The Stock Markets and Bond Markets: The Effect of the Fed’s Rate Higgs on the First Three Months of Inflation

Stocks kicked off October with more treats than tricks for investors. Despite worries about financial health of Credit Suisse, the market rallied to begin the fourth quarter.

The Dow rose 765 points, or 2.7%. That was its biggest gain in a long time. The Nasdaq and S&P 500 gained 2.3% and 2.6%, respectively. The stock market ended the third quarter on a negative note on Friday.

Inflation is still a concern. This might not be the best time to keep raising rates since the Fed and other central banks are worried about a distressed European bank.

The market may be in a losing situation, according to my colleague Matt. Good economic news has been bad news for investors, because the Fed is trying to cool down the economy as part of its inflation-fighting campaign. But bad economic news is also bad for investors – and everyone – because it raises the risk of a recession.

Fears about rising stress at Credit Suisse

            (CS) may lead the Fed to slow down its pace of rate hikes. Bond market investors seem to be betting that as well. The yield on the benchmark 10-year US Treasury bond, which briefly topped 4% last week, has slid in recent days and fell again Monday to about 3.66%.

The Fed is expected to raise interest rates by quarter of a percentage point for the fourth consecutive time at their November 2 meeting, but traders have been pricing in a 70% chance since last week. Now the chances of a rate hike that large are down to about 50%, as the probability of a more modest half-point increase grows.

The manufacturing index from the Institute for Supply management fell from August and was below Wall Street’s expectations. That could be a sign that the Fed’s rate hikes are already having the desired effect of slowing the economy and reducing inflation.

Manufacturing is showing the reality that the economy is slowing. The good news is that there are welcome signs that prices are stabilizing,” said Jim Baird, chief investment officer with Plante Moran Financial Advisors, in a report Monday.

Energy and the stock market: What did we learn in the S&P 500, the JPMorgan Chase, Tesla and Chevron?

The energy sector had the best performance in the S&P 500, while the top stock in the DJIA was Chevron. The stock of oil got a lift after it was reported that there was a plan by the group of producers to cut production in an effort to cushion the blow caused by the fall in crude prices.

The British pound, which has plummeted to record lows against the US dollar, rebounded after the new UK government abandoned its plan to cut taxes for the wealthiest Brits.

In corporate news, Tesla

            (TSLA) was one of the few stocks that didn’t take part in Monday’s rally. Shares of Elon Musk’s electric car giant fell nearly 9%, making the company the worst performer in the S&P 500, after it reported disappointing third quarter delivery and production numbers over the weekend.

On Columbus Day on Wall Street, there was much more than a sleepy day. Stocks weren’t doing much Monday morning but took a turn lower in the afternoon following stark comments from JPMorgan Chase CEO Jamie Dimon, who warned that the United States is likely to enter a recession within the next six to nine months.

The shares of the company that is in the 30 Stocks in the DOW were down nearly 1%. JPMorgan Chase

            (JPM) is one of several big banks that will report earnings on Friday.

But sellers have returned with a vengeance in the past few days. The Friday report did little to quell fears of more big rate hikes from the Fed.

A worse-than-expected retail sales report on Thursday sent the stock market plunging. The index lost 2.3% and was the largest decline of the year. The S&P 500 lost 2.5% in its worst day in a month.

Lael Brainard, the Fed vice chair, talked in a speech about challenges in the housing market. Brainard noted that the transmission of tighter policy was most apparent in housing and that the moderation of demand due to monetary policy tightening is only partly realized.

The policy actions to date will have their full effect on activity in coming quarters due to lagging transmission in other sectors. In other words, the rest of the economy could soon slow.

Twelve companies in the S&P 500 are trading in the green despite the sell-off. Real estate and energy sectors have been hit the hardest the hardest, down more than 3.3% and 2.1%, respectively.

Stocks had been riding high this month on weaker-than-expected inflation and a number of stronger-than-expected reports on the broad economy and the job market. The Federal Reserve could slow its pace of rate hikes if investors were hopeful it could keep inflation under control.

Moody’s Analytics now predicts that the US economy will grow at a slower rate in the fourth quarter than they had previously thought. Moody’s analysts lowered their GDP forecast for next year to just 9%), much lower than their projection of 1.9%.

The Dow Stock Market Survived, but the Consumer Confidence Index Grows Stronger on Decay than It Expected

Meta and Adobe are the top gainers of the day, rising 3.3% and 3.4%, respectively. Adobe reported better-than-expected quarterly earnings and issued better-than- expected guidance. Meta has been down for a long time, but saw a tick after JP Morgan upgraded shares to neutral from overweight.

The stock market surged Wednesday as investors cheered healthy results from two of America’s leading companies and a surprisingly strong reading on consumer sentiment.

Walgreens

            (WBA) was one of just two Dow losers, falling more than 2%. There are shortages of popular children's pain relief medication. Walgreen competitorCVS was down about 1.5%. Weak guidance from rival Rite Aid

            (RAD) didn’t help: Rite Aid

            (RAD) shares plunged more than 17%.

Despite Wednesday’s rally the stocks are still down for December. Except for a Christmas miracle, the major indexes will end the year in the red. There was a strong gain for stocks in both October and November, which could have helped the market finish on a positive note.

The Conference Board reported a better-than-expected consumer confidence on Wednesday. The Consumer Confidence Index for December rose from last month’s level and easily topped economists’ expectations. It appears that consumers are becoming slightly less worried about inflation.

The jump in Main Street sentiment came even as more signs pointed to a continued housing market slowdown. In November, existing home sales fell by more than expected. It is the tenth straight month of declining sales.

Source: https://www.cnn.com/2022/12/21/investing/dow-stock-market-today/index.html

The Carnage in Cryptocurrencies: A Turn ‘Number’ for Carnival, and a Threat to Cybercurrency

The shares of Carnival rose 5% after the company reported a narrower loss than analysts were expecting.

But BlackBerry

            (BB), the former mobile device leader that has since morphed into a cybersecurity company, tumbled 10% to a new 52-week low following a weak outlook.

There is turbulence in the world of cryptocurrencies. Bitcoin prices were slightly lower Wednesday as investors wait for Sam Bankman-Fried, founder of the bankrupt FTX exchange, to be extradited from the Bahamas to the US.

More victims have been claimed by the carnage that took place in crypto. Core Scientific filed for Chapter 11 protection on Wednesday. Core Scientific shares were down to about 5 cents a share.