Last Updated 4:03 PM EST
Stock indices finished today’s trading session in the red. The Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 fell 0.5%, 0.91%, and 1.42%, respectively.
The communications sector was the session’s laggard, as it lost 2.32%. Conversely, the energy sector was the session’s leader, with a gain of 0.04%.
Furthermore, the U.S. 10-Year Treasury yield increased to 3.59%, a gain of 10 basis points. Similarly, the Two-Year Treasury yield also increased, as it hovers around 4.26%. This brings the spread between them to -67 basis points.
Compared to Friday, the market is pricing in a higher chance of a higher Fed Funds rate for June 2023. In fact, the market’s expectations for a rate in the range of 5% to 5.25% increased to 28.4% compared to Friday’s expectations of 22%.
In addition, the market is now also assigning a 46% probability to a range of 4.75% to 5%. For reference, investors had assigned a 49.6% chance Friday.
Last Updated 3:00PM EST
Stocks are in the red heading into the final hour of today’s trading session. As of 3:00 p.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are down 1%, 1.3%, and 1.7%, respectively.
In addition, WTI crude oil is higher today, as it hovers around the mid-$75 per barrel range. The commodity’s overall downtrend has caused prices at the pump to decline when compared to last week.
Indeed, the national average for regular gas was last $3.142 per gallon, down from last week’s reading of $3.262. This is significantly lower than the all-time high of $5.016 per gallon on June 14.
The highest prices can be found in Hawaii, where prices are substantially higher than the national average, at $5.111 per gallon. On the other hand, Texas is the state with the lowest gas prices, at $2.621 per gallon.
It’ll be interesting to see if this downward trend will continue going forward as the Federal Reserve looks to raise interest rates to fight inflation while oil producers lower production in order to maintain the price.
Last Updated 12:19PM EST
Equity markets are in the red halfway into the trading session. As of 12:19 p.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are down 0.2%, 0.5%, and 1.1%, respectively.
On Monday, the National Association of Home Builders released its U.S. NAHB Housing Market Index for December. The report measures home builder sentiment by surveying around 900 companies. A reading above 50 indicates that more home builders have a positive view of market conditions than a negative one.
The bad news is that today’s number came in at 31, meaning that most have a negative view of the market. In addition, this print is lower than the 34 that was expected. Indeed, sentiment has declined every month in 2022. This is the lowest level since April 2020, when the reading was 30.
The main driver behind this drop in sentiment is higher construction costs related to rising inflation and financing costs. In addition, buyer demand is softening as builders are being forced to reduce prices in order to increase sales and limit cancelations.
This downward trend is likely to continue as the Federal Reserve continues to raise interest rates to combat inflation.
Last Updated 9:59AM EST
Stock indices continued to sell off in Monday trading in the last trading week before Christmas, as investors sought ground while handling recession concerns.
The major averages of the U.S. stock market ended the last week in the red as investors reacted to the Federal Reserve’s 50-basis point interest rate hike and insinuations of more rate hikes for a longer time than expected. The central bank now expects to hike interest rates to 5.1% in order to restrict the economy desirably.
On Friday, the S&P declined 1.11%, shedding 2.08% for the week and 5.58% so far this month. The Dow lost 0.85% on Friday, ending the week 1.66% lower. On the other hand, the Nasdaq 100 slipped 0.89%.
In 2022, the Fed raised interest rates by 400 basis points through seven interest rate appraisals, effectively restricting the economy, as evidenced by two straight months of deflation (October and November). Nonetheless, the labor market still stands strong and as of November, consumer spending also hasn’t slowed down as expected. These two areas of the economy need to be restricted to achieve the target inflation rate of 2%-3% (a far cry from the current rate of 7.1%). This makes a high-interest rate environment inevitable for a few more months to a year. Thus, recession risk remains.
On the economic front, the National Association of Home Builders survey will be out on Monday, giving investors insights into how November’s consumers have reacted to the idea of owning a home in the middle of high mortgage rates.
On the earnings front, two important reports that await investors on Tuesday are those of FedEx (NYSE:FDX) and Nike (NYSE:NKE). Traders are expected to keep a close eye on the earnings commentary to gauge the performance of the retail sector.
The week ahead is likely to be slower than the rest because of the holidays, and it will be interesting to see whether investors are optimistic enough to end the year with a typical “Santa Claus rally” the following week.
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