U.S. Major Averages Rest, European Markets Hover Near Record Highs, Asian Markets Diverge

Barry Adams
13 Mar, 2024
New York City

Stocks traded in a narrow range, and benchmark indexes hugged the flatline as investors debated interest rate paths. 

The S&P 500 index was nearly unchanged after the market rally in the previous session lifted the index to a new record high. 

Investors have generally welcomed the recent reports on inflation, the job market, and factory orders. 

Inflation has been cooling over the last nine months, but that cooling trend is generally reflective of lower energy prices. 

Despite the Federal Reserve lifting rates eleven times between March 2022 and September 2023, inflation is still above the Fed's target rate of 2% and housing prices are still rising across the nation. 

Moreover, the Fed has no plans or tools to bring prices back to the pre-pandemic level of 2019, and policymakers are still looking for prices to continue to rise at least 2% or faster in the future. 

Home prices are up between 50% and 300%, food prices are up at least 100%, and transportation costs are up by at least 80% over the last three years. 

Yet, the Federal Reserve is looking to lower interest rates as early as June, which is most likely to fuel another round of price increases for homes, food, and automobiles. 

Turning our attention to stocks, the 4-month market rally has broadened beyond tech stocks to healthcare, industrial, transportation, and retailers. 

The S&P 500 index and the Nasdaq Composite have advanced more than 8% in the year so far to the close of Tuesday's trading, following the 24% and 43% surge in 2023, respectively. 

 

U.S. Indexes and Yields

The S&P 500 index increased 0.04% to 5,176.60, and the Nasdaq Composite fell 0.5% to 16,180.22. 

The yield on 2-year Treasury notes increased to 4.53%, 10-year Treasury notes inched up to 4.09%, and 30-year Treasury bonds edged down to 4.26%.

WTI crude oil increased $1.98 to $79.53 a barrel, and natural gas prices increased 3 cents to $1.67 a thermal unit.

Gold decreased by $17.44 to $2,175.44 an ounce, and silver rose 76 cents to $24.98. 

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 102.94.

 

U.S. Stock Movers

Coinbase declined 1.7% to $251.90 after the company announced its plans to raise $1 billion through a convertible bond offering. 

Petco Health & Wellness advanced 5% to $2.69 after the pet food retailer reported better-than-expected financial results in the fiscal fourth quarter. 

Dollar Tree dropped 13% to $136.0 after the deep discount retailer reported weaker-than-expected quarterly results. 

The retailer also announced plans to close 1,000 underperforming stores. 

 

CAC-40 In Paris Close at New Record High, DAX Hovers Near High

European stock market indexes advanced, and investors looked beyond interest rate uncertainties. 

Benchmark indexes in Paris traded at new record highs, and the reference index in London inched higher after the UK's economy rebounded modestly in January. 

Market sentiment in Frankfurt was cautious amid worries of interest rate path and persistent worries of weak domestic consumer demand.  

Retail sales in eurozone has struggled after consumers retrenched to basic necessities and avoided discretionary items amid elevated interest rates and inflation. 

 

UK GDP Slightly Rebounded In January

Gross domestic product increased by 0.2% in January, reversing a 0.1% decrease in December after construction and service activities expanded. 

The UK's economy has been struggling amid weak consumer demand and muted business activities, and the economy slipped into a technical recession in the second half of 2023. 

For the three months to January, the UK's economy shrank by 0.1%, the Office for National Statistics reported Wednesday. 

 

Germany's Wholesale Price Decline Accelerated 

Germany's wholesale price decline accelerated in January, confirming the slowing inflation trend in the largest economy in the eurozone. 

Wholesale prices declined 3.0% in January, steeper than the 2.7% fall in December, the Federal Statistical Institute reported Wednesday. 

 

Eurozone Industrial Output Dropped In January 

Industrial output in the eurozone declined sharply in January after production of capital goods plunged, Eurostat reported Wednesday. 

Industrial production plunged 3.2% from the previous month and 6.7% from a year ago in January, reversing the 1.6% monthly growth in December. 

Capital goods production plunged 14.5% from the previous month and decreased 12.1% from a year ago, and monthly output of durable goods declined 1.2% and non-durable goods fell 0.2%. 

The decline in industrial output was the steepest since last year's March, on the persistent weakness in capital goods, durable and non-durable goods. 

 

Europe Indexes and Yields

The DAX index decreased by 0.01% to 17,961.38, the CAC-40 index rose by 0.6% to 8,137.58, and the FTSE 100 index inched higher by 0.3% to 7,772.17.

The yield on 10-year German bonds edged up to 2.31%; French bonds inched higher to 2.76%; the UK gilts edged higher to 3.96%; and Italian bonds inched lower to 3.59%.

The euro edged higher to $1.093, the British pound inched higher to $1.278, and the U.S. dollar held steady at 87.82 Swiss cents.

Brent crude increased $1.80 to $83.82 a barrel, and the Dutch TTF natural gas decreased by €0.21 to €24.57 per MWh.

 

Europe Stock Movers

Sandoz Group declined 0.1% to CHF 27.76 after the generic drug maker said core net income in 2023 declined to $953 million from $1.2 billion a year ago. 

Inditex rose 5.6% to €43.40 after the apparel retailer reported higher sales and pre-tax profit in 2023. 

Volkswagen Group decreased 0.7% to €120.0 despite the German vehicle maker reporting strong financial results in 2023. 

Investors are worried that rising competition in China and in the company's domestic market from Chinese suppliers of electric vehicles is likely to negatively impact earnings in 2024. 

Adidas AG decreased 0.5% to €193.72 after the German athletic shoe maker reported an annual loss in 2023. 

Advanced Medical Solutions Group gained 1.7% to 214.08 pence after the UK-based company agreed to acquire Peters Surgical for a maximum price of 141.4 million. 

