down for the second day in a row after investors reacted to local corporate earnings news. 

Global weakness also contributed to market weakness after Microsoft announced a plan to lay off 10,000 employees and Google's parent Alphabet said it plans to eliminate 18,000 jobs. 

The Sensex index decreased 0.4% or 236.66 points to 60,621.77 and the Nifty index declined 0.4% or 80.20 points to 60,621.77.

The Indian rupee traded higher to 80.98 against the U.S. dollar and the yield on 10-year Indian government bonds closed higher at 7.34%.