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S&P 500 ends at highest in month, indexes gain for week as earnings kick off

  • JPMorgan, Wells Fargo shares jump
  • U.S. consumers’ inflation expectations ease – survey
  • Tesla falls after price cuts on electric vehicles
  • Indexes: Dow up 0.3%, S&P 500 up 0.4%, Nasdaq up 0.7%

NEW YORK, Jan 13 (Reuters) – The S&P 500 and Nasdaq finished at their highest levels in a month on Friday, with shares of JPMorgan Chase and other banks rising following their quarterly results, which kicked off the earnings season.

All three major indexes also registered strong gains for the week, leaving the S&P 500 up 4.2% so far in 2023, and the Cboe Volatility index (.VIX) – Wall Street’s fear gauge – closed at a one-year low.

On Friday, financials (.SPSY) were among sectors that gave the S&P 500 the most support.

JPMorgan Chase & Co (JPM.N) and Bank of America Corp (BAC.N) beat quarterly earnings estimates, while Wells Fargo & Co (WFC.N) and Citigroup Inc (C.N) fell short of quarterly profit estimates.

But shares of all four firms rose, along with the S&P 500 banks index (.SPXBK), which ended up 1.6%. JPMorgan shares climbed 2.5%.

Still, Wall Street’s biggest banks stockpiled more rainy-day funds to prepare for a possible recession and reported weak investment banking results while showing caution about forecasting income growth. They said higher rates helped to boost profits.

Strategists said investors will be watching for further guidance from company executives in the coming weeks.

“This has shifted the focus back to earnings,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.

“Even though the earnings were basically OK, people are just kind of stepping back, and you’re going to see a wait-and-see attitude with stocks” as investors hear more from company executives.

Year-over-year earnings from S&P 500 companies are expected to have declined 2.2% for the quarter, according to Refinitiv data.

Also giving some support to the market Friday, the University of Michigan’s survey showed an improvement in U.S. consumer sentiment, with the one-year inflation outlook falling in January to the lowest level since the spring of 2021.

The Dow Jones Industrial Average (.DJI) rose 112.64 points, or 0.33%, to 34,302.61, the S&P 500 (.SPX) gained 15.92 points, or 0.40%, to 3,999.09 and the Nasdaq Composite (.IXIC) added 78.05 points, or 0.71%, to 11,079.16.

The S&P 500 closed at its highest level since Dec. 13, while the Nasdaq closed at its highest level since Dec. 14.

For the week, the S&P 500 gained 2.7% and the Dow rose 2%. The Nasdaq increased 4.8% in its biggest weekly percentage gain since Nov. 11.

The U.S. stock market will be closed Monday for the Martin Luther King Jr. Day holiday.

Thursday’s Consumer Price Index and other recent data have bolstered hopes that a sustained downward trend in inflation could give the Federal Reserve room to dial back on its interest rate hikes.

Money market participants now see a 91.6% chance the Fed will hike the benchmark rate by 25 basis points in February.

Among the day’s decliners, Tesla (TSLA.O) shares fell 0.9% after it slashed prices on its electric vehicles in the United States and Europe by as much as 20% after missing 2022 deliveries estimates.

In other earnings news, UnitedHealth Group Inc (UNH.N) shares rose after it beat Wall Street expectations for fourth-quarter profit but the stock ended down on the day.

Shares of Delta Air Lines Inc (DAL.N) dropped 3.5% as the company forecast first-quarter profit below expectations.

Volume on U.S. exchanges was 10.77 billion shares, compared with the 10.81 billion average for the full session over the last 20 trading days.

Advancing issues outnumbered declining ones on the NYSE by a 1.79-to-1 ratio; on Nasdaq, a 1.78-to-1 ratio favored advancers.

The S&P 500 posted 12 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 105 new highs and 8 new lows.

Additional reporting by Shubham Batra, Ankika Biswas and Amruta Khandekar in Bengaluru; Editing by Subhranshu Sahu, Shounak Dasgupta and Grant McCool

Our Standards: The Thomson Reuters Trust Principles.

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Xi says COVID control is entering new phase as cases surge after reopening

  • China overcame unprecedented difficulties in COVID battle: Xi
  • Still a time of struggle for controlling COVID: Xi
  • In Wuhan, surge in new cases shows signs of easing
  • Shanghai has 10 million infections, health official says
  • End of zero-COVID curbs prompts global concern

WUHAN/BEIJING, Dec 31 (Reuters) – Chinese President Xi Jinping called on Saturday for more effort and unity as the country enters a “new phase” in its approach to combating the pandemic, in his first comments to the public on COVID-19 since his government changed course three weeks ago and relaxed its rigorous policy of lockdowns and mass testing.

China’s abrupt switch earlier this month from the “zero-COVID” policy that it had maintained for nearly three years has led to infections sweeping across the country unchecked. It has also caused a further drop in economic activity and international concern, with Britain and France becoming the latest countries to impose curbs on travellers from China.

