Markets slide lower as Covid protests across China spread

Dow dropped 156, decliners over advancers 5-2 & NAZ pulled back 65.  The MLP index slid 2+ to the 222s & the REIT index fell 2+ to the 385s.  Junk bond funds inched higher & Treasuries saw a little buying, lowering yields.  Oil was off to the 75s & gold declined 5 to 1748.

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Online sales for Black Friday set a record this year with consumers spending $9.2B, according to Adobe Analytics, a gain of 2.3% year-over-year (YoY).  Tech gifts have been very popular so far with sales rising 221% above a regular day in Oct this year.  Among the top sellers were smart home items & audio equipment.  Toys are hot items, rising 235%.  Discounts helped boost sales with the biggest savings seen among apparel, toys, sporting goods & televisions.  Mobile shopping remains a big story, with Black Friday hitting a new record: 48% of online sales came from smartphones, up from 44% last year.  "As Black Friday hit record spending online, we’re also seeing more prominent signs of a budget-conscious consumer this year," said Vivek Pandya, lead analyst, Adobe Digital Insights.  "Shoppers are embracing the Buy Now Pay Later payment method more this year to be able to buy desired gifts for family and friends."  Shoppers spent $5.3B online on Thanksgiving Day, up 2.9% from the holiday last year & setting a record with smartphones accounting for 55% of online sales, up from 51% last year.  Shoppers & retailers got a jump on the season with early deals in Oct getting consumers to spend over $72B online.  Adobe expects the 5 days from Thanksgiving Day thru Cyber Monday to generate $34.8B in online spend, up 2.8% year-over-year.  Cyber Monday will remain the season's & year's biggest online shopping day at $11.2B, up 5.1% YoY.

Black Friday hits huge record – thanks to this year's hottest gifts

The Treasury Dept said Chevron (CVX), a Dow stock, has been issued an expanded license to import petroleum or petroleum products produced by its joint venture with PDVSA, the Venezuelan state oil-firm.  The approval comes after talks resumed between the Venezuelan gov, led by socialist Pres Nicolás Maduro, & the opposition Unitary Platform.  "This action reflects longstanding U.S. policy to provide targeted sanctions relief based on concrete steps that alleviate the suffering of the Venezuelan people and support the restoration of democracy," the Treasury Dept said.  US officials had previously offered to loosen sanctions & release some Venezuelan prisoners held in US jails contingent on continuing talks & agreements to strengthen democracy in Venezuela.  Venezuela produces at most 800K barrels of oil per day.  That figure is up from the average of 525K barrels it produced a year ago, but far off its failed target of 1M a day by the end of 2021 & nowhere near the more than 3M barrels per day the country was producing in the 1990s.  The stock fell 3.82.
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US Treasury authorizes Chevron to expand oil pumping in Venezuela

Hundreds of demonstrators & police clashed in Shanghai yesterday night as protests over China's stringent COVID restrictions flared for a 3rd day & spread to several cities in the wake of a deadly apartment fire in the country's far west.  The wave of civil disobedience is unprecedented in mainland China since Pres Xi Jinping assumed power a decade ago, as frustration mounts over his signature zero-COVID policy nearly 3 years into the pandemic.  The COVID measures are also exacting a heavy toll on the world's 2nd-largest economy.  "I'm here because I love my country, but I don't love my government ... I want to be able to go out freely, but I can't. Our COVID-19 policy is a game and is not based on science or reality," a protester said.  Protesters also took to the streets in the cities of Wuhan & Chengdu yesterday.  In Beijing, small gatherings held peaceful vigils, while students on numerous university campuses around China gathered to demonstrate over the weekend.  Yesterday in Shanghai, police kept a heavy presence on Wulumuqi Road, which is named after Urumqi & where a candlelight vigil the day before turned into protests.  A witness saw police escorting people onto a bus which was later driven away thru the crowd with a few dozen people on board.  On Sat, the vigil in Shanghai for victims of the apartment fire turned into a protest against COVID curbs, with the crowd chanting calls for lockdowns to be lifted.

Shanghai hit by Covid protests as anger spreads across China

The 2nd estimate for Q3 GDP, unrest in China over Covid restrictions & possibility of a national railroad strike will be monitored by investors this week.  Remember that higher holiday sales were partly due to high inflation.  Since mid Jun, Dow has recovered about 4350.  Further gains will need more positive news on the economic recovery.

