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Dow futures: Inflation report due after S&P 500 rally above 200 days on Fed Chair Powell

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Dow futures fell slightly Thursday morning, along with futures for the S&P 500 and Nasdaq futures. Salesforce.com’s headline gains overnight but investors’ focus will be on Thursday’s PCE inflation report after Fed Chairman Jerome Powell launched a technology-led stock market rally on Wednesday.




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Fed Chair Powell said on Wednesday that the pace of rate hikes may start to slow at the December meeting, providing more clear support for a smaller hike at the next meeting. But Powell stuck to his opinion That the federal funds rate will likely reach 5% or more. The current federal funds rate range is 3.75%-4%. Powell also noted that many of the factors that support inflation are declining. The Fed chief, who indicated that a recession might be necessary, said a “soft landing” was still possible.

Nasdaq got in the way, with apple (AAPL), Microsoft (MSFT), nvidia (NVDA), Tesla (TSLA) and the parent of Google the alphabet (The Google) are all compound outweighs. Notably, the S&P 500 rose to clear the 200-day moving average, which is a major resistance area.

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On Thursday, investors will get the personal consumption expenditures price index for October, with the November jobs report due Friday morning.

So while Wednesday’s action was encouraging, investors should wait for the market’s reaction to the important Fed data.

Main earnings

Salesforce.com (CRM), snowflake (snow) And the can (can) led a number of software earnings reports. pure storage (PSTG) And the Victoria’s Secret (VSCO) also reported.

CRM stock declined sharply in overnight trading Salesforce earnings topped But the guidance was light. Co-CEO Brett Taylor will step down, leaving Marc Benioff as sole CEO. SNOW shares also fell strongly early Thursday after initially diving on the weak footing Snowflake revenue routing. Fund inventory was slightly changed as EPS was outpaced and sales were outpaced slightly.

PSTG stock rose modestly overnight after that Pure Storage topped Q3 views And raise the extension. The stocks closed down about 1% after falling for the day on weak results and guidance from NetApp (NTAP). VSCO stock fell slightly as Victoria’s Secret’s earnings topped but sales fell slightly.

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early Thursday, dollar general (DJ) And the Kruger (K) on tap.

Chinese electric car makers New (nio), Lee Otto (L.I) And the Xpeng (XPEV) November sales reported early Thursday. Nio and Li Auto, with the newer models, posted record monthly deliveries. Xpeng deliveries were down from a year ago, but up slightly from October with hopes for a big jump in December. All three stocks fell in pre-market trading after rallying on Wednesday, along with other Chinese names, on hopes of a Covid reopening.

inflation report

The Commerce Department will release the Personal Consumption Expenditure Price Index, the Fed’s preferred measure of inflation, at 8:30 a.m. ET as part of its Income and Spending Report.

The PCE price index for October is supposed to show an increase of 0.4% compared to September. On a yearly basis, PCE inflation should ease to 6% from 6.2% in September. Core personal consumption expenditures, which exclude food and energy, are expected to rise 0.3%. Core PCE inflation is expected to ease to 5% from 5.1% in September.

The PCE inflation report, along with Friday’s November jobs report, will help shape expectations for a Fed rate hike. The Consumer Price Index for November will be released on December 13, one day before the announcement of the December Federal Reserve meeting.

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Earlier Wednesday, the ADP reported a sharp slowdown in private sector hiring in November. Also, the JOLTs survey showed that job openings fell more than expected in October. Third-quarter GDP growth was revised up more than expected, along with the inflation measure in the report.

Dow jones futures today

Dow futures fell 0.15% against fair value, with CRM stocks falling in blue-chip stocks. S&P 500 futures were down 0.2% and Nasdaq 100 futures were down 0.3%.

The 10-year Treasury yield fell 10 basis points, to 3.6%.

Crude oil futures rose.

Remember to work in overnight Dow Jones futures contracts and elsewhere that does not necessarily translate into actual trading in the next regular session Stock market session.

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Stock market rise

The stock market rally was mixed for most of the Wednesday session, then took off after Fed Chair Powell’s remarks, and closed at session highs.