The switch by China followed unprecedented protests over the policy championed by Xi, marking the strongest show of public defiance in his decade-old presidency and coinciding with grim growth figures for the country’s $17 trillion economy.

In a televised speech to mark the New Year, Xi said China had overcome unprecedented difficulties and challenges in the battle against COVID, and that its policies were “optimised” when the situation and time so required.

“Since the outbreak of the epidemic … the majority of cadres and masses, especially medical personnel, grassroots workers braved hardships and courageously persevered,” Xi said.

“At present, the epidemic prevention and control is entering a new phase, it is still a time of struggle, everyone is persevering and working hard, and the dawn is ahead. Let’s work harder, persistence means victory, and unity means victory.”

New Year’s Eve prompted reflection online and by residents of Wuhan, the epicentre of the COVID outbreak nearly three years ago, about the zero-COVID policy and the impact of its reversal.

People in the central city of Wuhan expressed hope that normal life would return in 2023 despite a surge in cases since pandemic curbs were lifted.

Wuhan resident Chen Mei, 45, said she hoped her teenage daughter would see no further disruptions to her schooling.

“When she can’t go to the school and can only have classes online it’s definitely not an effective way of learning,” she said.

VIDEO REMOVED

Across the country, many people voiced similar hopes on social media, while others were critical.

Thousands of users on China’s Twitter-like Weibo criticised the removal of a video made by local outlet Netease News that collated real-life stories from 2022 that had captivated the Chinese public.

Many of the stories included in the video, which by Saturday could not be seen or shared on domestic social media platforms, highlighted the difficulties ordinary Chinese faced as a result of the previously strict COVID policy.

Weibo and Netease did not immediately reply to a request for comment.

One Weibo hashtag about the video garnered almost 4 million hits before it disappeared from platforms at about noon on Saturday. Social media users created new hashtags to keep the comments pouring in.

“What a perverse world, you can only sing the praises of the fake but you cannot show real life,” one user wrote, attaching a screenshot of a blank page that is displayed when searching for the hashtags.

The disappearance of the videos and hashtags, seen by many as an act of censorship, suggests the Chinese government still sees the narrative surrounding its handling of the disease as a politically sensitive issue.

HOSPITALS OVERWHELMED

The wave of new infections has overwhelmed hospitals and funeral homes across the country, with lines of hearses outside crematoriums fuelling public concern.

China, a country of 1.4 billion people, reported one new COVID death for Friday, the same as the day before – numbers that do not match the experience of other countries after they reopened.

UK-based health data firm Airfinity said on Thursday that about 9,000 people in China were probably dying each day from COVID. Cumulative deaths in China since Dec. 1 have likely reached 100,000, with infections totalling 18.6 million, it said.

Zhang Wenhong, director of the National Centre for Infectious Diseases, told the People’s Daily in an interview published on Saturday that Shanghai had reached a peak of infections on Dec. 22, saying there were currently about 10 million cases.

He said those numbers indicated that some 50,000 people in the city of 25 million would need to be hospitalized in the next few weeks.

At the central hospital of Wuhan, where former COVID whistleblower Li Wenliang worked and later died of the virus in early 2020, patient numbers were down on Saturday compared with the rush of the past few weeks, a worker outside the hospital’s fever clinic told Reuters.

“This wave is almost over,” said the worker, who was wearing a hazmat suit.

A pharmacist whose store is next to the hospital said most people in the city had now been infected and recovered.

“It is mainly old people who are getting sick with it now,” he said.

In the first indication of the toll on China’s giant manufacturing sector from the change in COVID policy, data on Saturday showed factory activity shrank for the third straight month in December and at the sharpest pace in nearly three years.

Reporting by Martin Quinn Pollard, Tingshu Wang and Xiaoyu Yin in Wuhan, Eduardo Baptista in Beijing; Writing by Sumeet Chatterjee
Editing by Helen Popper and Frances Kerry

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Wall Street ends up with help from Nike, FedEx and consumer sentiment

  • Consumer confidence rebounds in December
  • Data shows November home sales decline
  • Nike jumps on strong second-quarter results
  • FedEx soars on cost-cutting plans
  • Indexes up: Dow 1.60%, S&P 1.49%, Nasdaq 1.54%

Dec 21 (Reuters) – Wall Street’s three main stock indexes closed higher on Wednesday for their biggest daily gains so far in December with help from upbeat Nike (NKE.N) and FedEx (FDX.N) quarterly earnings, as well as improving consumer confidence and easing inflation expectations from investors.

Nike Inc shares soared 12% after beating profit expectations for its second quarter on strong holiday demand from North American shoppers, while FedEx finished up 3.4% and shares in cruise operator Carnival Corp (CCL.N) jumped 4.7% after posting a smaller-than-expected quarterly loss.

FedEx Corp (FDX.N), which sparked a market selloff in September after pulling financial forecasts, provided financial guidance and announced plans for $1 billion cost cuts.

Also, U.S. consumer confidence rose to an eight-month high in December as inflation retreated and the labor market remained strong while 12-month inflation expectations fell to 6.7%, the lowest since September 2021.

