S&P 500 and Nasdaq Extend November Gains, Crude Oil Drops After OPEC+ Postpones Meeting

Barry Adams
22 Nov, 2023
New York City

Market indexes extended weekly gains, and the yield on Treasury bonds edged higher.

The yield on 10-year Treasury notes rebounded from a two-month low and traded above 4.4%, still lower than the 2007 high of 5% reached in October.

In yesterday's trading, yields traded down for short- and long-term maturities after the Fed's latest meeting minutes did not provide any conclusive direction for rate cuts.

Policymakers supported a restrictive monetary stance because inflation is cooling but still far higher than the target rate of 2%.

On the earnings front, Nvidia reported a multi-fold increase in revenue and earnings after strong demand from cloud computing companies to process generative AI drove sales higher.

On the economic front, durable goods orders fell 5.4% in October from the previous month, when orders rose 4.0%.

Durable goods orders are seasonally adjusted but not adjusted for price changes, and from a year ago, orders rose 4.0%.

The decline in durable goods orders was the second largest since April 2020, after orders for transportation equipment fell 14.8% from 11.6% in September.

Moreover, non-defense capital goods orders excluding aircraft decreased 0.1% following a revised 0.2% fall in September, a closely watched barometer for capital spending by businesses.

Financial markets are closed on Thursday for the Thanksgiving holiday and will close early on Friday.

 

Weekly Mortgage Applications Rebound

Mortgage application volume increased 3% last week from the previous week, according to the seasonal index published by the Mortgage Bankers Association. 

Demand finally began to rise at the fastest pace in two months after hitting a 28-year low in late October, and applications increased to their highest levels in six weeks but remained at very low levels.

Mortgage applications rose for the third week in a row in the week ending November 17.

Applications to purchase a home increased by 4% from the previous week, and refinance applications increased by 2%.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $726,200 or less decreased to 7.41% from 7.61%, with points decreasing to 0.62 from 0.67 for loans worth 80% of the property.

The effective rate decreased from last week.

Despite the recent rebound in mortgage demand, applications are still down 20% from a year ago, when mortgage rates were 75 basis points lower.

 

U.S. Indexes and Yields

The S&P 500 index has rallied 8% in November, and the Nasdaq Composite has advanced 11% in the period after the market rally resumed from a pause on Tuesday.

The S&P 500 index edged up 0.4% to 4,557.83, and the Nasdaq Composite increased 0.7% to 14,293.43.

The yield on 2-year Treasury notes increased to 4.86%, 10-year Treasury notes inched higher to 4.36%, and 30-year Treasury bonds edged higher to 4.52%.

Crude oil decreased $1.32 to $76.44 a barrel, and natural gas prices fell 2 cents to $2.87 a thermal unit.

Gold decreased $6.98 to $1,991.43 an ounce after the U.S. dollar eased and worries of oil-driven inflation receded following the decline in oil prices. 

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 103.62.

 

U.S. Stock Movers

Nvidia Corp. declined 1.7% to $490.75 after the company reported a surge in quarterly earnings and sales.

Revenue in the third quarter increased 206% to $18.1 billion from $5.9 billion, net income soared 12-fold to $9.2 billion from $680 million, and diluted earnings per share rose to $3.71 from 27 cents a year ago.

The advanced chipmaker estimated revenue in the fourth quarter to be $20 billion, with a band of 2%, a gross margin of 74.5%, and a non-GAAP gross margin of 75.5%.

The company continues to benefit as businesses and the government transition from general-purpose computing to accelerated computing and generative AI.

HP Inc. decreased 2.3% to $27.21 after the personal computing and equipment company reported quarterly results.

Revenue in the fiscal fourth quarter decreased 5% to $13.8 from $14.8 billion; the company swung to a net income of $974 million from a loss of $23 million; and diluted earnings per share of 97 cents from a loss of 2 cents a year ago.

Fresenius Medical Care increased 0.4% to €27.71 after the dialysis service provider lifted its annual outlook.

Revenue in the third quarter declined 3% to €4.9 billion from €5.03 billion, net income fell to €84 million from €230 million, and net income dropped to 29 cents from 7 cents a year ago.

The company reiterated its 2023 revenue to grow at a low to mid-single-digit percentage rate from €19.4 billion in 2022.

