Wall Street Stocks Retain Upward Bias, U.S. Economic Growth Revised Higher

Barry Adams
29 Nov, 2023
New York City

Market indexes trimmed earlier gains in the session, and Treasury yields dropped to the level last seen in September.

The S&P 500 index and the Nasdaq Composite advanced 0.3% on the hopes that the Federal Reserve is more likely to hold interest rates at the end of the next policy meeting in two weeks.

The S&P 500 index has advanced about 8% and the Nasdaq Composite has gained about 11% in November, amid optimism that the interest rates are closer to peak rates.

Semiconductor, cloud computing, and big tech stocks were among the leading gainers in the recent rally in the last four weeks.

Furthermore, the focus of the investor debate has shifted to the timing and magnitude of interest rate cuts in 2024.

The long-foreseen U.S. economic recession is now not likely to materialize in 2023 and possibly even in 2024, but investors worry that rates are likely to stay above 5% for most of 2024.

 

U.S. Third Quarter GDP Growth Revised Higher to 5.2%

Gross domestic product rose at a faster pace in the third quarter after the U.S. Bureau of Economic Analysis revised its previous estimate.

Real gross domestic product increased at an annual pace of 5.2%, higher than 4.9% in the preliminary estimate, and accelerated from a 2.1% rise in the second quarter.

The GDP increase was the fastest since the fourth quarter of 2021, and the increase in the third quarter primarily reflected a higher increase in government spending, inventory investment, and nonresidential investment, but consumer spending growth was revised lower.

 

U.S. Indexes and Yields

The S&P 500 index edged up 0.2% to 4,565.09, and the Nasdaq Composite increased 0.2% to 14,306.36.

The yield on 2-year Treasury notes decreased to 4.69%, 10-year Treasury notes inched lower to 4.29%, and 30-year Treasury bonds edged higher to 4.47%.

Crude oil increased $1.26 to $77.69 a barrel, and natural gas prices fell 1 cent to $2.82 a thermal unit.

Gold increased $4.40 to $2,045.36 an ounce after the U.S. dollar eased.

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 102.82.

 

U.S. Stock Movers

General Motors jumped 9.5% to $31.66 after the vehicle maker announced a $10 billion stock buyback, raised its dividend, and reinstated its annual outlook.

The company estimated net income attributable to stockholders between $9.1 billion and $9.7 billion, compared to the previous outlook of $9.3 billion and $10.7 billion.

Diluted earnings per share in the $6.52 to $7.02 range, including the estimated impact of the accelerated stock repurchase, compared to the previous outlook of $6.54 to $7.54

The vehicle maker said it plans to increase its dividend by 33%, or 3 cents per quarter, to 12 cents, beginning with the declaration in January 2024.

GM had about 1.37 billion outstanding shares prior to the announcement of the accelerated stock repurchase program.

Foot Locker jumped 16.9% to $27.67 after the specialty athletic retailer reported better-than-expected quarterly results.

Revenue in the fiscal third quarter ending in October declined 8.6% to $1.99 billion from $2.17 billion, and comparable store sales fell 8.0%.

The company attributed the decline in sales to "ongoing consumer softness," and the closure of Champ stores negatively impacted same-store sales by 3 percentage points.

Net income in the quarter decreased to $28 million from $96 million, and diluted earnings per share dropped to 30 cents from $1.01 a year ago.

The retailer tightened its full-year revenue growth estimate to between 8.0% and 8.5% from the previous guidance between 8.0% and 9.0%, and comparable sales growth to range between 8.0% and 8.5% from 8.0% to 9.0%.

The company entered into a long-term licensing agreement with two retailers in India and will commence sales operations in 2024.

During the third quarter, the company paid a quarterly dividend of $0.40 per share for a total of $38 million and did not repurchase any shares.

 

European Bond Yields Eased to 3-month Lows

European bond yields headed lower, and stocks advanced in Wednesday's trading.