“We’re seeing a broad rally. It’s been helped by upbeat corporate commentary and an improvement in consumer confidence,” said Angelo Kourkafas, investment strategist at Edward Jones in St. Louis referring to Nike and FedEx.

The Dow Jones Industrial Average (.DJI) rose 526.74 points, or 1.6%, to 33,376.48, the S&P 500 (.SPX) gained 56.82 points, or 1.49%, to 3,878.44 and the Nasdaq Composite (.IXIC) added 162.26 points, or 1.54%, to 10,709.37.

Energy firms (.SPNY) were the biggest gainers among the S&P’s 11 major industry sector, adding 1.89%, as oil futures rose.

The smallest gainer among the sectors was consumer staples (.SPLRCS), which finished up 0.8%.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., December 7, 2022. REUTERS/Brendan McDermid

Still, Wednesday’s data also showed that U.S. existing home sales slumped 7.7% to a 2-1/2-year low in November as the housing market was hurt by higher mortgage rates. But the data may be fuelling investor hope that the Fed could ease up on its tightening policy.

“At the macro level you have economic weakness but at the micro level you have companies that are resilient and delivering positive expectations from an earnings perspective,” said Brian Price, head of investment management for Commonwealth Financial Network in Waltham, Mass. “That combination is going to be positive.”

Fears of a recession following the U.S. central bank’s prolonged interest rate hikes have weighed heavily on equities and these fears have put the S&P on track for its biggest annual decline since 2008 and a decline for December.

“There’s still a lot of uncertainty and we’re likely to see a lot of volatility early in the year as we could be in a mild recessionary environment,” said Edward Jones’ Kourkafas but he believes the market has already priced in a weaker economy.

“We still have some headwinds ahead but maybe we don’t have to price in a recession twice. So far what we’ve seen this year has already priced in a mild recession.”

AMC Entertainment Holdings Inc (AMC.N) finished up 4.3% after the cinema-chain operator said it suspended talks to acquire certain assets of bankrupt Cineworld Group (CINE.L).

Advancing issues outnumbered declining ones on the NYSE by a 3.43-to-1 ratio; on Nasdaq, a 2.10-to-1 ratio favored advancers.

The S&P 500 posted 5 new 52-week highs and 3 new lows; the Nasdaq Composite recorded 69 new highs and 268 new lows.

On U.S. exchanges 9.81 billion shares changed hands, compared with the 11.16 billion average for the last 20 sessions.

Reporting by Sinéad Carew in New York, Shubham Batra, Amruta Khandekar, Ankika Biswas and Johann M Cherian in Bengaluru; Editing by Shounak Dasgupta, Maju Samuel and Aurora Ellis

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Wall Street ends lower as investors digest economic data

  • U.S. producer prices increase in November
  • Consumer sentiment improves in December
  • Lululemon tumbles after downbeat forecast
  • Indexes close: S&P 500 -0.73%, Nasdaq -0.70%, Dow -0.90%

Dec 9 (Reuters) – Wall Street ended lower on Friday as investors assessed economic data and awaited a potential 50-basis point interest rate hike by the U.S. Federal Reserve at its policy meeting next week, while apparel company Lululemon slumped following a disappointing profit forecast.

U.S. producer prices rose slightly more than expected in November amid a jump in the costs of services, but the trend is moderating, with annual inflation at the factory gate posting its smallest increase in 1-1/2 years, data showed.

“Today’s data shows that inflation is coming down, but it’s lingering and is stickier than most assume,” said Anthony Saglimbene, chief market strategist at Ameriprise Financial in Troy, Michigan.
However, in December, consumer sentiment improved, while inflation expectations eased to a 15-month low, a University of Michigan survey showed.

Futures trades suggest a 77% chance the Fed will raise interest rates by 50 basis points next week, with a 23% chance of a 75-basis point hike, with those odds little changed after Friday’s economic data.

Consumer prices data for November, due Tuesday, will provide fresh clues on the central bank’s monetary tightening plans.

Lululemon Athletica Inc (LULU.O) tumbled almost 13% after the Canadian athletic apparel maker forecast lower-than-expected holiday-quarter revenue and profit.

Netflix Inc (NFLX.O) gained 3.1% after Wells Fargo upgraded the video streaming giant to “overweight” from “equal weight”.

The S&P 500 declined 0.73% to end the session at 3,934.38 points.

The Nasdaq declined 0.70% to 11,004.62 points, while Dow Jones Industrial Average declined 0.90% to 33,476.46 points.

Of the 11 S&P 500 sector indexes, 10 declined, led lower by energy (.SPNY), down 2.33%, followed by a 1.28% loss in health care (.SPXHC).

The energy index recorded a seventh straight session of losses, its longest losing streak since December 2018, as oil prices looked set for weekly losses on recession concerns.

Wall Street’s main indexes have fallen this week after logging two straight weekly gains. Weighing heavily on investors are fears of a potential recession next year due to extended the central bank’s rate hikes.

For the week, the S&P 500 dropped 3.4%, the Dow lost 2.8% and the Nasdaq shed 4%.

