Stocks and Bond Yields Advanced After Powell Comments

Barry Adams
07 Feb, 2023
New York City

Stocks powered ahead after financial markets put aside rate anxieties following the latest comments from Federal Reserve Chairman.  

Chairman Jerome Powell acknowledged that inflation has started to cool but added that the disinflation process is in the early stage. 

Market indexes bounced around and fell at one point in negative territory as investors took bets on the future rate path and the appropriate levels of interest rates. 

“The disinflationary process, the process of getting inflation down, has begun and it’s begun in the goods sector, which is about a quarter of our economy," Chairman Powell said in a question and answer session at the Economic Club of Washington, D.C. 

"“But it has a long way to go. These are the very early stages,” Powell added. 

Markets accelerated gains in the final hour of trading and tech stocks led the gainers. 

Later in the week, investors are awaiting earnings from 300 companies including quarterly results from Chipotle Mexican Grill, VF Corp, PepsiCo, Coty, Equifax, New York Times Goodyear Tire, Uber, Disney, Eaton Corp and Yum Brands. 

 

Record U.S. International Trade Deficit In 2022 

The U.S. trade deficit widened in December to $67.4 billion from the revised $61 billion in November, the Bureau of Economic Analysis reported Tuesday. 

In December, the goods deficit with China rose to $22.8 billion, the European Union  $18.6 billion, Mexico $12.0 billion, Vietnam $8.1 billion, Germany $8.0 billion and Japan $7.2 billion. 

For the full-year 2022, the trade deficit widened to record $948.1 billion or 3.7% of current dollar GDP from $845 billion in 2021 or 3.6% of GDP.  

The goods trade deficit widened 9.3% to $1,191.8 billion and the services surplus narrowed 0.6% to $243.7 billion. 

In 2022, exports of goods rose 17.7% to $2,085.6 billion and imports rose 16.3% to $3,277.3 billion, both driven by crude oil. 

The deficit with China expanded to $382.9 billion and the shortfall with Canada to $81.6 billion.

 

U.S. Indexes In Review 

The S&P 500 index increased 1.3% to 4,164.0 and the Nasdaq Composite index rose 1.9% to 12,113.79. 

Crude oil rose $3.53 to $77.64 a barrel and natural gas increased 14 cents to $2.59 a thermal unit. 

The yield on 2-year Treasury notes edged down to 4.47%, 10-year Treasury notes increased to 3.67% and 30-year Treasury bonds traded near 3.72%. 

 

French Trade Deficit Widened In 2022 

France's trade deficit widened in December after imports rose at a faster pace than exports, the Ministry of the Economy reported Tuesday. 

In December, exports increased 16.2% and imports rose 19.3% and trade deficit in December widened to Є14.93 billion from Є12.06 billion a year ago. 

Energy imports in 2022 soared to Є115 billion from Є45 billion and trade deficit jumped 90% or by Є78 billion to Є164 billion. 

In 2022, exports rose 18% and imports soared 29% but aviation, perfumes, cosmetics, beverages and pharmaceutical sectors reported surplus. 

 

German Industrial production Dropped 

Germany's industrial production declined at the fastest pace in nine months in December, the data released from Destatis or Federal Statistics Office showed. 

Industrial production fell 3.1% in December on the month, reversing the 0.4% increase in November. 

The 5.8% fall in intermediate goods output drove the overall production lower and consumer goods production increased 0.3% but capital goods production was unchanged.  

The decline in December was the largest since the 4.2% fall in March.  

 

Volatile European Markets Closed Lower  

European markets closed down in choppy trading after energy prices advanced and investors reacted to corporate earnings. 

European markets closed down as investors reacted to local earnings and digested the latest economic reports. 

On the earnings front, BNP Paribas, Siemens Energy, BP Plc and TeamViewer earnings release dominated news cycle 

Stocks lacked direction after the U.S. Federal Chairman Jerome Powell said inflation has begun to cool but it is too early to forecast a long term trend.

The DAX index decreased 0.6% to 15,320.88, the CAC-40 index declined 4.75 points to 7,132.35 and the FTSE 100 index increased 0.4% to 7,864.71. 

The yield on 10-year German Bunds increased to 2.32%, French bonds rose to 2.77%, the UK Gilt to 3.3% and Italian bonds to 4.2%. 

The euro traded near $1.075, the British pound inched lower to $1.20 and the Swiss franc fetched 91.97 U.S. cents. 

Brent crude oil traded higher $2.83 to $83.84 a barrel and Dutch TTF natural gas spot price dropped 6.5% to Є54.50 per MWh. 