Benchmark stock market indexes traded higher after inflation in Spain and Germany edged lower, and comments from the U.S. Federal Reserve suggested that interest rates may not be revised higher.

Fed Governor Christopher Wallace stressed that the central bank's policy is "well positioned" to slow the economy and lower inflation to 2%.

Governor Wallace's comments supported the view that the Federal Reserve is done raising rates for now.

Investors are awaiting the release of the PCE Price Index, an alternative measure of inflation, and the recent decline in inflation has bolstered the case for the third rate pause in a row at the end of the policy meeting ending on December 13.

In economic news, Sweden's economy contracted for the second quarter in a row ending in September, Statistics Sweden reported Wednesday.

GDP in the third quarter sequentially declined 0.3% after falling 0.8% in the second quarter. The economy contracted after household consumption contracted and inventories declined in the quarter.

The third-quarter decline was revised from the flat reading in the preliminary estimate.

From a year ago, GDP contracted 1.4%, following a 0.4% decrease in the second quarter.

 

German Import Price Slump Extends to Eight Months

German import prices fell for the eighth month in a row, primarily because of higher base comparisons in the previous year, the Federal Statistics Office, or Destatis, reported Wednesday.

Import prices fell by 13.0% from a year ago in October, after falling by 14.3% in the previous month.

Energy import prices fell 43.5% in October after crude oil, natural gas, and coal prices plunged from a high level a year ago due to the war in Ukraine.

Prices of durable goods declined by 0.6%, and those of non-durable consumer goods fell by 0.7%, but capital goods prices advanced by 1.8%.

 

Spain's Inflation Eased In November 

Consumer price inflation in Spain eased to 3.2% in November from 3.5% in the previous two months, the National Statistics Institute or INE, reported Wednesday.

On a monthly basis, consumer price inflation decreased by 0.4% in November after rising by 0.3% in the previous month.

The decline in inflation was driven by the fall in energy prices and the weakness of tourist packages.

Core inflation, which excludes volatile food and energy prices, eased to 4.5% from 5.2% in the previous month.

Overall inflation has been on the decline after peaking at 10.8% in July 2022, and core inflation has been on the slide after peaking at 7.6% in February 2023.

 

UK Mortgage Approvals Rebounded In October

UK mortgage approvals rose in October after falling for three months in a row, the Bank of England reported on Wednesday.

Net mortgage approvals, an indicator of future borrowings, increased to 47,383 in October from 43,675 in September.

Mortgage approvals rebounded in October after falling for three months in a row.

Mortgage approvals peaked above 100,000 in early January 2021 and declined to a record low of 39,892 in January 2023, barring the pandemic era low and sub-prime crisis in 2007–08.

 

Europe Indexes and Yields

The DAX index increased 1.1% to 16,166.45, the CAC-40 index rose 0.2% to 7,267.64, and the FTSE 100 index declined 0.4% to 7,423.46.

The yield on 10-year German bonds decreased to 2.44%; French bonds traded lower to 3.0%; the UK gilts declined to 4.13%; and Italian bonds inched lower to 4.18%.

The euro rebounded to $1.097, the British pound at $1.268, and the U.S. dollar at 87.70 Swiss cents.

Brent crude increased $1.06 to $82.74 a barrel, and the Dutch TTF natural gas declined by €2.41 to €40.36 per MWh.

 

Europe Stock Movers

Real estate sector stocks advanced after bond yields declined.

Vonovia SE added 1.9% to €25.81, Segro plc increased 1% to 817.0 pence, LEG Immobilien gained 2.2% to €71.58, and Unibail-Rodamco-Westfield jumped 2.8% to €56.78.

Energy stocks were under pressure ahead of the OPEC+ meeting on Thursday amid uncertainties about the production quota agreement.

BP plc gained 0.2% to 476.15 pence, Shell PLC decreased 0.02% to 2,579.0, TotalEnergies fell 0.9% to €62.59, and Repsol SA declined 0.2% to €14.12.