U.S. stocks ended a recent run of losses on Thursday after data showed initial jobless claims rose modestly last week.

Broadcom Inc (AVGO.O) jumped 2.6% after the chipmaker forecast current-quarter revenue above Wall Street estimates.

Boeing Co climbed 0.3% after Reuters report the plane maker plans to announce a deal with United Airlines (UAL.O) for orders of 787 Dreamliner next week.

Declining stocks outnumbered rising ones within the S&P 500 (.AD.SPX) by a 3.3-to-one ratio.

The S&P 500 posted 5 new highs and 1 new lows; the Nasdaq recorded 54 new highs and 213 new lows.

Volume on U.S. exchanges was relatively light, with 9.9 billion shares traded, compared to an average of 10.9 billion shares over the previous 20 sessions.

Reporting by Sruthi Shankar, Ankika Biswas and Johann M Cherian in Bengaluru, and by Noel Randewich in Oakland, Calif.; Editing by Vinay Dwivedi, Sriraj Kalluvila, Shounak Dasgupta and Aurora Ellis

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China’s producer prices fall, consumer inflation slows on soft demand

  • PPI falls for a second month
  • Nov PPI -1.3% y/y vs -1.3% y/y in October
  • Nov CPI +1.6% y/y vs +2.1% y/y in October

BEIJING, Dec 9 (Reuters) – China’s factory-gate prices showed an annual fall for a second month in November while consumer inflation slowed, indicating weak activity and soft demand in an economy that has been held back by tough pandemic controls.

Analysts said they expected the government to keep interest rates low and take measures to boost confidence.

The producer price index (PPI) was down 1.3% on a year earlier, unchanged from an annual contraction seen in October, according to National Bureau of Statistics (NBS) data issued on Friday. That was slower than a 1.4% fall tipped in a Reuters poll.

The November consumer price index (CPI) rose at its slowest pace in eight months, climbing 1.6% from a year earlier, which was less than the 2.1% annual rise seen in October but in line with a Reuters poll.

“These data suggest the economic momentum (continues) to weaken,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management.

A high-level political meeting on Tuesday, a gathering of the ruling Communist Party’s Politburo, emphasised that in 2023 the government would focus on stabilising growth, promoting domestic demand and opening up to the outside world.

Zhang said that, although the government had eased pandemic controls over the past week, it would take further measures to spur the economy.

“The Politburo meeting … identified weak confidence as a major problem for the economy,” he said. “I expect the government will do more to boost market and household confidence. The fast pace of reopening indicates the government’s sense of urgency.”

Growth in the world’s second-largest economy has sagged this year, largely impacted by the uncompromising COVID-19 curbs as global demand has also wavered.

The producer price deflation and milder consumer price inflation of November accompanied record COVID-19 infections and related curbs that disrupted production and curbed mobility.

Although markets have cheered the shift in pandemic policy, economists say it will likely depress growth over the next few months as infections surge, bringing an economic rebound only later in 2023.

Reuters Graphics

Producer deflation was led by the steel industry, in which prices were down 18.7%.

Part of the explanation for slower growth in consumer prices was in food markets.

Food prices were up 3.7% on a year earlier, whereas the rise seen in October was 7.0%. Within the food category, pork was a factor behind moderating inflation: it was 34.4% pricier in November than in the same month last year, but in October the annual rise had been 51.8%.

Underlying core annual inflation, which excludes volatile food and energy prices, was just 0.6% in November, unchanged from October

“The overall inflation pressure remains benign in China, and we expect the CPI inflation will be around 1.6% for 2023, down from 2.0% in 2022. Given this, the monetary policy will remain accommodative over the coming year,” said Hao Zhou, chief economist at Guotai Junan Group.

China’s central bank has kept its benchmark one-year loan prime rate at 3.65% since August. It expects consumer inflation to remain moderate next year.

Reporting by Liangping Gao and Liz Lee; Editing by Edmund Klamann and Bradley Perrett

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S&P 500, Nasdaq snap losing streaks after jobless claims rise

  • Weekly jobless claims rise in line with estimates
  • Moderna, Pfizer up as FDA authorizes updated COVID boosters
  • Exxon climbs after boosting buyback program
  • Indexes up: Dow 0.55%, S&P 0.75%, Nasdaq 1.13%

Dec 8 (Reuters) – The S&P 500 (.SPX) ended higher on Thursday, snapping a five-session losing streak, as investors interpreted data showing a rise in weekly jobless claims as a sign the pace of interest rate hikes could soon slow.

Wall Street’s main indexes had come under pressure in recent days, with the S&P 500 shedding 3.6% since the beginning of December on expectations of a longer rate-hike cycle and downbeat economic views from some top company executives.

Such thinking had also weighed on the Nasdaq Composite (.IXIC), which had posted four straight losing sessions prior to Thursday’s advance on the tech-heavy index.

Stocks rose as investors cheered data showing the number of Americans filing claims for jobless benefits increased moderately last week, while unemployment rolls hit a 10-month high toward the end of November.