Dow Jones Industrials

 

 

Markets edge higher in listless trading

Dow gained 177, advancers over decliners 2-1 & NAZ was off 46.  The MLP index went up 1+ to the 225s & the REIT index crawled up 1+ to the 287s.  Junk bond funds slid lower & Treasuries saw a little selling (more below).  Oil was off pennies in the 77s & gold added 3 to 1749.

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Black Friday is traditionally seen as the kickoff for America's Christmas shopping season, but inflation appears to have shifted consumer behavior this year to the point Black Friday will be eclipsed ever so slightly by Small Business Saturday.  A new survey released by Bankrate.com found that 59% of holiday shoppers are likely to hit stores on Small Business Saturday, while 56% plan on making purchases on Black Friday.  Retailers will still see significant traffic both in person & online this Thanksgiving weekend just like usual, with some 80% of shoppers saying they will shop on either Fri, Sat or Cyber Monday.  But trends indicate several months of high prices have prompted consumers to plan ahead for the holidays in 2022.  Ted Rossman, senior industry analyst for Bankrate,said he speculates this will be the most "normal" holiday shopping season in 3 years since most of the pandemic worries have faded.  But he says "inflation is now the dominant theme."  In a previous survey, Bankrate found that 40% of holiday shoppers are changing their habits due to higher prices by seeking more discounts, shopping earlier & buying fewer items.  Rossman pointed out that roughly ½ of shoppers surveyed began making Christmas gift purchases prior to Halloween, which is similar to last year.  But he says this year "the motivation is different."  While the 2021 shopping season was dogged by supply chain woes, those have largely healed. Now, many retailers are burdened with too much inventory that is forcing them to offer more discounts.  "This should be the best discounting season in years," Rossman predicted.  Rossman says the evidence is already there, with several retailers launching Black Friday- & Cyber Monday-type deals in early Oct.  He pointed out that consumers are still spending, but they're being especially thoughtful about where each dollar goes as essentials such as gas, groceries & housing are gobbling up greater shares of household budgets.  Since a lot of people already started shopping early, Rossman explained, this weekend's shopping may not look exactly as it did pre-pandemic.  There may not be as many shoppers lined up at 5 AM for door busters given that a lot of deals have already been available online for weeks.

Black Friday taking a back seat to Small Business Saturday this year

High inflation & fears that a recession could be on its way won't stop holiday shopping from being robust this year, according to a recent forecast by Insider Intelligence & eMarketer.  Inflation could even propel holiday sales.  Consumer spending is projected to grow 7% to nearly $1.3T, the forecast said.  However, it noted that much of this gain is due to inflation.  Cyber Monday & Black Friday online sales could reach nearly $12B & $10B, respectively.  This would mark a 3.8% year-over-year increase in Cyber Monday sales & a 3.9% increase for Black Friday sales.  These shopping holidays are expected to be the largest for e-commerce sales, followed by Thanksgiving, Small Business Saturday & Cyber Sunday.  Although online shopping is ramping up, in-store sales will also "remain strong at 5.9%" & surpass $1T for the first time, the study projects.  "Consumers are comfortable being in stores and have money to spend," Insider Intelligence & eMarketer said in its forecast.  "So they’re out shopping in full force once again. The decline of brick-and-mortar retail has been greatly exaggerated."  Many Americans are still dealing with major debt, even as holiday shopping is expected to increase. 

Holiday shopping expected to reach over $1 trillion as inflation surges

Treasury yields were slightly higher as investors digested the Federal Reserve's Nov meeting minutes, which suggested that interest rate hikes would be slowed in the coming months.  The yield on the benchmark 10-year Treasury note was about 2 basis points higher at 3.726% & the 2-year Treasury yield was last trading at 4.512%, up about 2 basis points.  Yields & prices move in opposite directions & one basis point equals 0.01%.  As markets re-opened for a ½-day of trading, they continued to absorb the Fed’s Nov meeting minutes published earlier in the week.  The minutes suggested that the central bank would soon slow the pace of interest rate hikes.  “A substantial majority of participants judged that a slowing in the pace of increase would likely soon be appropriate,” they said, echoing the tone struck by Fed speakers in recent weeks.  Central bank officials have been indicating that whilst rates will continue to rise, they will likely do so in smaller increments.  This has been welcomed by many investors as concerns about the speed of rate hikes leading the economy into a recession have spread. 

