Sell Mode Drives Trading On Wall Street, FOMC Minutes Show Rate Path Uncertain

Barry Adams
03 Jan, 2024
New York City

Stocks remained under pressure for the second day this week, and investors curbed their enthusiasm for rate cuts amid economic uncertainties and elevated inflation.

Investors reviewed the latest Fed's rate-setting committee meeting minutes, the job opening report for November, and ISM's manufacturing industry survey for December.

The Fed's meeting confirmed that policymakers agreed that rate cuts are likely in 2024, but members were not sure if and when those rate cuts would take place.

The S&P 500 index and the Nasdaq Composite declined for the second day in a row, and Treasury yields edged slightly higher.

Tech stocks led the decliners after AI-driven, cloud computing, and cyber security stocks traded down on valuation worries following the surge in 2023.

Investors also dialed down rate-cut optimism and sold tech winners in 2023 after the 10-year Treasury yield approached 4%.

Market participants are worried that the Federal Reserve may not lower rates as early as March, despite the steady decline in inflation over the last ten months and softening labor market conditions.

Labor market conditions are easing but remain tight, supporting wage gains that are not consistent with the Fed's goal of lowering inflation to 2%.

 

Job Openings Declined to a 31-month Low

The number of job openings declined by 62,000 to 8.79 million in November, the U.S. Bureau of Labor Statistics reported Wednesday.

The number of job openings declined to the lowest level since March 2021, fell for the third consecutive month in a row, and decreased from a record high of 12 million in March 2022.

In November, the number of hires decreased by 363,000 to 5.5 million, total separations declined by 292,000 to 5.3 million, and quits edged down by 157,000 to 3.5 million.

During the month, job openings declined in transportation, warehousing, and utilities by 128,000 and in federal government by 58,000, but job openings expanded in wholesale trade by 63,000.

Across the nation, job openings fell in the South by 128,000, in the Northeast by 29,000, and in the West by 7,000, but increased in the Midwest by 102,000.

 

U.S. Manufacturing Activities Extended the Longest Decline in Two Decades

The Manufacturing Purchasing Managers' Index improved slightly to 47.4 in December from 46.7 in November, the Institute for Supply Management reported Wednesday.

The index indicated that factory activities shrank for the 14th consecutive month, extending the longest period of declining activity since 2000 and 2001.

The index for production rebounded to 50.3 from 48.5, but new orders fell to 47.1 from 48.3, employment edged higher to 48.1 from 45.8, and inventories continued to shrink with the index easing to 44.3 from 44.8.

 

U.S. Indexes and Yields

The S&P 500 index decreased 0.4% to 4,722.15, and the Nasdaq Composite dropped 0.7% to 14,663.76.

The yield on 2-year Treasury notes increased to 4.34%, 10-year Treasury notes inched higher to 3.96%, and 30-year Treasury bonds eased to 4.11%.

WTI crude oil increased $2.10 to $72.50 a barrel, and natural gas prices decreased 10 cents to $2.67 a thermal unit.

Gold decreased $24.81 to $2,033.99 an ounce, and the yellow metal price traded down for the second day after investors dialed back rate-cut optimism.

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 102.43.

 

U.S. Stock Movers

PGT Innovations increased 3.5% to $41.70 after the window and door maker received an unsolicited offer from Miter Brands for $41.50 a share.

PGT agreed to a $41 per share offer from Masonite International on December 18.

Bloomin' Brands increased 2.6% to $28.01 after the owner of Outback Steakhouse added two board members, as agreed with activist investor Starboard Value.

Walt Disney decreased 0.03% to $90.66, and activist investor ValueAct Capital agreed to support the company's latest slate of board members, giving the management a leg up against activist investor Trian Partners.

Cryptocurrency-focused stocks traded down after Bitcoin declined 5.5% to $42,395.60.

Marathon Digital Holdings dropped 10.5% to $20.58, and Coinbase Global declined 7.5% to $146.0.

Apple declined 0.7% to $184.09 and extended its loss for the second day after falling 3.6% in the previous session following a downgrade by Barclays analysts.

BYD Class H shares in New York traded down 2.5% to $26.85 despite the company ramping up sales of its new energy vehicles in 2023 to 3 million.

BYD produced 1.6 million battery-powered passenger cars and 1.4 million hybrid cars.

Tesla still leads the battery-powered vehicle segment with 1.8 million vehicles in 2023.

 

European Markets Turned Lower Second Consecutive  Day 

European markets lacked direction, and investors reviewed the latest economic reports from around the world.

Germany's jobless rate edged slightly higher to 5.9% in December from the revised 5.8% in the previous month, the Federal Employment Agency reported Wednesday.

The jobless rate advanced to the highest since May 2021 and increased for the eleventh month in a row by 5,000 to 2.703 million.

The number of unemployed increased by 186,000 from the previous year, but the jobless rate ranged from 3.4% in Bavaria to 6.0% in Brandenburg to 9.2% in Berlin.

 

Europe Indexes and Yields

The DAX index decreased 1.4% to 16,538.39, the CAC-40 index fell 1.6% to 7,411.86, and the FTSE 100 index inched lower by 0.5% to 7,682.33.

The yield on 10-year German bonds decreased to 2.05%; French bonds inched lower to 2.59%; the UK gilts edged up to 3.64%; and Italian bonds advanced to 3.73%.

The euro edged lower to $1.092, the British pound inched lower to $1.262, and the U.S. dollar eased to 85.43 Swiss cents.

Brent crude decreased $2.12 to $78.02 a barrel, and the Dutch TTF natural gas increased by €2.22 to €32.80 per MWh.

 

Europe Stock Movers

Maersk increased 4.4% to DKK 13,475.0 after the company announced its plan not to resume shipping through the Red Sea lanes "until further notice."

ASML Holding declined 1.9% to €651.80 and extended its loss from the previous session after the Dutch government halted shipments of advanced chipmaking equipment to China.

Atos SE decreased 4.8% to €6.65 after the company said it plans to initiate due diligence talks with Airbus with a potential sale of its big data and security unit.

Ryanair Holdings plc decreased 4.4% to €18.29 after the budget airline said the number of online travel platforms had suspended selling its flights in early December.

The budget airline said the removal of its flights is not likely to affect its financial outlook and passenger count, but the move has affected its load factor in December and January by "1% to 2%."

The online travel platforms, including Kayak, Booking.com, and Kiwi, dropped the company's flights following the Irish court granting the airline a permanent injunction against the screenscraper Flightbox for "unlawfully scraping Ryanair content" and distributing it to online travel platforms.

The budget airline also announced that its December traffic increased by 9% to 12.54 million, but the load factor declined to 91% from 92% a year ago.

Wizz Air Holdings declined 3.4% to 2,142.0 pence, and the budget carrier said December traffic increased 18% from a year ago to 4,964,857.