4.10pm: US markets subdued ahead of Powell's speech
US markets ended the day in mixed fashion with investors preferring to remain sidelined ahead of a speech by US Federal Reserve chair Jerome Powell tomorrow.
At the close the Dow Jones Industrial Average was 3 points higher at 33,850, the S&P 500 slipped 6 points, or 0.16%, to 3,958 and the Nasdaq Composite fell 66 points, or 0.59%, to 10,984.
Powell is due to speak at a Brookings Institution event on Wednesday about the outlook for the US economy and the labor market.
Investors will be looking for clues about when or whether the Fed will slow the pace of its aggressive interest rate hikes.
Evidence that the rate rises might be feeding through to a slower economy were shown in falling consumer confidence which hit a four-month low in November.
Stocks on the move included Apple which fell 3.89% following a report that iPhone production could take a big hit due to unrest at a Foxconn factory in China, amid protests in China against the nation’s zero-Covid policy.
Shares of Tabolla surged 43.48% after it announced Yahoo had taken a 25% stake in the company as part of a 30-year agreement, in which Taboola will power native advertising on all Yahoo platforms.
Biogen fell 4.34% after a Science.org report that a woman participating in an experimental Alzheimer’s treatment trial, sponsored by Biogen and a Japanese pharma company, recently died from a brain haemorrhage.
12.15pm: Apple's iPhone shipment worries are a global concern
Markets took a turn to the downside at midday as Apple’s declining share price led the Nasdaq lower and weighed on Wall Street.
At noon, the Nasdaq had lost 0.5% to sit at 10.993 points, while the S&P 500 was down 0.4% at 3,950 and the Dow down 0.3% at 33,754.
Fears that Apple faced major shortages of its new iPhone 14 model due to China’s zero COVID strategy caused its share price to sink 1.8% ahead of the all-important holiday shopping season.
China’s strategy of COVID containment has caused headaches for the global economy all week.
“The situation in China remains unclear, but it doesn’t look as if Beijing is rushing to respond to protests by a rapid loosening of COVID restrictions,” IG’s Chris Beauchamp wrote Tuesday.
Domestically, investors are eyeing another set of comments from Fed chair Jerome Powell tomorrow.
“Meanwhile the dollar has been unable to take much comfort from further comments about the need for more Fed tightening, with traders preferring to hold back on backing the greenback any further ahead of tomorrow’s Powell speech,” Beauchamp added.
9.35am: China's next move in the spotlight
US stocks opened mixed on Tuesday as the market mood improved on optimism that China may be moving toward amending its zero-COVID policy.
Just after the market opened, the S&P 500 was flat at 3,964 points, the Dow Jones Industrial Average had slipped 18 points at 33,831 points, while the Nasdaq Composite had added 12 points or 0.1% at 11,062 points.
Forex.com market analyst Fiona Cincotta said US stocks were set for a stronger start amid rising speculation that unrest in China from COVID restrictions would force authorities to move faster to loosen curbs.
“Beijing didn’t announce any major changes to the current measures but did say that it would speed up the pace of vaccinations among senior citizens,” she said. “This could be considered a crucial step toward ending strict lockdown rules.”
Cincotta noted that, in addition to China, stocks were benefitting from optimism that the Federal Reserve could slow the pace of rate hikes from the December meeting, with Fed speakers yesterday sending mixed messages.
“NY Fed President John Williams suggested that there is still work to be done to tame inflation, but there could be a cut next year,” she said.
“James Bullard and Vice Lael Brainard also flagged the amount of work still to be done. The hawkish chatter could be a prelude to Federal Reserve chair Jerome Powell’s speech tomorrow.”
6.30am: Cautious gains
US stocks are expected to open higher on Tuesday, regaining some ground lost after falls in the previous session, with investors continuing to eye news about anti-government protests in China.
Futures for the Dow Jones Industrial Average were up 0.1% in pre-market trading, while those for the S&P 500 were 0.2% higher, and contracts for the Nasdaq-100 gained 0.4%.
“China and its covid response are driving the headlines,” noted Neil Wilson, chief market analyst at markets.com, citing the Hang Seng’s 5% surge in Hong Kong after health officials in China moved to encourage the elderly to get vaccinated against COVID-19.
The anti-government protests in China continue to worry markets, however, especially with regard to whether the world’s most populous country will continue to pursue its stringent zero-covid policy amid the opposition from ordinary citizens.
“There is unease about supply chain implications from ongoing restrictions and rising cases, and concern about what protests against the government could mean for risk,” said Wilson, noting that there is also a sense that the direction of travel can only be towards easing restrictions sometime in the new year.
“When exactly that will be depends on many things, not least the pace of vaccinations, but it seems likely to regime will have to relent at some point,” he added.
Closer to home, the latest comments from US rate-setters came in decidedly on the hawkish side and in turn weighed on share prices on Monday.
St Louis Fed president James Bullard, seen as one of the most hawkish members of the Federal Open Market Committee went on record to say that markets were “under-pricing risk that the FOMC will have to be more aggressive rather than less aggressive in order to tame the substantial inflation in the US.”
“This chimes with my own view that inflation will be stickier and the Fed will need to keep going for longer than the market currently expects,” noted Markets.com's Wilson.
US rate-setters have delivered four consecutive interest rate increases of 75 basis points in as many meetings as they try to rein in stubbornly high inflation. More rate increases are expected even as some sections of the market hold out hope for a scaling back in interest rate hikes.
It is worth noting too that New York Fed president John Williams stressed that inflation was still too high and predicted unemployment could rise as high as 5% next year from 3.7% last month.
On the data front, the US consumer confidence index for November, due at 10.00am ET today, and the S&P Case-Schiller home sales data, due at 9.00am ET, will be closely watched.
Contact the author at jon.hopkins@proactiveinvestors.com