U.S. Market Averages Rest As Old Worries Resurface, World Bank Highlights Growth Hurdles

Barry Adams
06 Jun, 2023
New York City

Market indexes hugged flat-line as investors shifted focus to inner workings of the U.S. economy and debated the future rate path. 

After a week of volatile trading and leading indexes trading near nine-month highs, investors worried about the looming economic slowdown in the second half.  

Moreover, a long list of worries also kept investor sentiment in check. 

Market indexes rested and after the passage of debt ceiling agreement rate path, stubborn inflation and slowing corporate earnings dominated sentiment.  

In addition, trading in Apple and chip stocks influenced broader averages and investors worried that the recent two-week surge in chip stocks may be overdone. 

 

World Bank Lifts Global Growth, Higher Rates and Tighter Credit to Drag U.S.

The latest report from the World Bank highlighted key hurdles for the global economy, despite improving its forecast. 

The global economy is expected to grow 2.1% in 2023, a faster pace from the 1.7% estimate in January.  

The multilateral agency revised the U.S. economic growth higher to 1.1% from the previous estimate of 0.5%, the Euro Area growth to 0.5% from flat, China growth to 5.6% from 4.3% and India growth was lowered to 6.3% from 6.6%. 

Among the top 20 economies in the world, only India's economy is expected to  grow above 6% annually in 2023, 2024 and 2025. 

The World Bank added in its report that the U.S. economy is likely to slow considerably from 2.1% in 2022  to 1.1% in 2023, largely because of the sharp rise in interest rates over the last sixteen months and recent bank failures are also likely to tighten credit conditions. 

Household consumption is likely to slow substantially as families exhaust their savings accumulated during pandemic. 

"Model-based estimates show that the peak impact on growth from this tightening is likely to take place in 2023" and "decelerating consumption and residential investment will likely contribute to very feeble activity in the second half of 2023," the report noted. 

 

U.S. Indexes & Yields 

The S&P 500 index decreased 4.48 points to 4,269.18 and the Nasdaq Composite increased 12.83 points to 13,242.21. 

The yield on 2-year Treasury notes decreased to 4.52%, 10-year Treasury notes edged down to 3.69% and 30-year Treasury bonds held at 3.86%. 

Crude oil decreased $0.16 to $71.98 a barrel and natural gas prices increased 1 cent to $2.26 a thermal unit. 

 

U.S. Stock Movers

GitLab Inc increased 23.6% to $43.77 after the database developer reported smaller-than-estimated loss and offered a positive outlook for the current quarter and full-year. 

Coinbase Global Inc plunged 17.9% to $48.34 after the cryptocurrency exchange was sued by the Securities and Exchange Commission. 

The regulatory agency alleged that the company is acting as an unregistered broker. 

Yesterday, the SEC sued Binance alleging similar charges as the agency ramped up its oversight of the cryptocurrency market.  

Mobileye Global Inc declined 2.5% to $41.44 after the company announced its plan to sell 35 million class A shares in a secondary offering according to a regulatory filing. 

Thor Industries Inc soared 8.6% to $89.03 after the recreational vehicle maker reported better-than-expected quarterly earnings and lifted its full-year estimate. 

Taiwan Semiconductor Manufacturing Company  added  0.2% to $98.21 after Apple said it plans to use its own silicon for all of its computers using TSMC processes.  

With the release of its own chip, Apple has moved away from Intel and all computing devices made since 2020 will not have chips made by Apple. 

 

Final Hour Rally Lifted European Indexes 

European markets rebounded from morning lows amid lingering worries of inflation and slow-growth.  

Benchmark indexes in Paris, London and Frankfurt gained after the eurozone retail sales were flat in April and investors reviewed global monetary outlook. 

In addition, British Retail Consortium noted retail sales growth slowed to a seven-month low in May because of surging food prices. 

Moreover, Germany's factory orders declined in April and consumer inflation in the Netherlands accelerated to 6.1% in May from 5.2% in April. 

 

Eurozone Retail Sales Flat In April 

The Euro Area retail sales adjusted for seasonal factors were unchanged in April from the previous month, Eurostat, the statistical office of the European Union reported Tuesday. 

Retail sales for March were revised to a decline of 0.4%. 

From a year ago, retail sales declined 2.6% in the eurozone and fell 2.9% in the European Union, marking the seventh month of sales contraction in a row. 

Non-food products retail sales increased 0.5% but food, drinks and tobacco sales decreased 0.5% and fuel sales fell 2.3%. 

On a yearly basis, food, drinks and tobacco sales declined 4.4%, automotive fuel by 1..8% and non-food products by 1.1%.   

 

Germany Factory Orders Declined In April

German factory orders declined 0.4% in April from the previous month, the Federal Statistics Office or Destatis reported Tuesday.

March orders were upwardly revised to a decline of 10.9% from the preliminary estimate of 10.7%. 

Orders declined for the second month in a row following the decline in large-scale orders.  

Machinery and equipment orders declined 6.2% and miscellaneous vehicle construction orders, which includes railed vehicles, spacecraft, aircrafts and army vehicles,  plunged 34.0% 

However, orders for electrical equipment increased 12.0% and  motor vehicles, trailers and semi-trailers advanced 2.4%. 

New orders in the consumer goods sector fell 2.5% and in the capital goods sector decreased 1.7% and intermediate goods sector increased 2.3%.

Domestic orders rose 1.6%, while foreign orders decreased 1.8% from the previous month. New orders from the rest of the world fell 1.1% and orders from the euro area declined 2.7%.

From a year ago, factory orders adjusted for seasonal and calendar factors decreased 1.2% in April. 

March orders fell 2.2%, revised from the preliminary estimate of 2.9% decline. 

 

Europe Indexes & Yields 

The DAX index increased 0.2% to 15,992.44, the CAC-40 index increased 0.1% to 7,209.00, and the FTSE 100 index inched higher 0.4% to 7,628.10. 

The yield on 10-year German Bunds inched lower to 2.33%, French bonds traded lower to 2.88%, the UK gilts edged down 4.19% and Italian bonds increased to 4.11%.

The euro edged lower to $1.069, the British pound to $1.240 and the Swiss franc to 90.75 cents.

Brent crude decreased $0.22 to $76.45 a barrel and the Dutch TTF natural gas decreased €3.06 to €25.45 per MWh.

 

Europe Stock Movers 

British American Tobacco increased 0.8% to 2,593.0 pence after the company reiterated its annual outlook. 

Associated British Foods Plc declined 0.9% to 1,828.64 pence after the company agreed to acquire National Milk Records for £48 million.

Paragon Banking Group Plc increased 9% to 549.0 pence after the company revised its fiscal 2023 outlook and launched its second £50 million stock buyback plan. 

N Brown Group Plc plunged 12.3% to 24.10 pence after the online retailer swung to a pre-tax loss in the fiscal year 2023 and the company blamed it on "challenging market" environment.