The report follows data last Friday that showed U.S. employers hired more workers than expected in November and increased wages, spurring fears that the Fed might stick to its aggressive stance to tame decades-high inflation.

Markets have been swayed by data releases in recent days, with investors lacking certainty ahead of Federal Reserve guidance next week on interest rates.

Such behavior means Friday’s producer price index and the University of Michigan’s consumer sentiment survey will likely dictate whether Wall Street can build on Thursday’s rally.

“The market has to adjust to the fact that we’re moving from a stimulus-based economy – both fiscal and monetary – into a fundamentals-based economy, and that’s what we’re grappling with right now,” said Wiley Angell, chief market strategist at Ziegler Capital Management.

The Dow Jones Industrial Average (.DJI) rose 183.56 points, or 0.55%, to close at 33,781.48; the S&P 500 (.SPX) gained 29.59 points, or 0.75%, to finish at 3,963.51; and the Nasdaq Composite (.IXIC) added 123.45 points, or 1.13%, at 11,082.00.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., December 7, 2022. REUTERS/Brendan McDermid

Nine of the 11 major S&P 500 sectors rose, led by a 1.6% gain in technology stocks (.SPLRCT).

Most mega-cap technology and growth stocks gained. Apple Inc (AAPL.O), Nvidia Corp (NVDA.O) and Amazon.com Inc (AMZN.O) rose between 1.2% and 6.5%.

Microsoft Corp (MSFT.O) ended 1.2% higher, despite giving up some intraday gains after the Federal Trade Commission filed a complaint aimed at blocking the tech giant’s $69 billion bid to buy Activision Blizzard Inc . The “Call of Duty” games maker closed 1.5% lower.

The energy index (.SPNY) was an exception, slipping 0.5%, despite Exxon Mobil Corp (XOM.N) gaining 0.7% after announcing it would expand its $30-billion share repurchase program. The sector had been under pressure in recent sessions as commodity prices slipped: U.S. crude is now hovering near its level at the start of 2022.

Meanwhile, Moderna Inc (MRNA.O) advanced 3.2% after the U.S. Food and Drug Administration authorized COVID-19 shots from the vaccine maker that target both the original coronavirus and Omicron sub-variants for use in children as young as six months old.

The regulator also approved similar guidance for fellow COVID vaccine maker Pfizer Inc (PFE.N), which rose 3.1%, and its partner BioNTech, whose U.S.-listed shares gained 5.6%.

Rent the Runway Inc (RENT.O) posted its biggest ever one-day gain, jumping 74.3%, after the clothing rental firm raised its 2022 revenue forecast.

Volume on U.S. exchanges was 10.07 billion shares, compared with the 10.90 billion average for the full session over the last 20 trading days.

The S&P 500 posted 15 new 52-week highs and three new lows; the Nasdaq Composite recorded 82 new highs and 232 new lows.

Reporting by Shubham Batra, Ankika Biswas, Johann M Cherian in Bengaluru and David French in New York; Editing by Vinay Dwivedi, Sriraj Kalluvila, Anil D’Silva and Richard Chang

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S&P, Nasdaq extend losing streaks amid rising recession worries

  • Apple down after Morgan Stanley cuts Dec shipment target
  • Tesla falls on production loss worries
  • Carvana records worst-ever daily drop
  • Indexes: Dow flat, S&P down 0.19%, Nasdaq 0.51%

Dec 7 (Reuters) – The S&P 500 and Nasdaq closed down on Wednesday after a choppy session on Wall Street, as investors struggled to grasp a clear direction as they weighed how the Federal Reserve’s monetary policy tightening might feed through into corporate America.

For the benchmark S&P 500 (.SPX), it was the fifth straight session that it has declined, while the Nasdaq (.IXIC) finished down for the fourth time in a row. The Dow snapped a two-session losing streak, as it ended unchanged from the previous day.

The Nasdaq was dragged down by a 1.4% drop in Apple Inc (AAPL.O) on Morgan Stanley’s iPhone shipment target cut and a 3.2% fall in Tesla Inc (.IXIC) over production loss worries.

Markets have also been rattled by downbeat comments from top executives at Goldman Sachs Group Inc (GS.N), JPMorgan Chase & Co (JPM.N) and Bank of America Corp (BAC.N) on Tuesday that a mild to more pronounced recession was likely ahead.

Fears that the U.S. central bank might stick to a longer rate-hike cycle have intensified recently in the wake of strong jobs and service-sector reports.

More economic data, including weekly jobless claims, producer price index and the University of Michigan’s consumer sentiment survey this week, will be on the watch list for clues on what to expect from the Fed on Dec. 14.

“It feels like we’re in this very uncertain period where investors are trying to ascertain what’s more important, as policymakers are slowing down on rates but the data is not playing ball,” said Craig Erlam, senior market analyst at OANDA.

“The market is trying to balance the headwinds and the tailwinds and this is causing some confusion.”

The CBOE volatility index (.VIX), also known as Wall Street’s fear gauge, closed at 22.68, its highest finish since Nov. 18.