The Dow Jones Industrial Average rose 2.2% on Wednesday Stock market trading. The S&P 500 jumped 3.1%. The Nasdaq Composite jumped 4.4%. Small Capital Russell 2000 rose 2.7%.

Apple shares rose 4.9 percent and Google shares rose 6.1 percent, both of which rose above 50 days. Microsoft and Nvidia stocks, already above their 50-day lines, jumped 6.2% and 8.2%, respectively. Tesla stock rose 7.7%, regaining the 21-day streak.

US crude oil prices rose 3% to $80.55 a barrel, but fell 6.9% for the month. China Covid hopes of reopening also lifted copper futures prices.

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Treasury yields and the prospects for higher federal interest rates

The 10-year Treasury yield reversed lower, falling 5 basis points to 3.7%. The two-year Treasury yield, which is closely tied to Fed policy, fell to 4.33%, despite Powell expecting the federal funds rate to peak at least 5%.

The odds of a 50 basis point rate hike are now around 79% vs. 66% after Tuesday. Markets still see another half-point move as a slight favorite in February, but the odds of a quarter-point move are over 45%.


Tesla vs. BYD: Which EV giant is the best to buy?


Exchange Traded Funds

between the The best mutual fundsThe Innovator IBD 50 ETF (fifty(up 1.8%, while the Innovator IBD Breakout Opportunities ETF)fit) increased by 2%. iShares Expanded Technology and Software ETF (IGV) down 4.4%, with Microsoft and CRM stocks both major components. VanEck Vectors Semiconductor Corporation (SMH) jumped 5.7%, with Nvidia stock holding the highest.

SPDR S&P Metals & Mining ETFs (XME) advanced 3.75% and the Global Infrastructure Development Fund (ETF) in the USA (cradle) by 2.4%. Energy Defined Fund SPDR ETF (xle(Up 0.5% and Financial Select SPDR ETF)XLF) increased by 1.7%. SPDR Health Care Sector Selection Fund (XLV) added 2.4%.

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Reflecting more speculative stories, the ARK Innovation ETF (ARK)ark(up 7.7% and ARK Genomics ETF)ARKG) 6.5%. Tesla stock remains a major holding via Ark Invest’s ETF.


Top five Chinese stocks to watch now


Market rally analysis

The stock market rally made a significant upward move in heavy volume on Wednesday following Fed Chair Powell’s comments.

The S&P 500 has rebounded from near the 21-day line to a high of 4,000 and is moving above the 200-day line for the first time in seven months.

The Nasdaq Composite Index, which has been slowing the market rally, led the upside on Wednesday. It recovered the 21-day line and the 11,000 level, to settle at the highest closing level in two months. Apple, Microsoft, Google, Nvidia and Tesla stocks made strong gains on Wednesday, but it’s not clear which of them will lead the current bullish trend.

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Russell 2000, who snapped a 21-day streak during the day, rebounded to regain the 200-day lead. The Dow Jones index, which has led the current market rally, is back at its highest level in seven months.

Losing investors were routed by wide-ranging gains. Many of the blue chips that were under pressure on Wednesday rallied.

While there was a lot of positive action on Wednesday, the S&P 500 remained below the 200-day moving average. The PCE inflation report for October on Thursday and the jobs report for November on Friday could reinforce the upward rebound on Wednesday or lead to a downward pullback.

Keep in mind that the current market rally made several big gains in one day, but then struggled to make headway over the next few days or weeks.


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What are you doing now

The stock market witnessed a strong session, as the main indices and blue-chip stocks took encouraging steps.

Investors will probably tend to increase exposure on Wednesday, and that could work.

But there are still good reasons not to increase exposure yet. The S&P 500 crosses the 200-day line, but not decisively. Doing so would likely mean the top of a long-term lower peaks trend line on the weekly chart. Reaching decisively above this area could be a strong sign that the current bullish trend is more than bearish.

But this will require a positive reaction to inflation data and the upcoming PCE jobs report.

Investors should work diligently on their watch lists, looking at promising stocks from a variety of sectors. But definitely stay tuned. The market rally may be at a turning point, but in which direction it will turn.

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Read The Big Picture Every day to keep up with the market trend, stocks and leading sectors.