 

Europe Stock Movers 

BP Plc increased 3.3% to 494.0 pence after the energy explorer reported bumper profit reflecting higher crude oil, gasoline and natural gas prices. 

The energy company said group revenue increased 34.5% to $70.2 billion and net income soared more than four-fold to $11.1 billion from $2.6 billion and diluted EPS rose to $3.50 from 70 cents a year ago.

BP repurchased $3.2 billion of stock in the quarter including $2.5 billion repurchase announced in the previous quarter. 

Carlsberg AS dropped 3.3% to €128.40 after the brewery company reported a loss. 

Revenue in the Fourth quarter rose 16.9% to DKK 70,265 million, driven by organic revenue growth of 15.6%. 

The company swung to net loss of DKK -1,063 million, impacted by write-downs of DKK 10,735 million.

The brewery operator proposed a 13% increase in dividend to DKK 27 per share, equal to a total dividend payout of DKK 3.7 billion.

The company also completed its stock repurchase program of DKK 4.5 billion on January 27. 

The company guided 2023 operating earnings growth in the range of -5% to +5%. 

ams OSRAM AG declined 17% to  7.83 Swiss francs after the sensor maker suspended its 2022 dividend to strengthen its business. 

Revenue in the fourth quarter declined 4% to €1.11 billion from €1.22 billion but net income plunged to €29 million from €119 million and diluted earnings per share declined 11 euro cents from 45 euro cents a year ago. 

The company guided first quarter 2023 revenue between €900 million and €1.0 billion and operating earnings margin between 4% and 7%. 

TeamViewer AG jumped 17% to €14.40 after the German software company announced a stock repurchase program and forecasted double-digit growth between 10% and 14% in 2023. 

Fourth quarter billings surged 24% from a year ago to €190.6 million and revenue rose 14% to €150.5 million. 

In the fourth quarter, earnings before interests and taxes increased 20% to €49.5 million from €41.3 million in the previous year. 

The number of subscribers in the quarter increased 1% 626,000 from 617,000 in the previous year. 

In the year 2022, billings increased 16% to €634.8 million and revenue rose 13% to  €565.9 million. 

BNP Paribas SA increased 2.6% to €62.34 after the French bank announced a €5 billion stock repurchase plan. 

2022 revenue increased 9% to €50.4 billion and net income rose 7.5% to €10.19 billion and earnings per share of €7.80. 

BNP also confirmed the sale of Bank of the West to BMO Group for $16.3 billion, generating capital gain of $2.9 billion booked in the first quarter of 2023. 

The company lifted its 3-year to 2025 earnings growth target to 9%.  

 

SoftBank's Vision Fund Losses Expanded

SoftBank Group Corp declined 1.1% to ¥6,268.0 and the diversified tech investment company reported a loss of ¥783.4 billion largely on the account of losses in its start up fund. 

The Vision Fund segment reported a loss of ¥660 billion or about $5 billion after the fund marked down its investment in Didi Global and Grab Holdings and ByteDance. 

For the first nine-months in the fiscal year 2022, the loss expanded to 5 trillion yen from 441 billion yen in the previous year's period. 

 

Real Wages In Japan Edged Up 

Benchmark indexes in Tokyo closed unchanged and the yen rebounded from the recent lows.

Japan's real wages edged up 0.1% in December from a year ago, rising for the first time in nine months since March, a report released on Tuesday by the labor ministry showed.  

The Nikkei 225 index declined 8.18 points to 27,685.47 and the yen strengthened 1.5% to 130.73 against the U.S. dollar. 

 

China Reopening Enthusiasm Lifted Indexes 

Chinese stocks rebounded on the hopes that the reopening of the economy and social mobility will accelerate the increase in business activities. 

The Shanghai Composite index increased 0.3% to 3,248.09 and the Hang Seng index advanced 0.4% to 21,298.70. 

Stocks in Mumbai closed down driven by losses in metals stocks after Tata Steel reported a surprise loss in the December quarter. 

 

Losses In Metals Stocks In India Drove Indexes Lower  

Stocks in Mumbai closed lower after Tata Steel reported an unexpected loss, dragging the metals and broader indexes lower. 

The Sensex index declined 0.4% or 220.86 points to 60,286.04 and the Nifty index eased 0.24% or 43.10 points to 17,721.50. 

The rupee edged lower to 82.86 against the U.S. dollar. 

Adani Ports increased 1.9% after the company reported better-than-expected quarterly profit. 

Consolidated profit fell 16% in the December quarter.  

Tata Steel said revenue in the December quarter declined about 5% to ₹57,354 crore or $6 billion and swung to a net loss of ₹2,502 crore or $320 million from a profit of ₹9,598 crore or $1.2 billion.