Daily Market Notes: 12-13-2022

Take that, you bearish sellers from last Friday, as the market more than made up the selling that occurred in the final hour on that day to open higher and just kept pushing upward as the session moved along yesterday and finished at the best levels of the day.

Things started out on the upside and then made a late acceleration to the upside, reversing the pattern from Friday when they basically collapsed in the final hour. The Dow was ahead by around 300 points just before 3pm when it got another upside kick to finally end with a large closing advance of 528 at 34,005. It was led by nice gains in BA, CAT, HD, MCD, UNH and V. And this is after it ended last week with the worst performance since September.

The S&P also did well with an upside acceleration in the final hour as well from a 28 point gain to a closing one of 56 up to 3990. The Nasdaq sort of lagged a bit due to selling in NFLX and that awful TSLA but still put in a respectable gain of 139 to 11,143. The Russel 2000 Index of small stocks also did okay with a 22 point day up to 1818 while in the strangest relationship of the session, the VIX made a large advance up to 25 which is really unusual because on a day of equity gains of this magnitude, one would like to think that the VIX would sell off, but the assumption is that the market could make large moves today and tomorrow based on the release of the November P.P.I report at 8:30am and then the big one which will take place tomorrow at 2pm with the latest Fed interest rate decision and then the news conference at 2:30pm, so hold onto your hats for these two events.

The expectation is for a 50 basis point hike after four straight hikes of 75 bp which has lifted the federal funds rate up to a range of 3.75% to 4% after starting the year at virtually zero. Other central banks around the world are also likely to raise their own rates by half a percentage point this week, including the European Central Bank.

The current projection is for the November C.P.I. report to show a gain of 7.3% which is down from 7.7% the month before. Anything that deviates from consensus could lead to large market moves one way or the other, and sure enough we will get one on today’s opening to the upside (see below).

Expectations for a slowdown in rate hikes may also be setting some investors up for disappointment, if central banks signal this week they will ultimately take rates higher than markets expect as the current thinking is that the funds rate will top out at a range of 4.75% to 5% next year.

Some economists expect Fed policy makers on Wednesday to signal their median expectation is for rates to hit a range of 5% to 5.25%, up by half a percentage point from their last projection and hold them there for a while at a high level for some time to ensure that the battle against inflation is won.

The yield on the 10-year Note rose to 3.61% from 3.59% late Friday. The two-year yield advanced to 4.39% from 4.34%.

There were some large gains based on mergers and acquisitions as for instance HZNP  jumped by 15% after AMGN said that it would acquire the biopharmaceutical company for about $26.4 billion and COUP rose after being taken over by a private equity firm as did beleaguered WEBR after it was also acquired by a private equity firm as well.

Energy producers also rose after the price of U.S. oil gained and this follows their reaching the lowest levels of the year last week on worries about a weakening global economy, which would mean less demand for energy.

Earnings this week will see: yesterday – COUP higher; today – ORCL; Thursday – ADBE, JBIL; Friday – WGO, DRI and ACN.

Economic reports will have: Tuesday – the all-important November C.P.I. came in lower than expected with a monthly gain at 0.1% and the core rate excluding food and energy was higher by 0.2%. This equates to 7.1% year over year for the overall number and 6% year over year for the core rate; Wednesday – November retail sales, November industrial production and capacity utilization, December Philadelphia Fed Manufacturing Survey, Fed interest rate raising decision.

Donald M. Selkin

Chief Market Strategist


 Don Selkin is the Chief Market Strategist at Newbridge Securities Corporation, member FINRA/SIPC and provides the Fair Value analysis for CNBC each morning. The commentary provided in this Market Letter is intended to provide our current or potential customers with timely market analysis and should not be considered a research report. This Market Letter may contain, and is limited to: Discussions of broad based indices; Commentaries on economic, political or market conditions; Technical analysis concerning the demand and supply for a sector, index or industry based in trading volume and price; Statistical summaries of multiple companies’ financial data, including listings of current ratings; and, recommendations regarding increasing or decreasing holdings in particular industries or securities. This Market Letter does not make a financial or investment recommendation or otherwise promotes a product or service of the firm. This Market Letter contains only news, facts, and commentary on information previously reported from a news source believed to be accurate and reliable by the author. These news sources include the following: {Bloomberg Financial, Reuters, and Associated Press}. It is possible that at any given point in time, the author, Newbridge Securities, or one or more of its employees or registered individuals associated with Newbridge Securities, may hold a position, either long, or short, as well as options, bonds or other instruments in the companies mentioned in this report.