Cautious Optimism Prevailed On Wall Street, European Markets Close Near Record Highs

Barry Adams
19 Mar, 2024
New York City

Stocks rebounded from morning losses in Tuesday's trading as investors awaited rate decisions from the Federal Reserve. 

The S&P 500 index and the Nasdaq Composite increased 0.3%, and investors booked profits in hot tech stocks. 

The Federal Reserve kicked off its two-day policy meeting amid growing worries that policymakers may be influenced by the recent inflation updates, and keep higher rates for longer.  

Consumer and wholesale price inflation has cooled over the last fifteen months, and inflation is still above the 2% target rate set by policymakers despite eleven rate hikes. 

Moreover, home prices are still rising in most urban markets faster than wage gains, making home ownership a distant possibility for first-time home buyers. 

 

U.S. Housing Starts Jump In February

U.S. housing starts and permits increased in February, the Commerce Department reported Tuesday.

Low home inventories are forcing more and more buyers to buy new homes as buyers struggle with elevated mortgage rates and home affordability. 

Seasonally adjusted privately owned housing starts rose to 1.521 million, an increase of 10.7% from January and 5.9% from a year ago. 

Single-family housing starts in February were at a rate of 1.129 million, an increase of 11.6% above the revised January level of 1.01 million. T

Building permits increased 1.9% from the previous month and 2.4% from a year ago to a total of 1.518 million. 

Single-family authorizations in February totaled 1.031 million, an increase of 1.0% above the revised January level of 1.021 million. 

Authorizations of multi-family buildings with five units or more were at a rate of 429,000 in February.

Housing completions surged 19.7% from January and increased 9.7% from a year ago to 1.73 million. 

Single-family housing completions in February totaled 1,072,000, an increase of 20.2% above the revised January rate of 892,000. 

The February rate for completions of buildings with multi-family units was 644,000.

 

U.S. Indexes and Yields

The S&P 500 index increased 0.4% to 5,170.25, and the Nasdaq Composite rose 0.3% to 16,154.20. 

The yield on 2-year Treasury notes decreased to 4.70%, 10-year Treasury notes inched up to 4.30%, and 30-year Treasury bonds edged down to 4.44%.

WTI crude oil increased $0.94 to $83.66 a barrel, and natural gas prices increased 3 cents to $1.72 a thermal unit.

Gold decreased by $5.68 to $2,154.23 an ounce, and silver fell 8 cents to $24.95. 

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 103.88.

 

U.S. Stock Movers

Nvidia declined 1.9% to $867.99 after the company released its fastest AI graphics processor, dubbed Blackwell, at its first annual developer's GTC conference. 

The first Blackwell chip, called BG200, is scheduled to ship later in the year and promises to sharply increase processing power for artificial applications and accelerate training of AI models and tools. 

AMD declined 4.6% to $181.99 after Nvidia's announcement of a new chip. 

Super Micro Computer declined 10.2% to $898.57 after the company announced its plan to sell as many as 2 million shares. 

Super Micro stock has soared more than 250% this year following the enthusiasm for artificial intelligence. 

Super Micro is the preferred vendor for building servers using Nvidia's chips for artificial intelligence applications. 

Coinbase Global declined 2.2% to $227.04 after bitcoin prices dropped as much as 6.2% in early trading, extending losses from the peak above $73,000 reached last week. 

Unilever PLC increased 2.5% to $49.77 after the company announced its plans to spin off its ice cream division, which includes Ben & Jerry's and Magnum brands. 

The company also added that it plans to implement a productivity program to accelerate sales, improve its cost structure, and eliminate as many as 7,500 jobs. 

 

European Markets Trade In Tight Range

Benchmark indexes in Europe flatlined, and investors awaited monetary policy announcements from the U.S. Federal Reserve and the Bank of England. 

The DAX index and the CAC-40 index edged up 0.2% and traded near record highs as investors debated future rate paths in the eurozone and reviewed the latest monetary policy decisions from the Bank of Japan.

 

Hourly Labor Cost Growth Slows in the Fourth Quarter 

The broad swathe of changes announced by the central bank surprised many market watchers, and the Japanese yen edged fractionally lower to 149.90 against the U.S. dollar after the announcement. 

Hourly labor cost in the eurozone rose 3.4% from a year ago in the fourth quarter of 2023, following a downwardly revised 5.2% increase in the previous three months, Eurostat reported Tuesday. 

The labor cost growth decreased in the quarter after the pace of increase of slowed in construction to 4.4% from 6.0%, industry eased to 4.2% from 5.7%, and services inched down to 4.1% from 5.7% a year ago, respectively. 

 

Europe Indexes and Yields

The DAX index increased by 0.3% to 17,988.13, the CAC-40 index rose by 0.6% to 8,201.03, and the FTSE 100 index inched lower by 0.2% to 7,738.30.

The yield on 10-year German bonds edged down to 2.43%; French bonds inched lower to 2.87%; the UK gilts edged lower to 4.08%; and Italian bonds inched lower to 3.67%.

The euro edged higher to $1.084, the British pound inched higher to $1.267, and the U.S. dollar held steady at 88.78 Swiss cents.

Brent crude decreased $0.57 to $87.38 a barrel, and the Dutch TTF natural gas fell by €0.12 to €28.96 per MWh.

 

Europe Stock Movers

Thyssenkrupp AG declined 0.6% to €4.80 after the German industrial conglomerate said that the company is exploring alternatives for its Marine Systems business with the private equity group Carlyle. 

