2023/01/18 (151.014) Technical Analysis

Weak US Economic Data And Recurring Unterest Rate Concerns
Spoiled The Buying Sentiment Of Investors On The US WallStreet Today

Weak US economic data and recurring interest rate concerns spoiled the buying mood of investors on the US stock markets on Wednesday. The Dow Jones Industrial closed down 1.81 percent at 33,296.96 points. The market-wide S&P 500 lost 1.56 percent to 3,928.86 points. The technology-heavy Nasdaq 100 lost 1.27 percent to 11,410.29 points. On the one hand, price inflation at the manufacturer level continued to ease, on the other hand, retail sales figures were unexpectedly weak. Both of these could give the US Federal Reserve reason to be less resolute in continuing its rate hike course in the future. However, some Fed members had recently reiterated the need to keep monetary policy tight, which had unsettled investors. In late trading, the Fed announced in its economic report (Beige Book) that the economy in the USA had barely grown recently. There has been slight growth in some districts, while activity in other districts has remained stable or even shrunk. The assessment is therefore somewhat more cautious than at the end of November.

United Airlines shares were unable to maintain their significant early gains and ultimately lost 4.6 percent. For the time being, they ended their rapid rise of around 35 percent since the beginning of the new year. The airline turned back a significant profit thanks to a rebound in travel this past quarter, beating average analyst forecasts. Microsoft shares fell 1.9 percent. The news of job cuts by the software giant fizzled out in trading. In view of the difficult market conditions, the Group plans to lay off around 10,000 employees by the end of the third quarter of 2022/23. That’s about five percent of the workforce. These and other measures incurred expenses of $1.2 billion in the second fiscal quarter. The biotech company Moderna scored with the approval of an RSV vaccine for adults over 60 years of age, which it was aiming for in the first half of the year. The vaccine has shown “promising results” in the phase III study required for approval, it said. Respiratory syncytial virus (RSV) causes respiratory disease. Moderna, the Nasdaq 100 leader, surged 3.3 percent. IBM’s shares lost 3.3 percent after a negative analyst comment, making them one of the weakest Dow stocks. Morgan Stanley had downgraded the titles of the computer group.

US Retail Sales Fall More Than Expected And/Or US Producer Prices Fall Most Since April 2020
– May Be That`s Why DXY Weakens To Near Seven-Month Low Today While 10-Year Treasury Yield Falls To 1-Month Low

Retail sales in the US declined 1.1% month-over-month in December 2022, following an upwardly revised 1% drop in November and worse than forecasts of a 0.8% fall. Sales at gasoline stations recorded the biggest decrease (-4.6%), followed by furniture stores (-2.5%), motor vehicle dealers (-1.2%), electronics and appliances stores (-1.1%), miscellaneous (-1.1%) and nonstore retailers (-1.1%). In contrast, sales were up 0.3% in building materials and garden equipment stores (0.3%) and sporting goods, musical instruments and book sellers (0.1%). Sales at food and beverage stores were flat. Retail sales aren’t adjusted for inflation and part of the decrease in December can be explained by a fall in goods prices during the month and a holiday shopping that was pulled forward into October. However, excluding sales at gasoline stations, sales were down 0.8%, in another sign of a weaker-than-expected holiday shopping and a slowdown in consumer spending amid high inflation and interest rates.

Producer prices for final demand in the US dropped 0.5 percent from a month earlier in December 2022, following a revised 0.2 percent gain in November and compared with market expectations of a 0.1 percent fall. It was the largest monthly decline since April 2020, adding to signs that inflationary pressure in the world’s largest economy is cooling. Goods prices were down 1.6 percent, led by a 7.9 percent slump in energy cost and, to a lesser extent, a 1.2 percent fall in food prices. On the other hand, service prices edged 0.1 percent higher, due to increased margins for final-demand trade services. On an unadjusted yearly basis, the PPI increased 6.2 percent in December, the least since March 2021.

The dollar index bottomed below 102 on Wednesday, close to levels not seen since June 2022, as prospects that cooling inflation will give the Federal Reserve room to slow its aggressive tightening spooked investors away from the greenback. The latest data showed producer prices fell the most since April 2020 in December, adding to bets that the Federal Reserve will increase rates by a smaller 25 bps in February. Also, inflation in the US has been slowing since July to 6.5% in December. The most pronounced selling activity was against risk-sensitive currencies such as the Australian and New Zealand dollars. On the flip side, the dollar strengthened against the Japanese yen after the Bank of Japan pushed back against speculations of another policy adjustment by maintaining ultra-low interest rates and keeping its yield control policy unchanged.

The yield on the US 10-year Treasury note fell towards the 4.4% mark in the third week of January, the lowest in over one month and approaching levels last seen in September, as a bigger-than-expected monthly decline in US producer prices and retail sales strengthened bets that the Federal Reserve will further slow the pace of interest rate hikes. The data furthered recent evidence that prices are slowing after consumer inflation fell for the sixth consecutive month in December. Consequently, money markets priced an over 95% chance of a softer 25bps interest rate increase in the central bank’s February decision before reaching a terminal rate of 5% by the end of the first quarter. Still, hawkish rhetoric by Fed policymakers warns that the fight against inflation is far from over.

Wall Street Struggles
To Keep Momentum Today

The Dow Jones lost more than 400 points on Wednesday as investors digested a slew of US economic data while reassessing the outlook for monetary policy. The S&P 500 and the Nasdaq 100 also turned negative, falling roughly 1% each, but some losses were capped by softening Treasury yields which boosted appetite for tech and high-growth stocks. US producer prices declined in December by the most since the start of the pandemic, and a drop in retail sales exceeded estimates, reinforcing bets that the Federal Reserve will slow its aggressive tightening campaign but exacerbating worries about a recession. On the earnings front, United Airlines topped Wall Street’s estimates in the latest quarter due to robust travel demand. Meanwhile, Moderna jumped over 5% after saying its vaccine for the respiratory syncytial virus is effective at preventing the disease in older adults.