4.15pm: US markets tumble in late trading
US markets tumbled in late trading to end the day in negative territory, giving up some of last week’s strong gains, as another tech giant was reported to be set to announce swathing job cuts.
At the close the Dow Jones Industrial Average was down 211 points, or 0.63%, at 33,537, the S&P 500 fell 36 points, or 0.89%, to 3,957 and the Nasdaq Composite dropped 127 points, or 1.1%, to 11,196.
Shares in tech giant, Amazon.com Inc. dropped 2% as The New York Times reported it was set to axe 10,000 jobs becoming the latest tech giant to cull its workforce.
Otherwise, there was little in the way of fresh news to provide direction although investors did have comments from two Fed officials to digest although the remarks balanced each other out.
“There is still a sensitivity to Fed speak... One was a little hawkish, one was a little dovish,” noted Eric Kuby, chief investment officer at North Star Investment Management Corp.
Shares in Oatly Group tumbled 12% after the oat-based drinks maker tumbled reported a larger-than-expected quarterly loss and revenue that fell short of consensus.
Hasbro Inc. was another weak feature, down 8%, after Bank of America said the toy company was harming one of its best brands, the “Magic: The Gathering” card game.
The firm noted the company was rolling out too many new card sets and raising production too much in an attempt to capitalize on demand, but it’s turning off retailers and consumers.
12:05pm: US dollar up, gold declines
Two of the three major US indices were lower midday, with a modest rebound in yields pushing both the S&P and Nasdaq Composite down while adding to the US dollar.
At midday, the S&P 500 was down by 0.2% at 3,986, the Nasdaq Composite was down by 0.5% at 11,264, while the Dow Jones was up by 0.1% to 33,785 points.
Michael Hewson, chief market analyst at CMC Markets, said yields and the US dollar have rebounded, after US Federal Reserve governor Christopher Waller said the market reaction to last week’s CPI was slightly overdone.
“That said, he went on to say that the next rate hike was still likely to be at a slower pace, which was in line with a lot of the comments last week,” Hewson wrote in a report.
“The US dollar has consequently risen back above the 140.00 area against the Japanese yen, after hitting a low of 138.50 last week,” he wrote, adding the rebound in yields is also serving to pull gold prices away from their recent peaks, although the decline is modest. At midday, the US dollar index was up by 0.5%.
Hewson noted that Advanced Micro Devices shares have edged higher after a couple of broker upgrades, and that cinema chain AMC Entertainments was also higher after the company reported that 4.9 million people walked through its doors between Thursday and Sunday to watch the new Black Panther movie, Wakanda Forever, with reported weekend ticket sales of US$180 million.
The major movers at midday included Moderna risen by 5.6%, while Chinese e-commerce company JD.com was also up by 5.6%, and transportation manager RXO drove higher by 4.8%.
On the downside, toymaker Hasbro slid by 8.8% after it was downgraded by the Bank of America, while Generac Holdings was down by 5.9% and Bath and Body Works fell by 5%.
9.40am: Traders await big retail earnings week
Shortly after the opening bell, the Dow opened the week up 7 points, less than 0.1%, at 33,754, while the Nasdaq Composite dipped 114 points, 1%, to 11,209 and the S&P 500 slid 12 points, 0.3%, to 3,981.
Despite the slow start, market sentiment is positive overall, according to Nationwide chief of investment research Mark Hackett.
“A notable shift has occurred in the market, with investors increasingly risk-on across asset classes,” Hackett said, according to CNBC. “Technical indicators have improved dramatically, with investor sentiment, momentum, breadth, and risk factors all showing notable improvement.”
Investors are also reacting to the 2022 midterms, which have yet to be resolved as control of the House appears likely to be narrowly in Republican hands but remains too close to call. In the Senate, Democrats appear likely to hold 50 seats, with a runoff in Georgia that could make that number 51.
Earning season is also in full swing, with retailers including Walmart Inc, The Home Depot Inc, Target Corporation and Lowe’s Companies Inc reporting this week.
6.30am: Quiet start
US stocks are expected to open lower on Monday after last week’s strong gains in the wake of softer-than-expected inflation data for October, which strengthened expectations that US rate setters will scale back on interest rate hikes.
Futures for the Dow Jones Industrial Average were 0.3% lower in pre-market trading, while those for the S&P 500 were down 0.4%, and contracts for the Nasdaq-100 fell 0.7%.
“Market mood outside crypto is extremely joyful after last week’s inflation data surprised investors to the downside and China announced to relax Covid measures, and boost its shattered property sector,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
“Although US inflation remains relatively high to contain a perhaps premature bull run on dovish Fed expectations, news from China could help keep the mood nice and sweet,” she added.
Notably, US president Joe Biden and China’s president Xi Jinping will hold talks today on the sidelines of the G20 summit in Bali. Talks could go either way; they could either boost, or hit risk appetite in Chinese, and global assets. Investors will be watching developments closely.
The path for US interest rates continues to have a big impact on share prices. The Federal Reserve has delivered four 75 basis point interest rate hikes this year as it tries to fight runaway inflation.
Investors worry that the higher cost of borrowing will dent economic growth. While inflation remains elevated, it is starting to show signs of a softening. In data out last week, headline inflation fell to 7.7% in October, versus 8.0% expected by analysts and from 8.2% printed a month earlier, stoking expectations that US rate-setters will scale back on further interest rate hikes.
Contact the author at jon.hopkins@proactiveinvestors.com