Continuing jobless claims catalyst for market bounce, Investor attention on next week’s Fed meeting
Stocks rose Thursday as the S&P 500 attempted to crack a five-day losing streak and Wall Street evaluated the odds of a recession ahead.
The Dow Jones Industrial Average gained 0.6%, bolstered by Chevron and Boeing, while the Nasdaq Composite rallied 1.1%. The S&P 500 added 0.75%, putting it on pace to break its longest losing streak since October.
Despite the gains, stocks are on pace for a losing week. There’s been a strong selloff over the last few days and it doesn’t take much to create even the underpinnings for a modest rally. Thursday’s continuing jobless claims the likely catalyst for the market bounce.
The data showed a modest uptick in claims, beating estimates, but it was the Continuing claims that hit their highest level since February and above consensus, which is a slight move in the right direction for the economy that could further fuel the narrative that the labour market needs to break, in order for the Fed to successfully tamp down inflation.
Investor attention remains laser-focused on next week’s Federal Reserve policy meeting, where the central bank is widely expected to issue a 50 basis point interest rate hike. It’s a smaller increase than the prior four rate hikes, but may do little to alleviate recession fears as the Fed attempts to squash surging prices.
Next week’s November consumer price index on Tuesday should also provide more clarity on the direction of inflation, along with the producer price index slated for Friday.
The Treasury market sold off on Thursday and continues to flash warning signs of a slowdown in economic growth, with the gap between short- and long-term US borrowing costs on Wednesday reaching its widest point since 1981. The two-year Treasury yield reached 4.32%,while the 10-year yield rose to 3.49%.
And European oil companies are attracting US investors who view them as cheap compared with the likes of ExxonMobil and Chevron after a furious rally in American energy stocks. The valuation gap between European and US supermajors is luring investors who don’t usually invest in Europe. An example is London-listed BP which recently became the second-largest holding at BlackRock’s $19bn US equity dividend fund. The trend comes as some European fund managers avoid oil companies on environmental grounds.
In company news, inflation has negatively affected most businesses, but it’s been a benefit to Rent the Runway. Shares soared 74% after the fashion rental firm reported that third quarter sales jumped 31% and raised its guidance, as customers looking to save money chose to rent designer clothes rather than buy them.
Across the sectors, Tech was the standout, with Energy underperforming following lower crude with E&Ps and refiners the worst groups. Growth fared better overnight but remains a relative underperformer to value for the week.
Futures
The SPI futures are pointing to a 0.5 per cent gain.
Currency
One Australian dollar at 8:10 AM has strengthened compared to the US dollar yesterday buying 67.71 US cents (Thu: 67.28 US cents).
Commodities
Iron ore futures are pointing to a 4.1 per cent gain.
Gold added 0.2 per cent. Silver gained 1.5 per cent. Copper rose 0.6 per cent and oil fell 0.5 per cent.
Figures around the globe
Across the Atlantic, European markets closed mixed. Paris fell 0.2 per cent, Frankfurt closed flat and London’s FTSE closed 0.2 per cent lower.
In Asian markets, Tokyo’s Nikkei lost 0.4 per cent, Hong Kong’s Hang Seng gained 3.4 per cent and China’s Shanghai Composite closed 0.1 per cent lower.
Yesterday, the Australian sharemarket lost 0.7 per cent to close at 7176.
Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.
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