4:05pm: Dow, S&P finish slightly ahead
At 4pm, the Dow Jones was in the green at 33,743 points for a 0.6% gain on the day. The S&P 500 had advanced 19 points, or 0.5%, to finish at 3,965, and the Nasdaq ended the day as it started at 11,146 points.
12:05pm: Oil down more than US$3 a barrel
Two of the major US indices continued to make headway this afternoon, oblivious of the recession fears dogging oil, which is down sharply again today.
At midday, the S&P 500 was up by 0.25% at 3,956, the Nasdaq Composite was down by 0.2% at 11,123, while the Dow Jones was up by 0.5% to 33,701 points.
Chris Beauchamp, chief market analyst at online trading platform IG, said stocks are finishing the week with more gains.
“Stocks are once again shrugging off warnings about high interest rates in the US, and it appears the normal seasonal tendency of equities to rally in 4Q has asserted itself once again. Indeed, the fact that Fed speakers continue to bang the hawkish drum, but to little apparent effect, might suggest that traders still have their hearts set on a risk-rally into the end of the year, even if that sets everyone up for a fall in January,” Beauchamp wrote in a report.
Beauchamp noted that oil has seen several sharp drops this week, followed up by tepid rallies that suggest recession fears are making themselves felt in the commodity.
“The latest drop today has seen around 4% wiped off Brent and WTI. This in itself might be giving fresh impetus to the equity rally. While FOMC members go on about rising rates, the market is watching oil and other things like shipping rates and expecting further weakness in US CPI prints in coming months.”
At midday, West Texas Intermediate dropped by 3.4%, trading at US$78.85 a barrel, on news China cut already nominated December oil volumes from Saudi Arabia. The WTI and Brent Crude are heading for a second weekly loss, with Brent looking at more than a 9% decline.
The major movers included apparel and fashion chain Ross Stores (NASDAQ:ROST), up by 10.7% on news it beat top-and-bottom estimates for 3Q earnings. Palo Alto Networks was up by 8.9%, and Lincoln National (NYSE:LNC) rose by 5.4%.
On the downside, oil and natural gas company Diamondback Energy fell by 5.7%, as global oil prices hit a six-week low. Other oil companies also slid, including EOG Resources and Marathon Resources down by 3% respectively, followed by Chevron, off by 1.4%.
9:40am: Indexes on pace for a losing week
Just after the opening bell, the Dow was up 164 points, 0.5%, to 33,711, the Nasdaq Composite added 71 points, 0.6%, to 11,216 and the S&P 500 improved 23 points, 0.6%, to 3,970.
Despite the gains, the three major indexes are each on pace for losing weeks.
Investors have seemed to weather news that the Federal Reserve is likely to continue with its pattern of interest rate hikes. Boston Fed President Susan Collins echoed the sentiments of her other regional counterparts in a speech this morning.
“Restoring price stability remains the current imperative and it is clear that there is more work to do,” Collins said “I expect this will require additional increases in the federal funds rate, followed by a period of holding rates at a sufficiently restrictive level for some time."
For the moment, though, that hasn't dampened the markets any further.
“There’s absolutely been a thirst for relief and a tug of war,” said Shelby McFaddin, an investment analyst at Motley Fool Asset Management, according to CNBC. “But at the end of the day, it really just depends on this inflationary period becoming deflationary slower than it ramped up, and on what the Fed decides to do next.”
6.30am: Some gains
US stocks are expected to open higher on Friday as investors take in stride the prospect of more interest rate rises in the world's biggest economy.
Futures for the Dow Jones Industrial Average were up 0.4% in pre-market trading, while those for the S&P 500 were 0.6% higher, and contracts for the Nasdaq-100 rose 0.7%.
“The latest man to kill the market joy was St Louis Fed President, Mr. Bullard, who said that the rates should raise at least until the 5-5.25% range, while showing a chart that plotted rates between 5-7%,” noted Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
“Maybe that was a mistake, maybe not! Other than him, Neel Kashkari also said that he wants to see inflation stop climbing and that we are not there yet,” she added.
Later today, Boston Fed President Susan Collins has a speaking engagement and her words will be in focus.
Through last week and into the past few days, investors had been hoping that data showing that slowing inflationary pressures would eventually force the US Federal Reserve to scale back on rate hikes. So far this year, the Federal Reserve has delivered four consecutive 75 basis point interest rate hikes as it attempts to cool inflation.
“So, the ambiance in the stock markets is not as cheery as it was at the end of last week. The S&P500 started the day (yesterday) in a bad mood but recovered relatively well to close the session only 0.30% lower. A couple of encouraging earnings from retailers may have helped lift sentiment,” said Ozkardeskaya.
Investors also remain wary about predictions that the world’s biggest economy is heading for a recession. JP Morgan economists have said they expect the US to enter a mild recession next year because of rising interest rates and the tightening monetary conditions.
No surprise then that Ozkardeskaya predicts share price falls ahead.
“Moving forward, we could expect the downside correction at index level to deepen. The first bearish target for the S&P500 stands at the 3,855 level, which is the major 38.2% retracement on the latest rebound,” she said.
Contact the author at jon.hopkins@proactiveinvestors.com