Deutz AG rose 0.9% to €5.89 after the engine maker reported record earnings, which were in line with market expectations. 

The company delivered 186,718 engines, and fiscal year 2023 revenue increased to 9% of €2.1 billion and an adjusted EBIT of €120.4 million. 

The company guided fiscal year 2024 revenue to fall between €1.9 billion and €2.1 billion and adjusted its EBIT margin between 5.0% and 6.5%. 

Fraport Frankfurt Airport Services decreased 5% to €49.19 after the airport operator reported weaker-than-expected fourth quarter operating earnings and the company's 2024 outlook fell below market expectations. 

Close Brothers Group soared 7.2% to 358.80 pence after the financial services company announced its plans to raise £400 million to strengthen its balance sheet. 

Trustpilot Group gained 2.4% to 210.0 pence after the business review platform reported a narrower loss in the latest fiscal year, driven by improved sales. 

Unilever plc increased 2.8% to 3,925.0 pence after the food products company plans to separate its ice cream division and implement a productivity improvement program. 

SThree fell 2.2% to 415.0 pence after the recruitment company said the job market was challenging in the first two months of 2024. 

 

Asian Markets Closed Down

Asian markets struggled to advance amid China's earnings worries and Japan's decision to end its negative rate regime after lagging other major central banks for years. 

Market indexes in Tokyo rebounded from a morning slump after the rate decision, but they closed down in Shanghai and Hong Kong after market mood tuned negative on a lack of catalysts and worries about earnings growth compounded market anxieties. 

 

Japan Ends Negative Interest Rate Policy 

The Bank of Japan ended its negative interest rate policy and set its policy rate range between zero and 0.1% in a sweeping policy overhaul that ended its negative interest rate regime. 

The central bank lifted its policy rate for the first time in 17 years from -0.1% to zero amid high inflation and sharp gains in wages at large companies. 

In a 7-2 interest rate decision, policymakers decided to end the negative interest rates, but the accompanying statement provided little guidance about interest rate direction in the future. 

Major central banks have raised rates multiple times in the U.S. and Europe for two years, while the Bank of Japan stuck with its negative policy rates first implemented in 2016. 

The central bank will also stop buying Japanese stocks through the purchase of ETFs and end its yield control program.

The widely anticipated move exceeded many market watchers' expectations after the central bank announced its plans to end the purchase of stocks and also set a target rate for government bond yields. 

Ultraeasy monetary policy in place since 2000 has contributed to the Japanese yen's weakness and stoked inflationary forces since the onset of the COVID-19 pandemic in 2020. 

The BoJ said it will continue to purchase Japanese government bonds at the current rate, suggesting that the central bank will continue its easy monetary policy for a while. 

After the rate decision announcement, the Japanese yen drifted lower to 149.86 against the U.S. dollar. 

The Nikkei 225 Stock Average gained 0.04% to 39,768.19, and the Topix index advanced 0.5% to 2,734.58. 

Tokyo Electron and Advantest fell between 1% and 2%, and Disco Corp. and Screen Holdings advanced around 1.5%. 

Mitsubishi UFJ Financial Group, Mizuho Financial, and Sumitomo Mitsui Financial Group fell between 0.3% and 1.2%. 

In other news in the region, the Reserve Bank of Australia held its policy rate for the third time in a row at 4.35% and softened its hawkish inflation stance. 

 

Earnings Worries Drag Down China Stocks 

Stocks in Shanghai and Hong Kong extended losses after corporate earnings lagged market expectations. 

The worries about China's fragile economic recovery were compounded by the weaker-than-anticipated pace of earnings growth and the protracted property market slump. 

The average earnings growth has lagged market expectations as the rebound in consumer demand has been weaker than expected after the end of zero COVID lockdowns. 

The CSI 300 index fell 0.3% to 3,592.42, and the Hang Seng index declined 1.1% to 16,550.90. 

Wuxi Apptec dropped 6.6% to HK$39.90 after the company issued a cautious outlook, blaming global macroeconomic headwinds. Wuxi Biologics declined 4.9% to HK$14.04. 

Tech stocks and electric vehicle makers faced selling pressure on earnings and valuation worries. 

XPeng dropped 4% to HK$38.85 ahead of the company's earnings announcement later in the day.

Li Auto plunged 12%, and Alibaba Group, JD.com, Tencent Holdings, and Meituan Group declined between 1% and 3%. 

 

India Stocks Remain In Negative Territory 

Stocks in Mumbai edged lower in early trading following the weakness in Asian markets after the monetary policy decisions from the Bank of Japan and the Reserve Bank of Australia. 

The Sensex and the Nifty indexes fell as much as 0.5% amid interest rate uncertainties, rising crude oil prices, and a regulatory crackdown on speculation in small-cap stocks. 

The Federal Reserve is set to announce its rate decision tomorrow, and investors are anticipating that the central bank will hold interest rates steady. 

The crude oil price extended two-week gains to more than 5% in international trading amid rising tensions in the Middle East. 

Small-cap stocks continued their decline after the securities regulatory agency SEBI urged mutual fund companies to halt accepting new fund flows. 

The Sensex index decreased 0.4% to 72,462.94, and the Nifty index edged down 0.5% to 21,946.45. 

On the Mumbai stock exchange, 17 stocks traded at their 52-week highs and 19 stocks traded at their 52-week lows.

The yield on the 10-year Indian government bonds increased to 7.08%, and the Indian rupee edged lower to ₹82.92 against the U.S. dollar.