Mon, January 30, 2023

Stocks Finish Lower in Run-Up to Powell’s Speech

Stocks Finish Lower in Run-Up to Powell’s Speech

Traders Are Pessimistic About the Upcoming Powell Speech

Traders were hesitant to make large bets in advance of Jerome Powell’s speech on Wednesday, so stocks cut much of their losses. Gains in energy and financial companies tempered big tech’s decline. Amazon.com’s stock has dropped as the company sells investment-grade debt. The average volume for the preceding month was not met. For the first time in roughly two decades, a gauge tracking the global yield curve inverted to signal a recession.

Powell is likely to reaffirm the Fed’s plan to slow its pace of rate increases next month while noting that its effort against inflation will continue into 2023. One important official said that he expects rates to go somewhat higher than he had anticipated just a few months ago. Accordingly, several policymakers declared they would raise borrowing costs further this week.

According to Goldman Sachs Group Inc.’s David Kostin, corporate America’s stretched margins will diminish in 2023 as certain costs normalize. Those at other banks, including Morgan Stanley, have predicted a profit growth contraction in the next year.

The Continuing Development in China aggravates Pessimism

Rare protests flared in major cities across China last week, triggering worries among investors about growth and energy demand in the world’s second-largest economy. Stocks had already started the week on a negative note. On Monday, the S&P 500 suffered its longest one-day drop over three weeks.

Two US stocks were also displayed to stockholders. On Tuesday, the Commerce Department released economic numbers. In September, the S&P CoreLogic Case-Shiller National Home Price Index fell for the third consecutive month, indicating that increasing interest rates make would-be home purchasers think twice.

In addition, the Consumer Confidence Index of the Conference Board fell for the second month in November. The Conference Board believes that the fall reflects a slowing economy.

Other Asset Classes and International Indexes Are Also on A Downfall

The price of oil increased. US Crude is up 1.2% to $78.20 per barrel. The yield on the 10-year Treasury note rose to 3.746% from 3.701% on Monday. The two-year note rate rose to 4.471%, up from 4.469% the day before.

Bond yields are usually higher on longer-term bonds. However, the 10-year note yield is currently lower than the two-year note yield at any point in decades. An inverted yield curve is often considered a precursor to a recession, as such a thing is considered a warning.

The pan-European Stoxx 600 dropped 0.1% overseas.

HSBC Holdings agreed to sell its Canadian branch to the Royal Bank of Canada for about $10 billion, pushing the stock by $1.20, or 4.1%, to $30.48 on the New York Stock Exchange.

The majority of important indexes in Asia rose. The Shanghai Composite Index increased by 2.3%, while the Hong Kong Hang Seng Index increased by 5.2%.

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