The company agreed to make an initial cash payment of €132.5 million on a debt-free and cash-free basis and an earnout of up to €8.9 million, approximately £7.6 million, payable on delivery of US regulatory approvals, achievement of fiscal year 2024 revenue and gross margin targets, and satisfying certain inventory and tax conditions. 

 

Markets in China and Japan Diverge 

Asian markets traded mixed after the latest U.S. inflation report suggested that the U.S. Federal Reserve is more likely to keep rates higher at the end of its policy meeting on March 19. 

In overnight trading, benchmark indexes in New York advanced more than 1% after February's consumer price inflation met investors' expectations.

In Asia, the Nikkei 225 Stock Average declined 0.4%, the benchmark indexes in Shanghai fell 0.3% but in Hong Kong gained 0.4%, and the KOSPI index in Seoul added 0.3%. 

 

Tech Stocks in Tokyo Edged Lower, Investors Look Ahead of Rate Decision

Benchmark indexes in Tokyo traded down, and semiconductor stocks led the decliners on the worry that the recent monthslong rally may have stretched valuation too far. 

On the other hand, investors welcomed the rise in the producer price inflation data released on Tuesday. 

Japan's producer price inflation rose 0.6% from a year ago in February or gained 0.2% from the previous month, the Bank of Japan reported. 

The rise in producer prices follows the increase in consumer prices in the Tokyo metropolitan area, indicating inflation may be on the path to the 2% target set by the central bank. 

Investors are keenly awaiting the monetary policy outcome of the Bank of Japan on Wednesday, March 19, amid rising hopes that the central bank may lay the groundwork for lifting interest rates. 

Japan is the only developed nation in the world with negative interest rates, and investors are hoping that the central bank is ready to end its ultra-loose monetary policy.

The Nikkei 225 Stock Average fell 0.4% to 38,717.18, and the Topix index dropped 0.2% to 2,652.04. 

Semiconductor stocks rebounded following the gains in overnight trading in New York. 

Advantest, Screen Holdings, Tokyo Electron, Disco Corp., and SoftBank gained between 2% and 3%. 

Panasonic, Mitsubishi Electric, and Canon declined between 0.5% and 2%, but vehicle makers Toyota, Honda, and Nissan reversed morning losses to close up between 1% and 3%. 

 

Bargain Hunters Return to China Amid Low Valuations

Market sentiment in Shanghai and Hong Kong was driven by bargain hunters and corporate buybacks, as well as persistent worries about property market weakness and weak consumer sentiment. 

Chinese stock market indexes are down for the fourth year in a row after foreign portfolio investors continue to lighten their holdings and foreign direct investment plunged following the protracted downturn in the property market, persistent worries of intellectual theft, and rising personal security concerns after the government's expansion of espionage laws. 

Moreover, the recently concluded Chinese lawmakers annual parliamentary convention failed to make significant announcements to stabilize financial markets. 

The CSI 300 index decreased 0.6% to 3,576.31, and the Hang Seng index added 0.3% to 17,138.75. 

Hong Kong stocks advanced for the fourth day in a row after the listed companies ramped up their stock buybacks to take advantage of their beaten-down stocks. 

The latest surge is the longest market rally since the five-day advance in October. 

Electric vehicle makers BYD gained 0.4%, Li Auto advanced 4%, but Xiaomi Corp. declined 0.3%. 

AIA Group advanced more than 1% ahead of the company's annual results on Thursday, and yesterday the company confirmed it purchased its stock worth HK$12.7 million. 

Cathay Pacific Airways jumped 6.5% to HK$9.24 after the company reported a sharp jump in revenue and swung to profit in 2023. 

 

Cathay Pacific Traffic Rebounds 

The Hong Kong-based airline said 2023 revenue jumped 85.1% to HK$94.5 million, and net income swung to a profit of HK$9.78 billion from a loss of HK$6.62 billion in 2022. 

The airline has been struggling to expand capacity amid a shortage of pilots and a slow recovery in passenger demand, but the return to profitability allowed the company to declare a cash dividend of 43 Hong Kong cents per share. 

Passengers carried by the airlines jumped more than fivefold to 17.98 million in 2023 from 2.8 million, and air cargo delivered soared 19.6% to 1.38 million tons. 

 

India's Consumer Price Inflation Held Steady, Industrial Production Moderated

Stocks in Mumbai faced headwinds in trading as investors reviewed the latest updates on inflation and industrial production.

Benchmark indexes plunged more than 1% on the worries that securities regulators may step up trading oversight amid worries market manipulation by brokers and promoters.  

On the economic front, retail inflation in India held steady in February and stayed within the range set by the Reserve Bank of India. 

Consumer price inflation in February held at 5.1% and stayed in the tolerance range between 2% and 6% for the fourth month in a row. 

Volatile fresh vegetables, vegetables, and pulses contributed to the food price inflation acceleration to 8.9% from 8.3% in the previous month, said the statistical agency, the Ministry of Statistics and Programme Implementation. 

In other economic news, industrial output decreased moderately to 3.8% in January from 4.2% in December. 

Mining production rose 5.9%, manufacturing output increased 3.2%, and electricity surged 5.6%, according to the preliminary estimate released by the statistical agency. 

India's industrial production index has three components, with 77.6% weight assigned to manufacturing, 14.3% to mining, and 8% to electricity. 

The Sensex index decreased 1.2% to 72,761.89, and the Nifty index dropped 1.5% to 21,997.70. 

On the Mumbai stock exchange, 97 stocks traded at their 52-week highs and 253 stocks traded at their 52-week lows.

The yield on the 10-year Indian government bonds increased to 7.03%, and the Indian rupee strengthened to ₹82.79 against the U.S. dollar.