2023/01/19 (152.015) Technical Analysis

Burdened By Economic Fears,
The US Stock Markets Also Went Into Reverse Today

Burdened by economic fears, the US stock markets also went into reverse on Thursday. The US Federal Reserve had reported the previous evening that the US economy was largely stagnant. That had fueled fears of a recession in the world’s largest economy. Additionally, recent data signaling a slowdown in US consumer demand and business investment weighed.

The Dow Jones Industrial closed down 0.76 percent at 33,044.56 points. The market-wide S&P 500 also fell 0.76 percent to 3,898.85 points and the technology-heavy Nasdaq 100 lost exactly one percent to 11,295.67 points.

Fresh US economic data was mixed: According to the Philly Fed Index, the business climate in the US region of Philadelphia brightened more than expected in January, but still signaled a decline in economic activity. Meanwhile, the number of weekly initial jobless claims surprisingly fell again. The US housing market continues to be weak: in December the number of new buildings started and permits for new houses fell.

Disappointing quarterly earnings pushed Alcoa shares down 7.4 percent. The aluminum maker reported a net loss and announced that year-to-date sales are expected to fall short of original plans amid uncertainties surrounding global inflation, slowing demand from Europe and the weak economic outlook in China.
The consumer goods group Procter & Gamble was also unable to convince investors with its interim report for the past quarter, as the price drop of 2.7 percent showed. For fiscal year 2022/23, the company raised the lower end of its revenue target range. In terms of earnings per share, management continues to assume that the lower end of the forecast range will be reached. At the electric car manufacturer Tesla, investors had to accept a further price loss of 1.3 percent after the minus the day before. In the trial of investor fraud allegations against company boss Elon Musk, a lawyer for the tech billionaire admitted incorrect information in Musk’s momentous tweets in the summer of 2018. However, this was just an unfortunate choice of words under time pressure and not an attempt at fraud, he emphasized. The shares of the luxury electric car manufacturer Lucid were significantly weaker with a price drop of 8.7 percent after ringing in the new year with a profit of up to 20 percent. Dealers blamed the recent massive price cuts by competitor Tesla, which should give the electric car pioneer more market share in the USA. However, experts point out that Lucid’s basic model is primarily aimed at wealthier customers and thus has a different core customer base than Tesla.US Building Permits Drop To 31-Month Low As US Initial Unemployment Claims Fall To 4-Month Low

Building permits in the United States fell 1.6 percent from a month earlier to a seasonally adjusted annual rate of 1.33 million in December 2022, the lowest level since May 2020 and below market expectations of 1.37 million, a preliminary estimate showed. Permits, a proxy for future construction, have been falling as high inflation and rising mortgage rates hit demand for new housing. Single-family authorizations declined 6.5 percent to a rate of 730 thousand, the lowest since April 2020, while the volatile multi-segment rose 5.3 percent to 600 thousand. Permits were down in the South (-1.7 percent to 740 thousand), Midwest (-15.6 percent to 168 thousand) and Northeast (-2.5 percent to 115 thousand), but were up in the West (9.3 percent to 307 thousand).

The number of Americans filing new claims for unemployment benefits fell by 15,000 from the previous week to 190,000 on the week ending January 14th, the lowest in four months and well below market expectations of 214,000. The result further consolidated evidence of a tight labor market despite the Federal Reserve’s aggressive tightening path last year, challenging market bets that the Fed will halt its tightening path before reaching the forecasted terminal rate of 5.25%. The 4-week moving average, which removes week-to-week volatility, fell by 6,500 to 206,000. On a non-seasonally adjusted basis, initial claims fell by 53,582 to 285,575, largely due to seasonal factors. Notable decreases took place in New York (-17.196), Michigan (-5,540), and Georgia (-5,072).

US 10-Year Treasury Yield Holds Near 3.4% While Dollar Steadies As Fed Outlook Mulled

The yield on the US 10-year Treasury note, seen as a proxy for global borrowing costs, bottomed around 3.4%, close to levels not seen since September 2022, as mounting fears of a sharp economic downturn and prospects of a less aggressive Federal Reserve boosted appetite for government debt. Data released Wednesday showed that Americans curbed spending while business investment fell, heightening concerns that the economy may be moving closer to recession. At the same time, producer prices slid by the most since the pandemic’s start, offering further evidence that inflation had already peaked while giving the Fed room to slow its monetary tightening. Money markets are now pricing an over 95% chance that the US central bank will hike rates by 25 basis points in February. Still, hawkish remarks from several Fed policymakers highlighted that the fight against inflation is far from over.The dollar index steadied above 102 on Thursday after dipping briefly to an over 7-month low of 101.53 in the previous session, as investors digested weak US data and hawkish remarks from Federal Reserve officials. Latest data showed the US retail sales declined more than expected in December while US producer prices fell the most since April 2020, stoking concerns over a potential slowdown. Meanwhile, Fed’s James Bullard said rates were not yet restrictive and could rise up to 5.5% by year-end, while Fed’s Loretta Mester and Patrick Harker also backed more rate increases. The dollar has come under renewed pressure this year as the annual inflation rate in the US slowed for a 6th straight month to 6.5% in December, the lowest reading since October 2021, raising hopes that inflation peaked at 9.1% in June. The data cemented expectations that the Fed will downshift to a smaller 25 basis point rate hike in February after delivering a half-percentage point increase in December.

US Stocks Fall On Recession Fears On This Thursday

The Dow shed more than 230 points on Thursday, while the S&P 500 and the Nasdaq 100 closed roughly 0.8% and 1% lower, respectively as selling pressure prevailed amid concerns of a looming recession. Fresh data showed that the labor market remains tight, with the number of Americans filing for unemployment benefits unexpectedly falling last week to the lowest in four months, backing hawkish remarks from Federal Reserve officials who signal further rate hikes. Recent data also showed that retail sales, producer prices, and industrial production fell more than expected in December, raising worries about an economic slowdown. On the corporate side, Procter & Gamble and Alcoa shed 2.1% and 7.2% respectively, after disappointing results, while Truist Financial rose 4.3%. Looking forward, investors await Netflix earnings after the bell.