The German company also said it had resolved its legal dispute with the U.S. Department of Defense and finalized its settlement for payment of dialysis services provided under the Tricare program to members of military service, their dependents, and retirees.

The company sought to receive payment for services provided under the Tricare program on or before January 11, 2023.

As a consequence of the settlement agreement, Fresenius anticipates a positive impact on operating income of €175 million in the fourth quarter.

Dick's Sporting Goods increased 2.2% to $121.59 after the specialty retailer reported quarterly results.

Comparable store sales rose 1.7% on top of a 6.5% increase in the quarter a year ago.

Revenue in the third quarter increased 2.8% to $3.04 billion from $2.95 billion, net income decreased 12% to $201 million from $228 million, and diluted earnings per share fell to $2.39 from $2.45 a year ago.

The company repurchased 3.5 million shares for $388 million in the third quarter.

The company lifted its 2023 comparable store sales outlook to a range of 0.5% to 2.0%, up from the previously estimated flat to 2.0% increase.

 

European Markets Mixed After Mid-year UK Budget Review

European markets advanced, and investors focused on the upcoming OPEC+ meeting this weekend.

Benchmark indexes in London, Paris, and Frankfurt headed higher after the U.S. Federal Reserve's early November meeting minutes showed policymakers are still looking for more signals for the sustained decline in inflation.

Moreover, most participants preferred to keep the monetary policy stance restrictive, despite the cooling of inflation, but economic growth is still stronger than expected and wages are still rising faster than needed to slow inflation down to 2%.

Brent crude oil price was steady ahead of the OPEC+ meeting this week, and traders are anticipating Saudi Arabia and Russia to extend voluntary production cuts again.

 

UK Mid-year Budget Offers Mixed Bag of Tax Breaks and Minimum Wage Increase

The UK's Chancellor of the Exchequer, Jeremy Hunt, delivered the 2023 Autumn Budget, offering a cut to national employee National Insurance to 10% from 12% to 27 million workers.

The government also announced changes to benefits programs, tax cuts for businesses, and a 9.8% rise in the minimum wage to £11.44 from April 2024.

Hunt also confirmed the 4.5 billion in funding for eight sectors of manufacturing to boost investment in the critical sector of the economy. Overall, the manufacturing industry employs about 2.6 million people and generates 43% of all UK exports.

The Office for Budget Responsibility, an independent arm of the government, sharply downgraded the economic growth estimate to 0.6% this year and 0.7% next year from the previous estimates of 1.8% and 2.5% released in March.

 

Europe Indexes and Yields

The DAX index increased 0.4% to 15,957.82, the CAC-40 index rose 0.4% to 7,260.73, and the FTSE 100 index fell 0.2% to 7,469.57.

The yield on 10-year German bonds increased to 2.58%; French bonds traded higher to 3.14%; the UK gilts increased to 4.14%; and Italian bonds inched higher to 4.33%.

The euro continued to rebound and approached the high last seen in late August after the U.S. rate hike worries receded.

The euro rebounded to $1.095, the British pound at $1.254, and the U.S. dollar at 88.42 Swiss cents.

Crude oil dropped as much as 4% after this weekend's OPEC+ meeting was postponed to November 30 after Saudi Arabia struggled to convince other oil producers to curb production. 

Moreover, the U.S. oil inventories rose by 8.701 million barrels, more than twice the expected increase.   

Brent crude decreased $1.84 to $80.60 a barrel, and the Dutch TTF natural gas edged higher by €1.05 to €45.11 per MWh.

 

Europe Stock Movers

Sage Group jumped 11.1% to 1,114.0 pence after the UK-based software firm launched a stock repurchase plan and reported strong revenue growth in its latest fiscal year. 

Kingfisher plc declined 6.2% to 216.30 pence after the home improvement retailer lowered its profit outlook for the second time in three months.

Casino Guichard Perrachon SA decreased 0.3% to €0.81 after the grocery retailer estimated 2023 losses in its core French business.

ThyssenKrupp AG rose 6.7% to €7.07 after the German industrial engineering and steel company estimated profit in the fiscal year 2024.

The company reported a net loss of €2 billion in the fiscal year 2023.

Fresenius SE increased 0.4% to €27.71 after the dialysis service provider lifted its annual outlook.

The German company also said it had resolved its legal dispute with the U.S. government.