US stocks get whacked following tense earnings reports and retail sales data
The Dow Jones Industrial average tumbled more than 600 points on Wednesday as investors took profits on some of the strong 2023 January gains and as a disappointing December retail sales reading raised concerns about a recession. Shares of banks led the losses.
The Dow Jones Industrial Average fell 1.8 per cent, while the S&P 500 lost 1.6 per cent. The Nasdaq Composite lost 1.2 per cent and was on pace for its first down day in the last eight.
All sectors were down, With Communication Services and Information Technology the best performers, down 0.94 per cent and 1.3 per cent respectively, whilst Consumer Staples got whacked the hardest, falling by 2.65 per cent
In response to the overnight fall, Yung-Yu Ma, chief investment strategist for BMO Wealth Management stated, “ We’ve had such a strong start to the year, but now we’re amid a tense earnings season, recently got weaker data — retail sales and yesterday’s Empire State Manufacturing Survey.
In company news, Microsoft announced plans to lay off about 10,000 employees, which hurt investor sentiment. The stock has fallen and dragged the Dow lower with it.
The overnight drop was also spurred on by Investors digesting the latest retail sales data, which showed a drop of 1.1 per cent in December, slightly more than the 1 per cent forecast.
They also weighed the latest reading on the producer price index, which measures input costs from companies. The PPI showed a 0.5 per cent decline for December. Economists surveyed by Dow Jones expected a 0.1 per cent decline. That briefly gave relief to investors who have hoped for inflation to retreat and for the Federal Reserve to slow its rate-hiking campaign.
Investors have been enjoying strong upward momentum for stocks since the start of the year, although many have begun to doubt the market’s strength. The Dow is still higher by 1 per cent for the month, while the S&P and Nasdaq are still up by 3 per cent and 5 per cent, respectively.
The US dollar touched a seven-month low on Wednesday, reversing a trend that dominated much of 2022 as lower expectations of sharp Federal Reserve rate rises eased pressure on global markets.
To commodity news, Electric Vehicle makers are hoping that an imminent wave of lithium supply will bring relief for their expansion plans after a two-year squeeze, but there is possibility of more pain to come if producers fail to deliver.
There are many sceptics who warn regarding fresh tightness if miners from Chile to China and Australia hit hurdles in launching daunting volumes of new supply.
A cause for optimism on supply is that the largest increases will be coming from the top producers like Albemarle Corp. and Chile's SQM that are considered more likely to succeed.
However, the key issue is whether less established producers will be able to deliver in full by defining a range of regulatory, technical, and commercial challenges.
There is also a new dispute brewing, as the EU leaders try to fight back against the US’s Inflation Reduction Act. To recap, Europeans and others have spent years calling on the US to take climate more seriously.
Now that it has, they accuse the White House of protectionism because the sweeping climate legislation passed last year would try to reshore clean-energy supply chains in the US.
As Europe reports, the EU is about to loosen its own restrictions on subsidies to speed up more domestic clean energy investment. Take that, Biden.
The energy watchdog lifted its forecast for oil demand growth this year by nearly 200,000 barrels a day to 1.9 million barrels a day. The extra demand means that the IEA now expects total oil demand this year to average 101.7 million barrels a day, well above pre-Covid levels and a record amount.
On the other side, Natural gas prices have tumbled to fresh lows, due to its continued sell off, ending today's session at the lowest closing price in 19 months.
The market is flashing bearish signals as mild winter weather curbs demand and production remains strong.
Liquified natural gas exports are also stumbling due to the continued shutdown of the Freeport LNG export plant in Texas.
China’s tech stocks have staged a $700bn rally as the country reopens and a regulatory clampdown on the sector loosens, drawing the attention of international asset managers who fled the market in recent years.
Hong Kong’s Hang Seng Tech index, which is stacked with Chinese companies, has soared almost 60 per cent from its lows last October, with heavyweights such as Tencent and Alibaba gaining $350bn combined in market value, according to Financial Times calculations based on Bloomberg data.
Futures
The SPI futures are pointing to a 0.4 per cent fall.
Currency
One Australian dollar at 8:10 AM has weakened compared to the US dollar yesterday buying 69.39 US cents (Wed: 69.85 US cents).
Commodities
Iron ore futures are pointing to a 1.4 per cent gain. Iron ore is 1.0 per cent higher at US$122.70 tonne.
Gold lost 0.2 per cent. Silver fell 2 per cent. Copper lost 0.01 per cent and oil fell 1.1 per cent.
Figures around the globe
Across the Atlantic, European markets closed mixed. London’s FTSE fell 0.3 per cent, Frankfurt closed flat and Paris added 0.1 per cent.
In Asian markets, Tokyo’s Nikkei gained 2.5 per cent, Hong Kong’s Hang Seng rose 0.5 per cent and China’s Shanghai Composite closed flat.
Yesterday, the Australian sharemarket added 0.1 per cent to close at 7,393.
Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.>
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Source: Finance News Network