Money market participants see a 91% chance that the Fed will increase its key benchmark rate by 50 basis points in December to 4.25%-4.50%, with rates peaking in May 2023 at 4.93%.

The S&P 500 (.SPX) lost 7.34 points, or 0.19%, to close at 3,933.92 and the Nasdaq Composite (.IXIC) dropped 56.34 points, or 0.51%, to finish at 10,958.55. The Dow Jones Industrial Average (.DJI) was flat, ending on 33,597.92.

Concerns about a steep rise in borrowing costs have boosted the dollar, but dented demand for risk assets such as equities this year. The S&P 500 is on track to snap a three-year winning streak.

Three of the 11 major S&P sector indexes were higher, with healthcare (.SPXHC) one of them. Technology (.SPLRCT) and communication services (.SPLRCL), down 0.5 and 0.9% respectively, were the worst performers.

Energy (.SPNY) fell for its fifth straight session. The sector’s performance was weighed by U.S. crude prices falling again, settling at the lowest level in 2022, as concerns over the outlook for global growth wiped out all of the gains since Russia’s invasion of Ukraine exacerbated the worst global energy supply crisis in decades.

Carvana Co (CVNA.N) had its worst day as a public company, losing nearly half its stock value, after Wedbush downgraded the used-car retailer’s stock to “underperform” from “neutral” and slashed its price target to $1.

Meanwhile, United Airlines (UAL.O) traded 4.1% lower. Unions representing various workers at the airline said they would join forces on contract negotiations.

Travel-related stocks were generally down. Delta Air Lines (DAL.N) and American Airlines Group (AAL.O) were 4.4% and 5.4% lower respectively, with cruise line operators Carnival Corp (CCL.N) and Norwegian Cruise Line Holdings (NCLH.N) and accommodation-linked Airbnb Inc (ABNB.O) and Booking Holdings (BKNG.O) all falling between 1.7% and 4.4%.

Volume on U.S. exchanges was 10.29 billion shares, compared with the 10.98 billion average for the full session over the last 20 trading days.

The S&P 500 posted seven new 52-week highs and seven new lows; the Nasdaq Composite recorded 61 new highs and 307 new lows.

Reporting by Shubham Batra, Ankika Biswas, Johann M Cherian and Shashwat Chauhan in Bengaluru and David French in New York; Editing by Vinay Dwivedi, Shounak Dasgupta and Lisa Shumaker

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Wall St slides as services data spooks investors about Fed rate hikes

  • U.S. service sector activity picks up in November
  • Tesla cuts output plan for Shanghai plant for December-sources
  • All S&P 500 sectors decline, with energy stocks hit hard
  • Indexes down: Dow 1.4%, S&P 1.79%, Nasdaq 1.93%

Dec 5 (Reuters) – U.S. markets ended Monday lower, as investors spooked by better-than-expected data from the services sector re-evaluated whether the Federal Reserve could hike interest rates for longer, while shares of Tesla slid on reports of a production cut in China.

The electric-vehicle maker (TSLA.O) slumped 6.4% on plans to cut December output of the Model Y at its Shanghai plant by more than 20% from the previous month.

This weighed on the Nasdaq, where Tesla was one of the biggest fallers, pulling the tech-heavy index to its second straight decline.

Broadly, indexes suffered as data showed U.S. services industry activity unexpectedly picked up in November, with employment rebounding, offering more evidence of underlying momentum in the economy.

The data came on the heels of a survey last week that showed stronger-than-expected job and wage growth in November, challenging hopes that the Fed might slow the pace and intensity of its rate hikes amid recent signs of ebbing inflation.

“Today is a bit of a response to Friday, because that jobs report, showing the economy was not slowing down that much, was contrary to the message which (Chair Jerome) Powell had delivered on Wednesday afternoon,” said Bernard Drury, CEO of Drury Capital, referencing comments made by the head of the Federal Reserve saying it was time to slow the pace of coming interest rate hikes.

“We’re back to inflation-fighting mode,” Drury added.

Investors see an 89% chance that the U.S. central bank will increase interest rates by 50 basis points next week to 4.25%-4.50%, with the rates peaking at 4.984% in May 2023.

The rate-setting Federal Open Market Committee meets on Dec. 13-14, the final meeting in a volatile year, which saw the central bank attempt to arrest a multi-decade rise in inflation with record interest rate hikes.

“Stock Exchange” is seen over an entrance to the New York Stock Exchange (NYSE) on Wall St. in New York City, U.S., March 29, 2021. REUTERS/Brendan McDermid/File Photo

The aggressive policy tightening has also triggered worries of an economic downturn, with JPMorgan, Citigroup and BlackRock among those that believe a recession is likely in 2023.

The Dow Jones Industrial Average (.DJI) fell 482.78 points, or 1.4%, to close at 33,947.1, the S&P 500 (.SPX) lost 72.86 points, or 1.79%, to end on 3,998.84, and the Nasdaq Composite (.IXIC) dropped 221.56 points, or 1.93%, to finish on 11,239.94.

