After three lower days to start the week which included the Nasdaq’s worst start to a December week since 1975, the market dug in its heels yesterday and ended with nice gains to put the indices back in their long-standing trading range as investors await some major events.
These will be today’s November P.P.I. report which will be followed by Tuesday’s C.P.I. reading and then Wednesday’s interest rate decision where the current consensus is for a 50 basis point increase.
The Dow advanced by 183 up to 33,781 led by gains in BA, HD, MCD, MSFT, NKE and UNH. The S&P added 29 to 3963 which finally broke its five-day losing streak but all of the indices are still lower for the week.
The Nasdaq did the best with a 123 point gain up to 11,082 led by strength in the chip stocks with NVDA leading the way while the Russell 2000 Index of small stocks gained 11 to 1818. The VIX, which got down to that strong support level to start the week and which led to the three days of selling in stocks and a gain in the index itself, finally came back down and ended at 22.29.
Major indexes are all in the red for the week and have been swinging between big monthly gains and losses throughout the year. Investors’ worries about inflation, rising interest rates and recession risks have made for a volatile market which has left investors to focus on those reports which center on inflation and that is why the two upcoming ones are so important.
The price of crude oil continued to decline and ended under $72 a barrel which should be helpful in the upcoming reports and is now lower than it was before the Russian invasion of Ukraine.
ATVI ended lower after the Federal Trade Commission said it was going to sue them in order to block MSFT’s attempted takeover of the video game company, saying it could suppress competitors to its Xbox game consoles and its growing games subscription business.
Bond yields finally rose a bit with the 10-year Note at 3.48% as it gained to 3.48% from 3.42% late Wednesday. The 2-year ended higher at 4.29% which keeps the yield curve at a historically wide 81 basis points and could be the harbinger of a recession sometime in 2023.
Resilient consumer spending, which is partly tied to strong employment, has also made the fight against inflation more difficult. It has been keeping the economy strong enough to stay out of a recession but it is also increasing the chances that the Fed will go too far in raising interest rates. The Fed could potentially cause a recession by hitting the brakes too hard on the economy.
This week sees the following earnings reports: yesterday – GME, CIEN, HCP higher; today AVGO, DOCU, RH higher while LULU and COST are lower.
Economic reports will be important with the following: yesterday – weekly jobless claims rose by 4K to 230K; today – preliminary December U. of Michigan Consumer Sentiment Survey and the all-important November P.P.I.
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.