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Stock, bond and cryptocurrency investors remain on edge after a rough year for the markets

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This version is for personal, non-commercial use only. Distribution and use of this material is subject to our Subscriber Agreement and copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com.

https://www.wsj.com/articles/stock-bond-and-crypto-investors-remain-on-edge-after-brutal-year-for-markets-11672403124

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Dow Jones losses are heading towards the closing bell as US stocks approach their worst year since 2008

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US stocks were trimming losses heading towards the closing bell on Friday, but were still on track to post their worst annual loss since 2008, as the harvest of tax losses combined with concern over the outlook for US corporate and consumer earnings took its toll.

How are stock indices traded?
  • Dow Jones Industrial Average
    DJIA,
    -0.22%

    It fell about 182 points, or 0.6%, to 33,039 points.

  • S&P 500 index
    SPX,
    -0.25%

    It fell nearly 26 points, or 0.7%, to about 3,824.

  • The Nasdaq Composite Index fell 72 points, or 0.7%, to about 10,406 points.

Stocks posted their biggest gains of the month on Thursday, with the Dow Jones rising 345 points, or 1.05%, to 33,221 as major stock indexes rebounded after losses incurred earlier in the week that pushed the Nasdaq Composite to a new closing low for the year. . The S&P 500 was on track on Friday to wrap up its fourth consecutive losing week, the longest streak of weekly losses since May, according to FactSet data.

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What drives the markets

US stocks traded lower on Friday afternoon, on pace to close the last trading session of 2022 with weekly and monthly losses.

Stocks and bonds have been crushed this year as the Federal Reserve raised its benchmark interest rate more aggressively than many expected, as it sought to crush the worst inflation in four decades. The S&P 500 is on track to end the year with a loss of nearly 20%, its worst annual performance since 2008.

“Investors were on edge,” Mark Heppenstahl, chief investment officer at Penn Mutual Asset Management, said in a phone interview Friday. “It seems as if being able to bring prices down might be a little easier given how bad the year has been.”

Stock indices have fallen in recent weeks as the recent rally inspired by hopes in the Fed’s policy focus faded in December after the central bank indicated it would likely wait until 2024 to cut interest rates.

On the last day of the trading year, the markets were also hit by selling to capture losses that could be written off from tax bills, a practice known as tax harvesting, according to Kim Forrest, chief investment officer at Bouquet Capital Partners. .

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Forrest added that an uncertain outlook for 2023 has also weighed in, as investors worry about the strength of corporate earnings, the US economy and consumer as the fourth-quarter earnings season approaches early next year.

“I think the Fed, and then earnings in mid-January — they’ll set the tone for the next six months. Until then, it’s anyone’s guess.”

The US central bank has raised its benchmark interest rate by more than four percentage points since the start of the year, pushing borrowing costs to their highest levels since 2007.

The timing of the first Fed rate cut will likely have a significant impact on markets, according to Forrest, but the outlook remains uncertain, even as the Fed tries to signal that it plans to keep interest rates higher for longer.

On the economic data front, the Chicago PMI for December, the latest major data release for the year, Came stronger than expected. Climbing to 44.9 from 37.2 in the previous month. Readings below 50 indicate contraction.

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In the coming year, Heppenstahl said, “we are likely to shift toward concerns about economic growth rather than inflation.” “I think the decline in growth will eventually lead to an even greater drop in inflation.”

Read: Stock market investors face 3 recession scenarios in 2023

Eric Sterner, chief information officer at Apollon Wealth Management, said in a phone interview on Friday that he expects the US to fall into a recession next year and that the stock market could see a new bottom as companies likely review their earnings. “I think the earnings outlook for 2023 is still very high,” he said.

The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite were all on pace Friday afternoon posting weekly losses of around 1%, according to FactSet data, at last check. For the month, the Dow was down about 5%, the S&P 500 was down about 7% and the Nasdaq was about to crash down about 10%.

Read: Value stocks are outperforming growth stocks in 2022 by a large margin historically

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As for bonds, Treasury yields rose on Friday as the US sovereign debt market was set to post its worst year since at least the 1970s.