In other economic data this week, investors will also monitor weekly jobless claims, producer prices and the University of Michigan’s consumer sentiment survey for more clues on the health of the U.S. economy.

Energy (.SPNY) was among the biggest S&P sectoral losers, dropping 2.9%. It was weighed by U.S. natural gas futures slumping more than 10% on Monday, as the outlook dimmed due to forecasts for milder weather and the delayed restart of the Freeport liquefied natural gas (LNG) export plant.

EQT Corp (EQT.N), one of the largest U.S. natural gas producers, was the steepest faller on the energy index, closing 7.2% lower.

Financials (.SPSY) were also hit hard, slipping 2.5%. Although bank profits are typically boosted by rising interest rates, they are also sensitive to concerns about bad loans or slowing loan growth amid an economic downturn.

Meanwhile, apparel maker VF Corp (VFC.N) dropped 11.2% – its largest one-day decline since March 2020 – after announcing the sudden retirement of CEO Steve Rendle. The firm, which owns names including outdoor wear brand The North Face and sneaker maker Vans, also cut its full-year sales and profit forecasts, blaming weaker-than-anticipated consumer demand.

Volume on U.S. exchanges was 10.78 billion shares, compared with the 11.04 billion average for the full session over the last 20 trading days.

The S&P 500 posted six new 52-week highs and four new lows; the Nasdaq Composite recorded 105 new highs and 133 new lows.

Reporting by Shubham Batra, Ankika Biswas, Johann M Cherian and Devik Jain in Bengaluru and David French in New York; Editing by Anil D’Silva, Shounak Dasgupta and Lisa Shumaker

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Inflation worries hurt U.S. consumer confidence; house prices decelerating

  • Consumer confidence index falls 5.3 points to 102.5
  • Labor market differential drops to 32.5 from 38.1
  • House price gains slow further in August

WASHINGTON, Oct 25 (Reuters) – U.S. consumer confidence ebbed in October after two straight monthly increases amid rising concerns about inflation and a possible recession next year, but households remained keen to purchase big-ticket items like motor vehicles and appliances.

The Conference Board survey on Tuesday also showed more consumers planned to buy a home over the next six months, despite soaring borrowing costs. The steady rise in consumers’ buying intentions could provide some stability for the economy in the near-term.

But there are signs that the Federal Reserve’s aggressive interest rate hikes are starting to cool the labor market, with a decline in the share of consumers viewing jobs as “plentiful” and a rise in those saying employment was “hard to get.”

“The biggest risk is the unknown lagged effects from the Fed’s cumulative tightening and the economy may not feel the full effects until next year when recession risks are high,” said Jeffrey Roach, chief economist at LPL Financial in Charlotte, North Carolina.

The Conference Board’s consumer confidence index fell to 102.5 this month from 107.8 in September. Economists polled by Reuters had forecast the index at 106.5. The decline in confidence was across all age groups, but more pronounced in the 35-54 and well as the 55 and over cohorts.

Regionally, there were marked decreases in Florida, probably because of Hurricane Ian, and Ohio. Consumers’ 12-month inflation expectations rose to 7.0%, likely reflecting a recent reversal in gasoline prices after falling over the summer, from 6.8% last month. Food also remains very expensive.

Stubbornly high inflation and fading confidence are a blow to President Joe Biden and Democrats’ hopes of retaining control of Congress in Nov. 8 mid-term elections.

The Fed, fighting the fastest-rising inflation in 40 years, has raised its benchmark overnight interest rate from near zero in March to the current range of 3.00% to 3.25%, the swiftest pace of policy tightening in a generation or more. That rate is likely to end the year in the mid-4% range, based on the U.S. central bank officials’ own projections and recent comments.

The survey’s present situation index, based on consumers’ assessment of current business and labor market conditions, tumbled to 138.9, the lowest level since April 2021, from 150.2 in September.

Its expectations index, based on consumers’ short-term outlook for income, business and labor market conditions, fell to 78.1 from 79.5 last month. The expectations index remains below a reading of 80, a level associated with a recession and suggests that the risks of a downturn could be rising.

The survey’s so-called labor market differential, derived from data on respondents’ views on whether jobs are plentiful or hard to get, dropped to 32.5, the lowest reading since April 2021, from 38.1 in September.

This measure correlates to the unemployment rate from the Labor Department and is still high by historical standards. Unemployment benefits data show the labor market remains tight.

Stocks on Wall Street were trading higher. The dollar fell against a basket of currencies. U.S. Treasury prices rose.

SPENDING PLANS RISE

Even as consumers worried about the economy’s outlook, they remained interested in buying big-ticket items over the next six months, though they pulled back on travel plans, suggesting many Americans intended to stay home over the holiday season.

The share of consumers planning to buy motor vehicles increased to the highest level since July 2020. More consumers planned to buy appliances such as refrigerators, washing machines and vacuum cleaners.

