Market Updates
Stocks Rebounded After Worst Week on Wall Street, Pending Home Sales Improved
Barry Adams
27 Feb, 2023
New York City
Stocks rebounded on the first day of trading this week after the worst week in 2023.
Treasury yields were in focus and yields on 2-year and 10-year notes edged lower but the yields on 6-month and one-year Treasury bills traded above 5% for the second week in a row.
So far, companies have been reporting a sharp decline in quarterly and annual earnings following a surge in 2021 because companies are struggling to pass higher costs to customers and are facing rising costs and wage pressures.
Earnings are expected to remain depressed for the rest of the year as companies adjust to higher operating costs and lower revenue growth in the face of higher interest rates and stable consumer spending.
Retailers are still struggling with high levels of inventories and tough comparisons with previous years and consumers shift focus to experiences from goods.
This week more than 600 companies are scheduled to report earnings, including results from Zoom Video, Advance Auto Parts, AutoZone, HP Inc, Abercrombie & Fitch, American Eagle Outfitters, Dollar Tree, Kohl's, Lowe's. Best Buy and Big Lots.
Moreover, investors reacted positively to the fall in durable goods orders supporting the case that the economy is not overheating and pending home sales expanded for the second month in a row.
Durable goods orders declined in January and pending home sales improved for the second month in a row.
Investors bid up stocks and look ahead to earnings from retailers as the earnings season slows down.
Pending Home Sales Index Improved In January
Pending home sales, an index of forward looking home sales, increased for the second month in a row, the National Association of Realtors.
Pending home sales increased 8.1% In January from the previous month, following a downwardly revised 1.5% gain in December.
Despite the back-to-back monthly improvement, the home sale index showed home sales activities dropped 24.1% from a year ago.
“Buyers responded to better affordability from falling mortgage rates in December and January,” said NAR Chief Economist Lawrence Yun.
The Northeast home sales index rose 6.0% from last month to 68.7, a fall of 19.8% from January 2022.
The Midwest index increased 7.9% to 83.3 in January, a sharp drop of 21.1% from one year ago.
The South index increased 8.3% to 99.2 in January, dipping 24.7% from the prior year. The West index jumped 10.1% in January to 66.2 but fell 29.3% from a year ago.
“An extra bump occurred in the West region because of lower home prices, while gains in the South were due to stronger job growth in that region,” Yun added.
“Home sales activity looks to be bottoming out in the first quarter of this year, before incremental improvements will occur,” Yun said.
Durable Goods Orders Dropped In January
Durable goods orders declined in January 4.5% from the previous month, according to the latest data released by the U.S. Census Bureau.
December durable goods orders were downwardly revised to an increase of 5.1% on the 13.3% plunge in transportation orders.
Shipments of manufactured durable goods in January decreased 0.1%, down following sixteen consecutive monthly increases. This followed a 0.4% increase in December.
Transportation equipment fell 1.7%, down following ten consecutive monthly increases.
Market Indexes and Yields
The S&P 500 index increased 0.7% to 3,998.10 and the Nasdaq Composite index advanced 0.8% to 11,485.94.
The yield on 2-year Treasury notes inched lower to 4.79%, 10-year Treasury notes eased to 3.91% and 30-year Treasury bonds hovered near 3.92%.
Crude oil prices declined 65 cents to $76.66 a barrel and natural gas prices inched up 9 cents to $2.64 a thermal unit.
U.S. Movers
Berkshire Hathaway declined 0.6% to $458,543.40 after the conglomerate of businesses reported a decline in operating earnings but the company stepped up its stock repurchases.
Berkshire Hathaway said operating earnings in the fourth quarter declined 8% to $6.7 billion from $7.3 billion and net income attributable to shareholders fell to $18.2 billion from $39.6 billion a year ago. Diluted earnings per Class A Share fell to $12,412 from $26,690 and Class B Share dropped to $8.27 from $17.79 in the previous year.
In 2022, operating earnings rose to $30.8 billion from $27.4 billion a year ago and net earnings attributable to shareholders swung to ($22.8 billion) from $89.8 billion and diluted earnings per Class A Shares to ($15,539) from $59,460 in the previous year.
Berkshire repurchased $2.6 billion of its own shares during the fourth quarter bringing the total for the year to approximately $7.9 billion.
Zoom Video Communications Inc decreased 0.2% to $73.84 ahead of the company's earnings release after the close of regular market hours.
Zoom reported third quarter revenue increased 5% to $1.1 billion and net income attributable to shareholders was $48.4 million and diluted earnings per share of 16 cents.
In the fourth quarter a year ago, Zoom reported revenue increased 21% to $1.07 billion and net income was $490.5 million or $1.60 a diluted share.
Annual Returns
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Earnings
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