Wall St ends higher, Treasury yields rise after data flurry

Just as yesterday ended with all the indexes way in the red but rebounding, this morning all remained briefly in the red before making their way into positive territory for the rest of the session, the Dow closing up 176.  But my oh my, how fickle is this market. Wednesday saw a big rally due to recession optimism which changed to a big sell off Thursday over recession pessimism. Today there was optimism again after a flurry of reports showed a softening economy pointing to the hikes doing their intended – bringing down inflation.

So inflation is cooling, but so is spending which makes sense; spending is the major driver behind inflation. Wednesday, weakening housing caused an uptick. Today a gain in new home sales also caused an uptick. Personal income rose more than expected and October inflation numbers had to be revised upwards. All in all, it was a jumbled market and, as today’s expert put it, “Everyone’s waiting for 2023 to have a fresh take again.”  The three indexes are still set for their biggest annual decline since 2008, the worst year of the financial crisis.  No volume data in this report but, per the CBOE, volume was very light at 7.8 billion. 

Fri  December 23, 2022  4:26 PM

Wall St ends higher, Treasury yields rise after data flurry

By Stephen Culp

DJ: 33,027.49  -348.99        NAS: 10,476.12  -233.25        S&P: 3,822.39  -56.05      12/22

DJ: 33,203.93  +176.44       NAS: 10,497.86  +21.74         S&P: 3,844.82  +22.43     12/23

NEW YORK, Dec 23 (Reuters) - Wall Street shuffled to a modestly higher close on Friday and Treasury yields advanced as investors digested a deluge of economic data ahead of the Christmas holiday long weekend, capping a week fraught with worries over the Fed's restrictive monetary policy and related recession fears.  All three major U.S. stock indexes ended the session green after waffling through much of the session, with investors showing little conviction as a raft of indicators pointed to economic softening, evidence that the Federal Reserve barrage of interest rate hikes were having their intended effect.

"Everyone’s waiting for 2023 to have a fresh take again," said Paul Kim, chief executive of Simplify ETFs in New York.  For the week, the S&P 500 and the Nasdaq posted their third straight Friday-to-Friday losses.  As the remaining trading days in 2022 tick away, all three indexes appear set to close the books on their steepest annual percentage plunges since 2008, the darkest year of the global financial crisis.  "This was the year where diversification failed and everything sold off together; a max pain year, where both bonds and equities sold off," Kim added. "There was nowhere to hide."

A slew of data from the Commerce Department and the University of Michigan showed that while inflation appears to be cooling, so is consumer spending, which accounts for about 70% of the U.S. economy.  On the other hand, new home sales posted a surprise gain and consumer sentiment brightened.  But the data did little to move the needle regarding Fed policy expectations.  "Inflation looks fairly sticky and interest rates keep mounting up," Kim said. "And the punchline is (interest) rates will have to be higher for longer."

The Dow Jones Industrial Average (.DJI) rose 176.44 points, or 0.53%, to 33,203.93 the S&P 500 (.SPX) gained 22.43 points, or 0.59%, to 3,844.82 and the Nasdaq Composite (.IXIC) added 21.74 points, or 0.21%, to 10,497.86.  European shares followed their U.S. counterparts down and up, and eventually ended the session nominally higher as economic jitters wrestled with strength in healthcare and banking stocks.  The pan-European STOXX 600 index (.STOXX) rose 0.04% and MSCI's gauge of stocks across the globe (.MIWD00000PUS) gained 0.23%.  Emerging market stocks lost 0.99%. MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) closed 1.1% lower, while Japan's Nikkei (.N225) lost 1.03%.

Treasury yields resumed their upward trajectory after data showed personal income rising more than expected and October inflation data was upwardly revised.  Benchmark 10-year notes last fell 22/32 in price to yield 3.7509%, from 3.671% late on Thursday.  The 30-year bond last fell 61/32 in price to yield 3.8269%, from 3.724% late on Thursday.  The dollar fluctuated but remained essentially unchanged against a basket of world currencies after two days of gains as market participants weighed the probability of interest rates rising further and staying there longer than many might have hoped.  The dollar index fell 0.11%, with the euro up 0.22% toat $1.0616.

The Japanese yen weakened 0.36% versus the greenback at 132.85 per dollar, while Sterling was last trading at $1.2045, up 0.02% on the day.  Oil prices jumped after Moscow announced it might cut crude output in response to the G7 price cap on Russian exports.  U.S. crude rose 2.67% to settle at $79.56 per barrel, while Brent settled at $83.92 per barrel, up 3.63% on the day.  Gold advanced amid dollar weakness ahead of the long weekend.  Spot gold added 0.3% to $1,797.42 an ounce.