“Consumers have abundant excess saving and they are willing to dig into this pile of cash to keep their real spending at least stable, even as inflation eats into their real incomes,” said Scott Hoyt, senior economist at Moody’s Analytics in West Chester, Pennsylvania.

Consumers were also more inclined to buy a house, probably encouraged by a sharp slowdown in house price inflation.

But surging mortgage rates remain an obstacle. The 30-year fixed mortgage rate averaged 6.94% last week, the highest in 20 years, up from 6.92% in the prior week, according to data from mortgage finance agency Freddie Mac.

A separate report on Tuesday showed the S&P CoreLogic Case-Shiller national home price index increased 13.0% year-on-year in August after advancing 15.6% in July. On a monthly basis, prices fell 0.9% in August, the second straight monthly drop.

A third report from the Federal Housing Finance Agency showed home prices increased 11.9% in the 12 months through August after rising 13.9% in July. Prices fell 0.7% on a monthly basis after decreasing 0.6% in July. It was the first time since March 2011 that monthly prices posted back-to-back declines.

“We expect home price inflation to slow in the remainder of 2022, falling to single digits by year-end and to zero by the second quarter of 2023,” said Nancy Vanden Houten, lead U.S. economist at Oxford Economics in New York. “With home sales falling as deteriorating affordability sidelines many buyers, prices will have to adjust. However, inventory remains low, and we think that will keep a floor under home prices.”

Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci

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China’s factory, services surveys suggest economy struggling to rebound

  • China Sept official manufacturing PMI above forecast
  • Private survey shows factory activity contracted sharply
  • Services sector activity growth slowed in Sept – official survey
  • COVID curbs, softening foreign demand, property weakness weigh

BEIJING, Sept 30 (Reuters) – China’s factory activity eked out growth in September, but a slowdown in services sector growth and a downbeat private manufacturing survey pointed to further cooling as the economy grapples with COVID-19 curbs and softening global demand.

China’s official manufacturing purchasing managers’ index (PMI) rose to 50.1 in September from 49.4 in August, the National Bureau of Statistics (NBS) said on Friday, beating expectations.

The index’s return to growth, after two months of contraction, was helped by recent easing measures, but the private Caixin survey showed factory activity slumped more quickly in September and the official survey showed a sharp slowdown in services sector activity growth.

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Signs that the world’s second-largest economy is struggling to regain traction after narrowly avoiding contraction in the second quarter, could add to concerns about a global recession, as major central banks embark on the most aggressive round of rate rises in decades.

“The surveys suggest that China’s economy continued to lose momentum in September, with the global downturn weighing on exports and virus disruptions dealing a fresh blow to services activity,” Zichun Huang, an economist at Capital Economics, said in a note.

Elsewhere in Asia, data showed South Korea’s factory production shrinking for a second month in August, but a separate release showed Japan’s factories ramping up output again last month.

MARGINAL GROWTH

China’s official manufacturing survey showed factory activity grew marginally in September, beating expectations for a reading of 49.6 in a Reuters poll of economists, and coming in above the 50-point mark that separates contraction from growth. China’s government has rolled out more than 50 policy measures since late May.

“With the basket of economic policies coming into effect and the impacts of heatwaves fading, the manufacturing sector has picked up, leading to the PMI return to expansionary territory,” said Zhao Qinghe, a senior statistician at the NBS, in a statement.

COVID outbreaks dragged down businesses in retail, aviation, accommodation and catering sharply, Zhao said, adding that a government-led infrastructure push accelerated construction activity.

The official survey showed non-manufacturing PMI falling to 50.6 in September from 52.6 in August. The official composite PMI, which includes manufacturing and services, fell to 50.9 from 51.7.

The private Caixin survey also released on Friday showed factory activity contracted at a sharper pace in September, with indexes for output, new orders and employment all declining due to weak demand. The Caixin survey typically covers smaller, export-oriented companies.

The releases come as the yuan hit its weakest level since the global financial crisis in 2008 this week even as the People’s Bank of China (PBOC) made betting against the yuan more expensive and warned against speculative yuan trading.

“Pressure on the yuan also means that the PBOC is constrained in its ability to provide monetary support,” Huang added.

Reuters Graphics Reuters Graphics

EXTERNAL DEMAND WEAKENS

The official manufacturing PMI survey showed the new export orders index dropping to 47.0 from 48.1 in August, a trend also reflected in the private Caixin survey. External demand has been hit by rising interest rates, high inflation and the war in Ukraine.

“(The) export order index eased further … pointing to weakening external demand as the monetary policy tightening has brought in recession concerns in the developed economies,” said Zhou Hao, chief economist at Guotai Junan International.

“If the external demand weakens further, the Chinese economy will have to turn more emphasis to domestic demand.”

The official manufacturing survey also showed new orders and employment shrinking, albeit more slowly, amid stricter coronavirus curbs in multiple cities including Shenzhen and Chengdu.

The release is one of the last official economic indicators to be announced before China’s ruling Communist Party Congress in mid-October.

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Reporting by Ellen Zhang and Ryan Woo; Editing by Ana Nicolaci da Costa

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