Market Updates
U.S. Averages Struggle to Advance, European Markets Closed Higher
Barry Adams
15 Feb, 2024
New York City
Stocks retained an upward bias but gains were muted after retail sales in January fell short of market expectations.
Benchmark indexes advanced for the second day in a row after falling sharply in Tuesday's trading following hotter-than-expected inflation in January.
Investors reacted to the latest earnings from Cisco Systems, Tripadvisor, Twilio, Stellantis, and Shake Shack.
Retail and Food Services Sales Declined In January
On the economic front, retail and food services sales declined in January from December, the Census Bureau announced Thursday.
Preliminary retail and food services sales, adjusted for calendar and seasonal factors but not for prices, decreased 0.8% from the previous month but were up 0.6% from a year ago.
December sales were revised lower to 0.4% from the previous estimate of 0.6%.
Retail trade sales were down 1.1% from December 2023 and 0.2% below last year.
Nonstore retailers were up 6.4% from last year, while food services and drinking places were up 6.3% from January 2023.
Jobless Claims Edged Slightly Lower
Seasonally adjusted initial jobless claims for the week ending on February 10 declined by 8,000 to 212,000 from the previous week's revised level.
The previous week's level was revised up by 2,000 from 218,000 to 220,000. The 4-week moving average was 218,500, an increase of 5,750 from the previous week's revised average.
U.S. indexes and yields
The S&P 500 index increased 0.3% to 5,013.42, and the Nasdaq Composite fell 0.1% to 15,847.21.
The yield on 2-year Treasury notes declined to 4.55%, 10-year Treasury notes decreased to 4.22%, and 30-year Treasury bonds edged down to 4.40%.
WTI crude oil increased $1.51 to $78.15 a barrel, and natural gas prices declined 3 cents to $1.57 a thermal unit, a low last seen in September 2020.
Gold increased by $10.78 to $2,003.05 an ounce 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 104.38.
U.S. Stock Movers
Cisco Systems declined 4.1% to $48.20 after the company reported a decline in sales and earnings in the fiscal second quarter and also issued a weaker-than-expected current quarter sales and earnings outlook.
Stellantis NV, the parent of Fiat and Chrysler, increased 5.1% to $25.64 after the automobile company announced its Є3 billion stock repurchase plan and hiked its annual dividend by 16% to Є1.55 per share.
The company plans to increase shareholder return by 26% from a year ago to Є7.7 billion in 2024.
Tripadvisor gained 4.9% to $26.56 after the travel information provider reported better-than-expected quarterly results.
Twilio dropped 11.7% to $64.20 after the email delivery service provider estimated weaker-than-expected revenue in the fiscal fourth quarter.
Apple declined 0.5% to $183.13 after Berkshire Hathaway trimmed several holdings in the fourth quarter, including Apple and HP, according to regulatory filings released on Wednesday.
Earnings Drive European Markets Higher, EC Lowered GDP Growth Outlook
European markets traded higher, and investors reviewed the latest batch of corporate results and comments from ECB president Christine Lagarde.
Benchmark indexes in Paris, Frankfurt, and London advanced after upbeat earnings from Airbus, Commerzbank, Safran, Orange, Renault, and Stellantis.
Restrictive interest rates and the impact of energy price shocks fade, and inflation in the eurozone is expected to moderate in 2024, ECB President Lagarde said to the committee of the European Parliament.
Lagarde acknowledges that activities are subdued across a broad spectrum of the economy and labor market conditions are tight, but wage pressures are moderating and energy price inflation is also weakening.
The European Commission lowered its economic growth outlook for the eurozone by 0.4 percentage points to 0.8%, citing broad weaknesses in activities.
The commission said all member states are likely to expand in 2024, with Germany at 0.3%, France at 0.9%, and Italy at 0.7%.
The inflation outlook for the Euro Area was lowered to 2.7% in 2024 and 2.2% in 2025 from 3.2% in 2023.
The Eurozone merchandise trade balance swung to a surplus of €65.9 billion from a deficit of €332.2 billion in 2022.
Exports in the year dropped 1.2% to €2.83 trillion and imports dropped 13.5% to €2.77 trillion from a year ago, respectively.
The UK Economy Dips Into Recession
The UK economy entered into a technical recession after GDP contracted 0.3% from the previous quarter in the fourth quarter, the Office for National Statistics reported Thursday.
On an annual basis, the UK economy contracted 0.2% in the fourth quarter of 2023.
The UK economy contracted in the fourth quarter amid broad weakness in household consumption, net international contribution, services, and industrial production.
For the full-year 2023, GDP in the UK edged slightly higher by 0.1% after expanding by 4.3% in 2022 and 8.7% in 2021.
The Bank of England forecasts the UK economy to expand by 0.25% in 2024 and 0.75% in 2025.
Europe Indexes and Yields
The DAX index increased by 0.6% to 17,046.69, the CAC-40 index rose 0.9% to 7,743.42, and the FTSE 100 index inched higher by 0.4% to 7,597.53.
The yield on 10-year German bonds edged down to 2.31%; French bonds inched higher to 2.81%; the UK gilts edged lower to 4.02%; and Italian bonds inched higher to 3.83%.
The euro edged lower to $1.073, the British pound inched higher to $1.255, and the U.S. dollar gained to 88.32 Swiss cents.