The yield on the 10-year Treasury note
TMUBMUSD10Y,
3.879%

It rose about four basis points on Friday at 3.88%, according to FactSet data, in the latest check. Ten-year yields jumped about 2.34 percentage points this year through Thursday, on track for the biggest annual gain ever based on data going back to 1977, according to market data from Dow Jones.

Meanwhile, the yield on the two-year note
TMUBMUSD02Y,
4.423%

Up about 3.64 percentage points in 2022 through Thursday to 4.368%, 30-year return
TMUBMUSD30Y,
3.971%

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It jumped 2.03 percentage points over the same period to 3.922%. That marks the largest increase in a calendar year for each based on data going back to 1973, according to market data from Dow Jones.

Outside the US, European stocks capped their biggest percentage drop in a calendar year since 2018, with the Stoxx Europe 600
xxxp,
-1.27%
And the
It is an index of euro-denominated stocks, down 12.9%, according to market data from Dow Jones.

Read: A downturn in the US stock market is trailing these international ETFs as 2022 draws to a close

Companies in focus

Steve Goldstein contributed to this article.

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Fed’s reverse repo facility reaches $2.554 trillion by Reuters

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© Reuters. FILE PHOTO: The Federal Reserve Building in Washington, US, January 26, 2022. (Reuters)/Joshua Roberts/File Photo

Written by Michael S Derby

NEW YORK (Reuters) – A key facility used by the Federal Reserve to help control short-term interest rates saw record inflows on Friday, the last trading day of the year.

The New York Fed said its reverse repo facility took in $2.554 trillion in cash from money market funds and other eligible financial firms, beating the previous high seen on Sept. 30, when inflows totaled $2.426 trillion.

The cash rally was almost certainly tipping into record territory in the usual end-of-quarter pattern that could worsen further towards the end of the year. On those dates, for a variety of reasons, many financial firms prefer to deposit money in the central bank rather than in the private markets.

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The Fed’s reverse repo facility has been very active for some time. After seeing almost no absorption for a long time, money began to gravitate toward the central bank in the spring of 2021 and then grew steadily. Daily reverse repo usage has been steadily above the $2 trillion mark since June.

The reverse repo facility takes cash from qualified financial firms in what is an actual loan from the Federal Reserve. The current rate is 4.3%, a yield that is often better than rates for short-term private sector lending.

The reverse repo facility is designed to provide a soft floor for short-term rates and the federal funds target rate, and is the Fed’s primary tool for achieving its function and inflationary mandates. To mark the higher end of the range, the Fed is also pushing deposit-taking banks to deposit cash at the central bank, where the interest rate on reserve balances is now 4.4%.

The federal funds rate is currently set between 4.25% and 4.5% and is trading at 4.33% as of Friday, sandwiched between the reverse repo rate and interest on reserve balances.

There are no signs of shrinkage

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Even with the heavy use of reverse repo, Fed officials have always remained unconcerned about large outflows, even as some in financial markets worried about the potential for the Fed to drain the borrowing and lending lives of private money markets.

Fed officials also expected that as the central bank continues to raise interest rates with the goal of bringing down very high levels of inflation, the use of the reverse repo facility should decrease. But that hasn’t happened yet, and some in the markets now believe that the consistently high utilization of the Fed facility will be around for some time to come.

Research by the Federal Reserve Bank of New York indicated that banking regulation issues make demand for the Fed’s reverse repo instrument high. Meanwhile, the Kansas City Fed added its view that large inflows are related to limited private market investment opportunities and policy uncertainty.

Strong cash flows to the central bank may not have alarmed central banks, but they have driven their operations to an actual loss. The Federal Reserve finances itself through interest on the bonds it owns as well as the services it provides to the financial community. It usually makes a noticeable profit and by law returns it to the treasury.

Currently, the cost of paying interest on reverse repo agreements and reserve balances outweighs income. The Fed reported Thursday that as of Dec. 28, the accounting metric it uses to track losses was $18 billion. Many observers expect that the Fed’s plans to raise interest rates further and keep them at high levels will mean fairly large losses for the central bank over time, even if these losses will not affect the action of the Fed’s monetary policy.

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