Dow finished down 764 (slightly above session lows), decliners over advancers 4-1 & NAZ slumped 360. The MLP index fell 1+ to the 215s & the REIT index was off 4+ to the 383s. Junk bond funds continued weak & Treasuries saw selling which lowered yields. Oil retreated 1+ to the 76s & gold sank 30 to 1788 (more on both below).
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2180338269244485)
As the potential for a recession & a decline in consumer spending grows, companies across sectors are signaling that they are cutting costs & either slowing hiring or laying off workers heading into 2023. But technology execs say they're expecting to spend more on key initiatives like cybersecurity & new technology in the new year as well as grow or maintain their workforces even as a vast majority expect to see a recession soon if one is not already here, according to the latest CNBC Technology Executive Council (TEC) survey. Nearly 3-qtrs (74%) of respondents said they expect their companies to spend more on new technology in the next 12 months, while 22% said they expect spending to be about the same. While both figures are slightly down since the last TEC survey in June when they were 75% & 25%, respectively, it also comes after the downturn in both stock price & business across the tech sector might suggest there would be a far more negative outlook. Roughly 4% of respondents said they would be spending less, compared to none in the previous survey. Tech spending overall is forecast to rise about 5.1% next year after a gain of less than 1% this year, according to a recent survey by Gartner, effectively unchanged from the firm’s surveys earlier this year. Some of that may reflect a feeling that companies that cut back on investment during previous downturns like the 2008 financial crisis badly lagged competitors in the years that followed. Cloud computing, which received nearly unanimous support as “critically important” from TEC survey respondents, will likely be the recipient of that sustained spending. Gartner expects cloud computing revenues to rise to $101B next year, up from $90B in 2021. Cloud computing is expected to rise by 20% for the next 2-3 years.
Tech executives signal spending in 2023 even as sector sees massive layoffs
Retail sales slumped even though the latest data on consumer prices earlier this week showed a cooling. Walmart (WMT), a Dow stock & dividend aristocrat, CEO Doug McMillon says the retail giant is managing for inflation & a
slowdown in consumer demand that extends into 2023 & the economic
conditions are changing what shoppers will see on the shelves of the
nation's largest retailer. Grocery sales, responsible for 56% of its revenue, is a key inflation read for the company. “We’re managing this item by item, category by category,” McMillon said in an exclusive interview at the Hope Global Forum this week. “We have a plan and adjusted our inventory to be ready for this next year.” These comments came after Nov CPI report that showed consumer prices rose 7.1% year over year, which was below estimates, but before the retail sales decline posted today. Food
prices remained elevated, rising 10.5% year over year. Grocery sales
require more regular shipments than general merchandise & trucking
prices are also elevated, approximately 35% higher YTD,
according to data from Evercore ISI. “What we’re seeing is that if
you take the fresh food categories, commodities, things like proteins,
things are starting to move. Chicken right now is more expensive, but
beef is down. Fruit and vegetable is in pretty good shape,” McMillon
said. “But dry groceries, consumables is where we’re seeing the most
stubborn and persistent inflation, mid double-digit inflation. And we’re
not hearing from our suppliers looking forward that’s going to come
down soon,” he added. General merchandise categories have started
to adjust because demand has softened, according to McMillon, but he
noted, “We think there’s going to be persistent inflation with us for a
while, in drug, grocery and consumables.” McMillon
said WMT is continuing to look for new technology to maintain
inventory & increase the speed of its e-commerce business. The stock fell 1.26 in a down market.
If you would like to learn more about WMT, click on this link:
club.ino.com/trend/analysis/stock/WMT_aid=CD3289&a_bid=6ae5b6f7
As the housing market cools quickly, house flippers are finding it harder to make fast profits. In Q3, gross flipping profit, which is the difference between the median purchase price paid by investors & the median resale price, dropped to $62K, according to ATTOM, a real estate data provider. That's down 18.4% from Q2 & down 11.4% year-over-year. It represents the smallest profit since the end of 2019 & the fastest quarterly drop since 2009. With that drop in gross profits, the return on investment fell to 25% from 30% in the previous qtr. Not bad, but not as good. Still ATTOM notes it’s not the size of the profits, but how quickly they're falling. With profits shrinking & higher mortgage rates hurting affordability for potential buyers, the share of home sales that were flips fell as well. Roughly 7.5% were flips in Q3, still historically high, but down from 8.2% in Q2. Flips, defined as homes bought & sold in a 12-month period, made up a 5.9% share of all home sales in Q3-2021. Home prices are weakening quickly, while renovation costs remain high. “It’s apparent that fix-and-flip investors aren’t immune to the shifting conditions in the housing market,” said Rick Sharga, exec VP of market intelligence at ATTOM, in a release. “With demand from buyers weakening, prices trending down over the past few months, and financing rates significantly higher than they were at the beginning of the year, flippers face a much more difficult environment today, and probably will in 2023 as well.” Home prices are still higher today than they were a year ago, but each month the gains are shrinking dramatically. Mortgage rates have come off their recent highs, but they are still more than twice what they were at the start of this year. The combination has caused home sales overall to drop for 9 straight months. While mortgage rates have dropped slightly over the past 2 months, that may not matter too much to flippers since about 64% of them use all cash. That is unchanged from previous qtrs. Another factor weighing on investors is the cost to flip. Prices for labor & materials remain high, & supply-chain delays are still factoring into renovation costs. The average time it took to flip a home in Q3 did drop slightly to 163 days, after rising for 3 consecutive qtrs . That is still, however, longer than the 149 days it took to flip a home in Q3 of last year.
Home flipping profits drop at the fastest pace in over a decade
Oil futures declined, pressured after a partial restart of the Keystone Pipeline & strength in the $ following yesterday's Federal Reserve policy announcement. A section of the Keystone pipeline has been restarted
following a shutdown last week due to a leak & global recession
risks increased after a wave of central banks delivered another strong
round of tightening, Oil' s recent rally is running out of steam as risk aversion runs wild.
The US benchmark WTI crude for Jan fell $1.17
(1.5%) to settle at $76.11 a barrel.
Oil futures end lower as Keystone Pipeline sees partial restart
Gold futures settled lower, extending Fed-day losses as the $ rebounded, adding to the pressure on gold during what has been a volatile week for precious metals prices. Gold for Feb fell $30 (1.7%) to settle at $1787 an ounce. Gold rallied after Tues's consumer-price index data for Nov came in cooler than expected, which also helped benefit stocks. But the Federal Reserve's latest economic projections yesterday along with the Fed's decision to hike interest rates by 50 basis points, suggested that interest-rate cuts may not arrive until 2024, weighing on both stocks & gold. With the Fed still waging war against inflation & interest rates expected to climb higher than anticipated, the appetite for zero-yielding gold took a hit. The $ strengthened following the news, which contributed to the losses for gold & helped push prices for the metal back below $1800 per ounce. The ICE US Dollar Index, a gauge of the $'s strength against a basket of rivals, traded as high as 104.879 & was last up 0.9% at 104.651. Separately, the Philadelphia Fed manufacturing index improved to a reading of negative 13.8 in Dec, but forecast expected a reading of negative 12. The Empire State Index fell sharply to negative 11.2 in Dec, from 4.5 the month before. Industrial production fell 0.2% in Nov, down a 2nd straight month.
Gold extends post-Fed losses as dollar strengthens
Dow Jones Industrials
No comments:
Post a Comment