Closing Comment — Tuesday, December 06, 2022
DJIA: 33,596.34, down 350.76
S&P 500: 3,941.26, down 57.58
Nasdaq: 11,014.89, down 225.05
Stocks tumble; yields slip
U.S. equities finished lower Tuesday to extend Monday’s rout. Heightened worries over the future course of interest rate hikes and growing recessionary fears weighed on investor sentiment and sent stocks tumbling. The Dow shed 350 points, while the Nasdaq Composite fell 2% amid a sell-off in large-cap Technology companies. The S&P 500 declined 1.4%. Ten of 11 sectors in the S&P 500 finished in negative territory, with Utilities the sole gainer.
On the data front, the U.S. trade balance showed the trade deficit widened in October amid a surge in imports and a decline in exports. Meanwhile, Georgia’s Senate run-off election is occurring today. Voters will choose between Democratic incumbent Raphael Warnock or Republican Herschel Walker.
Treasuries rallied despite uncertainty over the Federal Reserve’s (Fed) monetary policy path. The yield on the benchmark 10-year note shed seven basis points (0.07%) to 3.52%, while the yield on the 30-year bond declined seven basis points (0.07%) to 3.53%. The yield on the two-year note, which is more sensitive to changes in Fed policy, fell five basis points (0.05%) to 4.35%. In commodities, West Texas Intermediate (WTI) crude dropped 3.3% to $74.41/barrel after touching its lowest level since December 2021 during the session. Concerns over the global demand outlook have overshadowed reports China is easing their COVID-19 restrictions and the price cap on Russian crude products. The U.S. Dollar index climbed 0.2% against a basket of major currencies as investors flocked to the perceived safe-haven asset.
Opening Comment — Tuesday, December 06, 2022
DJIA: 33,947.10, down 482.78
S&P 500: 3,998.84, down 72.86
Nasdaq: 11,239.94, down 221.56
Stocks little changed after Monday rout
U.S. equity futures are little changed Tuesday as investors shake off yesterday’s market rout. The Dow is down 0.1%, while the S&P 500 is hovering near the flat line in pre-market action. The Nasdaq 100 is trading 0.1% above fair value on the GLOBEX. Yesterday, stocks fell as investors digested hotter-than-expected data. The Institute of Supply Management (ISM) Services Index came in at 56.5 in November versus the estimated 53.5 print. The strong print heightened concerns the Federal Reserve (Fed) may hike rates to a higher terminal rate than previously expected. The Dow lost 482 points, while the Nasdaq Composite fell 1.9%. The S&P 500 slid 1.8%.
Today, investors can expect an update on the U.S. trade balance for October. Meanwhile, polls have opened in Georgia’s Senate run-off election. Voters will choose between Democratic incumbent Raphael Warnock or Republican Herschel Walker.
Over in the commodity pits, West Texas Intermediate (WTI) crude is slipping 1.1% to $76.06/barrel amid renewed recessionary concerns. However, hopes of increased demand from China and the price cap on Russian oil have placed a floor under prices. China is continuing to relax its COVID-19 restrictions, doing away with some of the testing requirements and easing the quarantine rules. In the metals complex, spot gold is climbing 0.2% to $1770.80/ounce as investors seek clarity on the future course of interest rate hikes.
Across the pond, European Central Bank (ECB) Chief Economist Philip Lane has reiterated the need for the central bank to continue to hike rates, but he thinks inflation is nearing its peak in the Eurozone. Elsewhere, German industrial orders came in much stronger than anticipated in October, climbing 0.8% month-over-month versus September’s 2.9% monthly decline. Overnight in Asia, investors cheered as Beijing eased some of their COVID-19 testing requirements. The Reserve Bank of Australia raised interest rates by an expected 25 basis points (0.25%). In FOREX trading, the U.S. Dollar Index is falling 0.3% despite analysts expecting a slightly more hawkish Fed than previously thought.