Stocks Push Higher In Volatile Trading, 10-year Treasury Yield Hovers at 4%

Barry Adams
04 Jan, 2024
New York City

Benchmark indexes delivered mixed performance and Treasury yields edged higher after investors recalibrated interest rate outlook. 

The S&P 500 index and the Nasdaq Composite lacked direction, and investors debated interest rate paths, economic health, and labor market conditions.

Investors curbed their enthusiasm for rate cuts after the Fed's minutes suggested that policymakers are not in any hurry to lower rates until clear evidence of a sustained decline in inflation emerges.

While policymakers appear to agree that interest rates are near their peak levels in the current tightening cycle, rates could also go higher if the economic data suggest the need.

Investors' enthusiasm about a possible rate cut powered a nine-week rally in the S&P500 index and the Nasdaq Composite, but in the new year, investors are recalibrating the rate path outlook.

 

Private Sector Expands In December  

The private sector added payrolls at a faster-than-expected pace in December, highlighting the resilient U.S. labor market.

Private payrolls in the U.S. increased 164,000 in December, higher than a downwardly revised 101,000 in November, ADP reported Thursday.

The leisure and hospitality sector led the increase with an addition of 59,000, followed by increases in the construction sector by 24,000 and financial services by 18,000.

The closely watched nonfarm payroll data from the U.S. Labor Department is scheduled to be released on Friday, and economists are looking for the economy to add at least 160,000, according to a survey conducted by Ticker.com, following the increase of 199,000 in November.

 

Initial Weekly Jobless Claims Declined 

The latest weekly jobless claims report showed a decline in layoffs, but labor market conditions remain tight.

Initial jobless claims declined from 18,000 to 202,000 for the week ended December 30, the U.S. Labor Department reported Thursday.

The four-week moving average, which smooths out week-to-week volatility, declined by 4,750 to 207,750.

Continuing claims for the week ending in the previous week eased by 31,000 to 1.855 million.

 

U.S. Indexes and Yields

The S&P 500 index increased 0.08% to 4,709.35, and the Nasdaq Composite dropped 0.1% to 14,572.40.

The yield on 2-year Treasury notes increased to 4.35%, 10-year Treasury notes inched higher to 3.95%, and 30-year Treasury bonds eased to 4.10%.

WTI crude oil decreased $0.55 to $72.15 a barrel, and natural gas prices increased 15 cents to $2.82 a thermal unit.

Gold increased $2.40 to $2,042.78 an ounce, and the yellow metal price traded volatile for the third 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 102.32.

 

U.S. Stock Movers

Walgreens Boots Alliance increased 0.1% to $25.60 after the pharmacy operator reported fiscal first-quarter earnings and revenues that were ahead of market expectations.

Cal-Maine Foods dropped 5.2% to $52.05 after the egg producer reported fiscal second-quarter results.

Revenue plunged in the quarter after the average selling price per dozen fell to $1.70 from $2.70 and the number of dozne eggs sold increased to 288.2 million from 284.0 million, respectively, in the previous year.

Revenue in the quarter dropped to $523.2 million from $801.7 million, net income declined to $16.6 million from $198.3 million, and diluted earnings per share dropped to 35 cents from $4.07 a year ago.

Apple declined 1.2% to $182.0 after an analyst at Piper Sandler lowered his views on the tech giant.

Meta Platforms increased 0.1% to $344.80, and chief executive Mark Zuckerberg sold more than $400 million in the company's share at the end of last year as a part of a trading plan that was previously announced.

Ford Motor Company decreased 0.01% to $11.70, and the company announced a price increase for some of its electric F-150 Lightning pickup trucks.

 

European Markets Rebounded, Inflation In Germany and France Accelerated

European markets advanced in Thursday's trading, and investors reviewed the latest batch of economic releases.

France's consumer price inflation accelerated to 3.7% in December from 3.5% in the previous month, the statistical agency reported Thursday.

Germany's consumer price inflation rose to 3.7% in December from 3.2% in the previous month, the Federal Statistics Office or destatis reported Thursday. 

Core inflation, which excludes volatile food and energy prices, declined to 3.5%, and dropped to the lowest level since July 2022. 

The average Inflation rose to 5.9% for the entire 2023, after energy prices declined from the previous year but services inflation stayed elevated. 

Spain's private sector activity expanded for the first time in three months in December.

The HCOB Spain Composite PMI increased to 50.4 in December from 49.8 in November, S&P Global reported in its monthly update.

Italy's private sector activity contracted at a softer pace in December, S&P Global reported in a separate report today.

The HCOB Italy Composite PMI increased to 48.6 from 48.1 in November, indicating a contraction in private sector activities for the seventh month in a row.

UK net mortgage approvals increased by 50,067 in November, the Bank of England reported Thursday.

Net mortgage approval rose to a five-month high, but the increase remained muted due to the rising mortgage rates and elevated home prices in the nation.

The effective interest rate, reflecting the mortgage rate paid by the borrower, increased by 9 basis points to 5.34%.

Investors also reviewed the latest minutes of the meeting released by the U.S. Federal Reserve.

Rate-setting committee members appeared to conclude that interest rates are nearing peak rates in the current tightening cycle, but participants were not sure if and when rates would need to be lowered.

Committee members noted that economic growth is moderating, inflation is easing but still remains above the preferred level, and labor market conditions are weakening but still remain tight.

Most participants appeared to support the view that future economic data will provide more insights about the appropriate level of interest rates and whether higher rates are needed in the long term.

 

Europe Indexes and Yields

The DAX index increased 0.5% to 16,617.29, the CAC-40 index rose 0.5% to 7,450.63, and the FTSE 100 index inched higher by 0.5% to 7,723.07.

The yield on 10-year German bonds decreased to 2.06%; French bonds inched higher to 2.61%; the UK gilts edged up to 3.69%; and Italian bonds advanced to 3.75%.

The euro edged lower to $1.095, the British pound inched lower to $1.272, and the U.S. dollar eased to 84.91 Swiss cents.

Brent crude decreased $0.69 to $77.56 a barrel, and the Dutch TTF natural gas increased by €1.02 to €33.81 per MWh.

 

Europe Stock Movers

Energy stocks advanced after the crude oil price extended a 3-day gain amid rising tensions in the Middle East and growing violence in the Red Sea lanes, which prompted worries about supply disruptions.

U.S. President Joe Biden warned that the U.S. Navy fleet will attack Houthi installations unless rebels stop attacking merchant cargo ships traveling through Red Sea lanes.

The joint statement included support from the U.S., Japan, the UK, and Germany.

Telefonica SA rose 1% to €3.68 after the Spanish telecom operator signed an agreement with a trade union to lay off up to 3,421 staff.

The company will also take a charge of €1.3 billion linked to its layoff plan.

Nordex SE increased 2.2% to €10.04 after the company said it received an order to supply 106 MW of wind turbines from Spanish electricity producer Capital Energy.

The company did not disclose any financial details related to the order.

Evotec SE dropped 19% to €17.36 after the German biotech company said chief executive Werner Lanthaler stepped down from the office for personal reasons.

Next plc advanced 4.7% to €17.36 pence after the retailer lifted its profit outlook after sales in the pre-Christmas period were ahead of the company's expectations.

JD Sports Fashion PLC plunged 23.7% to 118.35 pence after the specialty retailer lowered its full-year profit estimate.