Daily Market Notes: 12-21-2022

After 10 lower days out of the past 13, the S&P and the other indices said enough is enough and after a classic “Turnaround Tuesday” with a sharply lower opening, things fought back for the remainder of the session and when all said and done, managed to end higher.

It was not easy after the Dow began with a 107 point decline right off of the opening bell and then managed to end higher after a choppy day with a 92 point closing gain up to 32,849 helped by advances in BA, CAT, CVX, IBM and TRV.

The S&P did worse because of the ongoing weakness in the Nasdaq with a 22 point initial decline which then turned into an improvement from those lows to finally finish 4 points higher at 3821 and the Nasdaq was the weakest of all as it turned an opening loss into a squeaked out 1 point advance helped by gains in ADBE while TSLA continued to collapse down to a two-year low.

The big story was in the bond market after a surprise move from Japan’s central bank increased the pressure on an already slowing global economy. Yields pushed higher after Japan, one of the world’s last holdouts of super-low and economy-aiding interest rates, made moves that could allow rates to climb more than otherwise.

The Bank of Japan said that it still wants the yield on 10-year Japanese government bonds to remain at roughly zero, but it also said it would allow the yield to move up to 0.50% instead of the 0.25% cap it had held previously. What made this unexpected move a particular surprise was how much resistance it has shown so far in joining the global campaign to hike rates in order to undercut high inflation.

Aftershocks from the Bank of Japan’s move affected bond and currency markets around the world as for instance in the U.S., the yield on the 10-year Note rose to 3.69% from 3.59% late Monday while the 2-year moved up to 4.30%.

The higher interest rates here have had a negative effect on housing with reports coming in lower than expected (see below).

In the foreign exchange market, Tokyo’s surprise move sent the value of the Japanese yen climbing against the U.S. dollar, which gave back some of its huge gains over the past year. The dollar fell to 131.50 Japanese yen, down 4% from a day earlier.

In China, stocks lost 1.1% after the World Bank cut its forecast for China’s economic growth this year to 2.7% from its June outlook of 4.3%. The bank cited repeated shutdowns of major cities to fight COVID-19 outbreaks. China now is relaxing some of its anti-COVID restrictions, but worries are rising that resulting breakouts of the virus could mean their own hits to the world’s second-largest economy.

Energy stocks did well here (surprise, surprise) as crude oil prices moved up to around  $76 a barrel.

This week sees the following earnings: yesterday – GIS lower; today – Dow component NKE higher plus FDX, RAD, CCL and SCS; tonight – CTAS, MU; Thursday – KMX, PAYX.

Economic reports will have: yesterday  –  December housing starts were off by 0.5% while building permits, an indicator of future activity, fell by 11,3% to the lowest level since June 2020; today – December Consumer Confidence rose by 108.3 which was the highest since April, November existing home sales fell by 7.7%; Thursday – weekly jobless claims, final reading for 3Q G.D.P. Friday – November personal income and spending, November new home sales, December U. of Michigan final Consumer Sentiment Survey.

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. This Market Letter is intended strictly for INTERNAL USE ONLY, NOT FOR USE WITH THE PUBLIC.