Brent crude decreased $1.30 to $82.95 a barrel, and the Dutch TTF natural gas rose by €0.11 to €24.97 per MWh.
Europe Stock Movers
Commerzbank surged 3.8% to €10.88 after the German bank said it plans to return about one billion euros to shareholders after the company reported a 55% surge in its annual profit in 2023.
The financial services company also reported fourth-quarter earnings that were ahead of market expectations.
Schneider Electric gained 3% to €201.30 after the French company specializing in energy management lifted its dividend and estimated higher earnings and revenue in the current year.
Renault SA jumped 6.6% to €40.19 after the French automaker and parent of Nissan returned to profitability in 2023 on the back of gains in sales and improvements in margins.
Stellantis increased 4.3% to €23.61 after the parent company of Italian automaker Fiat announced its plan to buyback its own shares.
Continental AG increased 0.8% to €76.72, and the German tiremaker announced its plans to eliminate 7,150 jobs worldwide by 2025.
Yen Remains Under Pressure, Japan Stocks Dominate Asia Markets
Market indexes in Asia drifted sideways after Japan unexpectedly fell into a technical recession and Japan's economy slipped to fourth place, lagging the German economy by a small margin.
The Nikkei index advanced 1% to 38,073.91, and the Topix index added 0.2% to 2,589.88.
The yen traded above 150 against the U.S. dollar for the second day in a row this week and for the first time since November, prompting more verbal intervention from Japanese officials.
The yen has declined more than 6% against the U.S. dollar so far in 2024.
Investors have been selling the Japanese yen on the worry that U.S. interest rates are likely to stay higher for longer after the release of the latest inflation data, expanding the yawning yield gap between Japanese government bonds and U.S. Treasury bonds.
Renesas Electronics Corp. decreased 1.2% to ¥2,568.50 after the Japanese chip maker announced the acquisition of the Australian-listed software firm Altium for $5.9 billion.
Japan Falls Behind Germany
Japan's economy unexpectedly shrank by 0.1% from the previous quarter in the fourth quarter of 2023.
The GDP in the third quarter was revised to a contraction of 0.3%, the Cabinet Office reported Thursday.
For the full year 2023, Japan's economy expanded 1.9% after rising 1.0% in 2022.
The economy dipped into a recession after private consumption, which accounts for more than half of the economy, declined for the third quarter in a row on elevated costs.
The weakness of government spending and capital expenditure overcame the net positive contribution from international trade.
The GDP data from Japan is generally not that reliable and is subject to sharp revisions. Most likely, the GDP will be revised higher in the second estimate because the business conditions index is signaling rising activity.
Japan's GDP slipped to the fourth largest in the world, trailing the U.S., China, and Germany.
Nominal GDP of Japan in 2023 rose 5.7% to 591.48 trillion yen, or $4.3 trillion, based on the average exchange rate in 2023.
Meanwhile, Germany's nominal GDP expanded 6.3% to €4.21 trillion, or $4.46 trillion, when calculated average exchange rate in 2023.
China's GDP surpassed Japan's in 2010, and India's economy is forecasted to surpass the economies of Japan and Germany by as early as 2028.
Hong Kong Stocks Face Persistent Downward Pressure
Investors remained hesitant about investing in Chinese stocks, and most regional investors are looking to trim holdings with any sign of a rebound, according to a survey published by Bank of America on February 13.
The global bank conducted a survey of institutions managing about $313 billion between February 2 and 8.
The Hang Seng index increased 0.4% to 15,947.63, and stocks advanced for the second day in a row in the hopes that Chinese government-controlled funds will step up buying.
Market sentiment reversed in the afternoon session after indexes dropped as much as 0.6% in early trading.
Alibaba Group, JD.com, Tencent, Baidu, and Meituan jumped between 0.1% and 3.0%.
Property developers struggled in trading, and Longfor Group, China Vanke, and China Resources Land declined between 1% and 2.5%.
Financial markets in mainland China are closed this week to celebrate the Lunar New Year.
Chinese stocks have lost about $5 trillion in market capitalization over the three years to 2023, and indexes have extended losses by another 5% in 2024.
India Stocks Lacked Direction In Volatile Trading
Stocks in Mumbai opened higher in early trading and extended the previous day's gains.
The Sensex and the Nifty indexes advanced by 0.2% following the rebound in market indexes in overnight trading in New York and Europe after bond yields eased.
The Sensex index increased 73.58 points to 71,891.62, and the Nifty index rose 32.35 points to 21,866.65.
On the Mumbai stock exchange, 124 stocks traded at their 52-week highs and 13 stocks traded at their 52-week lows.
India's Current Account Deficit to Moderate
India's current account deficit moderated after the service sector surplus rose at a healthy pace, the Reserve Bank of India reported on Wednesday.
The service trade surplus in the fiscal third quarter ending in December rose 16% to $44.9 billion, helping the current account to shrink further.
Service exports in the quarter rose 5.2% to $87.7 billion, and imports advanced 4.2% to $42.8 billion from a year ago, respectively.
India's current account deficit in the fiscal first half ending in September moderated to 1.0% from 2.9% after the merchandise trade deficit shrank and the service sector surplus rose.
The steady growth in service sector surpluses and foreign remittances has helped the country lower its current account deficit over the last decade.
Annual Returns
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Earnings
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