U.S. Stocks Lack Direction and Momentum, Natural Gas Drops to a 3-year Low

Barry Adams
08 Feb, 2024
New York City

Stock market indexes flatlined on Wall Street after extending weekly and monthly gains in the previous session.

The S&P 500 index and the Nasdaq Composite flirted with near-record highs as investors focused beyond lingering interest rate uncertainty.

Despite the ongoing debate about the future rate path and levels, the U.S. economy is expanding at a steady clip of more than 2%, and the job market has added 255,000 monthly jobs over the last year.

Moreover, inflation has been falling steadily from a high of 9% to near 3%, keeping consumer spending growth intact, driven in part by wage increases.

With the positive economic backdrop and resilient consumer and labor markets, corporate earnings have been largely ahead of market expectations for the second year in a row.

Moreover, the latest jobless claims indicated persistently tight labor market conditions.

Initial jobless claims declined by 9.000 to 218,000 in the week ending on February 2, the U.S. Department of Labor reported Thursday.

However, continuing claims eased by 23,000 to 1.871 million in the previous week.

 

U.S. indexes and yields

The S&P 500 index decreased 0.001% to 4,995.06, and the Nasdaq Composite rose 0.3% to 15,804.74.

The yield on 2-year Treasury notes increased to 4.43%, 10-year Treasury notes rose to 4.13%, and 30-year Treasury bonds edged up to 4.35%.

Natural gas prices dropped to a 3-year low after the latest weekly report from the Energy Information Administration indicated smaller-than-expected inventory withdrawals last week.

Utility companies pulled 75 billion cubic feet of natural gas, slightly less than expected but significantly lower than the 217 billion cubic feet withdrawn in the same week a year ago.

Additionally, LNG exports from the Freeport LNG plant near Houston are not likely to be fully operational for months, and milder weather over the next two weeks is also expected to keep demand for natural gas low.

WTI crude oil increased $2.03 to $75.89 a barrel, and natural gas prices declined 4 cents to $1.92 a thermal unit, a low last seen in September 2020. 

Gold decreased by $10.93 to $2,023.20 an ounce and extended the previous week's gains after the U.S. dollar gained in international trading.

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 104.34.

 

U.S. Stock Movers

Walt Disney Co. soared 7.9% to $107.0 after the media and entertainment company reported better-than-expected revenue, earnings, and full-year outlook.

The media company announced a $1.5 billion stake in Epic Games, the creator and developer of Fortnite.

Disney confirmed that the company is on track to launch its ESPN streaming service in 2025.

The company also said it is on track to cut $7.5 billion in costs by the end of fiscal 2024.

PayPal Holdings declined 9.5% to $57.35 after the payments services provider estimated weaker-than-estimated earnings in the first quarter and full year.

However, the company reported fourth-quarter results that were ahead of consensus estimates.

Spirit Airlines jumped 4.2% to $7.24 after the deep discount airline reported better-than-expected quarterly results.

Revenue in the fourth quarter declined to $1.32 billion from $1.39 billion, net loss shrank 32% to $183.6 million from $1270.6 million, and diluted loss per share fell to $1.68 from $2.49 a year ago.

Total revenue per passenger flight segment declined 15.3% to $114.84, driven by a 25% decrease in fare revenue to 48.24 and a 6.6% fall in non-ticket revenue to $66.60.

Arm Holdings soared 27.9% to $98.45 after the advanced chip designer reported sharply higher revenue and earnings in its latest quarter.

The UK-based chipmaker reported fiscal third quarter revenue rose 14% to $824 million from $724 million, net income fell 52% to $87 million from $184 million, and diluted earnings per share decreased to 8 cents from 18 cents a year ago.

The company exceeded its fiscal third-quarter revenue estimate of between $720 million and $800 million.

The company estimated fiscal fourth quarter revenue between $850 million and $900 million and lifted its full-year revenue estimate range to between $3.155 billion and $3.205 million from the previous range between $2.96 billion and $3.08 billion.

 

European Markets Rest Near Record High

European markets advanced, and investors looked overseas in the absence of domestic economic news.

Benchmark indexes in Frankfurt, Paris, and London edged higher despite the U.S. interest rate uncertainty, wean consumer sentiment in the eurozone, and elevated geopolitical tensions.

China's consumer price inflation declined for the fourth month in a row, and producer prices fell for the sixteenth consecutive month, citing persistent deflation risks.

Investors also reviewed the latest batch of earnings, and Maersk, AstraZeneca, BAT, Societe Generale, and Siemens were in focus after reporting their quarterly results.

 

Europe Indexes and Yields

The DAX index increased 0.3% to 16,963.83, the CAC-40 index rose 0.7% to 7,664.40, and the FTSE 100 index inched lower by 0.5% to 7,594.21.

The yield on 10-year German bonds edged up to 2.29%; French bonds inched higher to 2.80%; the UK gilts edged lower to 3.97%; and Italian bonds inched higher to 3.87%.

The euro edged lower to $1.078, the British pound inched higher to $1.263, and the U.S. dollar gained to 87.30 Swiss cents.

Brent crude increased $2.01 to $81.22 a barrel, and the Dutch TTF natural gas decreased by €0.44 to €27.45 per MWh.

 

Europe Stock Movers

ArcelorMittal rose 2.6% to €25.86 despite the France-based global steel company reporting a net loss of $2.9 billion.

Adyen NV soared 19.1% to €1,413.80 after the Dutch payment service provider reported a sharp jump in its net profit in the second half of fiscal 2023.

AP Moeller-Maersk Class B dropped 13.1% to DKK 11,080.0 after the ocean freight shipping company reported a net loss of $442 million in the fourth quarter of 2023.

AstraZeneca declined 3.2% to 10,152.0 pence after the British drug company reported a lower-than-expected profit in its latest period.

BAT soared 7.6% to 2,492.50 pence after the company said it plans to lower its stake in India-based hotel-to-tobacco conglomerate ITC.

 

In Asia China and India Face Two Different Price Pressures

In Asia, the benchmark indexes in Japan advanced, tracking gains in New York, but indexes struggled in Shanghai and Hong Kong due to the protracted downturn in the property market and persistent selling by foreign investors.

In overnight trading, market indexes on Wall Street advanced after companies reported better-than-expected earnings and investors looked beyond rate uncertainty.

Elsewhere in the region, market indexes in India, Sydney, and Seoul traded higher.

The ASX 200 index increased 0.3% to 7,639.20, the KOSPI index edged up 0.2% to 7,639.20, and the Sensex index inched down 0.8% to 71,557.82 after erasing early morning gains.

 

Japan Stocks Trade Higher, SoftBank Soars 10%

Market indexes in Tokyo extended recent gains and approached multi-decade highs, and investors reacted to the latest batch of earnings and the gains in the U.S. markets.

The Nikkei 225 increased 2.2% to 36,904.10, and the benchmark index advanced following a string of positive earnings and stable interest rate expectations, at least for the next two months.

SoftBank Group soared 10.9% to ¥7,332.0 after the company's U.S.-listed ARM Holdings soared nearly 20% in after-hours trading in New York following the earnings release.

Other leading semiconductor industry companies advanced as well.

Tokyo Electron, Advantest, Screen Holdings, and Renesas Electronics jumped between 1% and 5%.

Vehicle makers also participated in the market rally, and Toyota Motor, Honda Motor, Nissan, and Subaru advanced between 1% and 3%.

 

Japan's Current Account Stays in Surplus for the Eleventh Consecutive Month

Japan's current account surplus sharply rebounded to 744.5 billion yen from 0.095 billion yen a year ago, the Ministry of Finance reported Thursday.

The current account was in surplus for the eleventh month in a row in December after merchandise trade swung to a surplus of 115.5 billion yen from a deficit of 1,238.9 billion.

 

China's January Inflation Data Prompts Deflation Worries

China stocks were under pressure, and market indexes trimmed weekly gains after consumer and producer price inflation declined in January.

The CSI 300 index added 0.3% to 3,354.95, and the Hang Seng index dropped 1% to 15,925.10.

Consumer price inflation declined at an annual rate of 0.8% in January, a fourth monthly decline in a row and the largest fall since September 2009.

Producer price inflation fell 2.5% in the month, a 16th monthly decline in a row.

The National Bureau of Statistics reported both inflation updates in a separate report.

Consumer prices fell partly because of a higher base after the start of the spring festival in January, driving prices of food and energy higher.

In stock trading, tech stocks were under pressure after Alibaba Group reported a 70% decline in quarterly earnings and revenue rose less than expected (5.1%).

Alibaba Group fell 6.5% to HK$70.05, and the company expanded its stock repurchase plan by $25 billion to $35.3 billion.

Baidu, JD.com, Tencent, and Meituan fell between 0.5% and 2.0%.

Property developers continue to slide amid no signs of government measures to revive the moribund market and support the overleveraged property companies.

Longfor, China Resources Land, Sun Hung Kai, and China Vanke traded mixed.

 

India Stocks Sell Off On Inflation Forecast

Stocks in Mumbai declined, and bond yields held firm after the central bank held its key lending rate steady.

The Nifty and the Sensex indexes edged lower, and the Reserve Bank of India held the repo rate at 6.5%, as widely expected.

Market sentiment turned negative after the central bank estimated a 5.4% inflation rate for the financial year 2024 ending in March and estimated inflation to rebound to 5.0% in the final quarter.

The Sensex index decreased 0.8% to 71,574.55, and the Nifty index fell 0.7% to 21,756.0.

On the Mumbai stock exchange, 458 stocks traded at their 52-week highs and 13 stocks traded at their 52-week lows.

Adani Ports and SEZ declined 1.3% to ₹1,256.25, and the company won a bid to operate a container terminal at Tanzania's main port, Dar Es Salaam.

Adani will operate the larger of the two terminals, with a capacity of 660,000 twenty-foot equivalent units of containers.

Zomato gained 0.6% to ₹140.85 after the delivery service provider confirmed the closing of its businesses in the Czech Republic and Vietnam.