Treasury yields tick higher as markets assess Fed rate policy outlook

Many traders are on holiday already so there is not much going on in the shortened day of trading.  The week has been good to investors with the Dow up 600.  😀

Dow Jones Industrials

 

Markets advance as Fed minutes show smaller rate hikes ahead

Dow gained 97 advancrs over decliners 3-2 & NAZ added 110.  The MLP index was off 3+ to the 224s & the REIT index flattish in the 385s.  Junk bond funds were mixed & Treasuries saw more buying, reducing yields.  Oil continued to see selling, settling down 3+ to the 77s & gold was up 12 to 1752 (more on both below).

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Sales of new US homes unexpectedly jumped in Oct even as high home prices and mortgage rates not seen in over a decade have rapidly eroded affordability.  New single-family home purchases rose 7.5% to a seasonally adjusted annual rate of 632K units, the Commerce Dept reported.  The forecast expected new home sales — which account for a small percentage of total sales — to fall 5.5% last month.  On an annual basis, new home sales are still down 5.8%.  The median new house price climbed nearly 15.4% in Oct from the year-ago period to $493K.  That is also up more than 8% from Sep.  There were about 470K new homes on the market at the end of Oct, the report shows, a slight increase from the previous month.  "In the bigger picture, this year's steep rise in mortgage rates has had a notable impact on middle-class home buyers," said Holden Lewis, a home & mortgage expert at NerdWallet.  "New home sales are skewing toward higher-income buyers. In October, 48% of new homes sold for $500,000 or more; a year earlier, the figure was 33%."  The interest rate-sensitive housing market has borne the brunt of the Federal Reserve's aggressive campaign to tighten monetary policy & slow the economy.  Policymakers already lifted the benchmark federal funds rate 6 consecutive times — including 4 75-basis-point increases in Jun, Jul, Sep & Nov — & have shown no sign of pausing as they try to crush inflation that is still running near a 40-year high.  A basis point is one hundredth of 1%.

New home sales unexpectedly climb despite steep mortgage rates

The holiday shopping season is fully underway with Black Friday just days away.  3 weeks into the season & retailers are finding sales so far are dead even with last year at this time as consumers fight an uphill battle with inflationary headwinds.  Shoppers are hitting their keyboards, spending $64.6B online, up 0.1% year-over-year (YoY) & essentially flat, according to Adobe Analytics.  There have been 9 days when shoppers spent over $2B online in a single day (12 days at over $3B online) — on par with levels in 2021.  "We are beginning to see the impact of earlier holiday deals, as retailers contend with oversupply and a softening spending environment," said Vivek Pandya, lead analyst Adobe Digital Insights.  "E-commerce has remained resilient thus far, a strong start to the season as we look towards Cyber Monday, which is expected to set new records for online shopping."  Consumers have seen holiday deals come earlier & more frequently.  Discounts for toys have hit a record high, peaking at 30% off listed price in the first 3 weeks of the season.  Online sales of toys are up 172%, when compared to daily average sales last month   There areas where discounts have been seen the most are in tech: electronics (22%), computers (14%), appliances (13%) & televisions (13%).

Holiday sales flat as retailers forced to offer deals

The Census Bureau announced that new orders for manufactured durable goods increased in Oct, despite persistent inflation & global economic instability.  Non-military new orders for capital goods increased by $1.7B (1.9%) totaling $91B, whereas ships rose by $1.1B to $83.9B in Oct.  Moreover, inventories rose by 0.7% to 2$22.6B.  Orders for overall durable goods also went up by 1%, or $2.8B, totaling $227B.   Previously, orders increased by 0.3% in Sep, a noticeable change between the 2 correlating months.  The survey indicates that companies, despite growing manufacturing costs, are looking to improve productivity thru greater investments amid the uncertainty of a Federal Reserve interest rate hike.  Also, shipments of manufactured durable goods have steadily increased in 17 of the last 18 months.  Domestically, consumers have been resilient in the face of inflation, spending more on products boosting manufacturers' bottom line; however, a global economic slowdown still looms.  One of the ways economists measure a country's GDP via gov equipment investment is thru core capital goods shipments, which have risen by 1.3% since Jan.  The exact estimates for Q4 GDP will be released at the beginning of the new year.  The data provided by the census bureau indicates it the US will likely have a strong GDP at the start of 2023.

New orders for US durable goods increased during October despite inflation

Gold prices settled higher ahead of the release of minutes from the Federal Reserve's most recent policy meeting, while investors digested US economic data showing business conditions deteriorating, suggesting slower economic growth.  Gold prices for Dec rose $5 to settle at $1745 per ounce.  Investors eyed the Fed minutes & a big batch of US economic data in the last day of trading before Thanksgiving.  The ICE US Dollar Index a measure of the currency against a basket of major rivals, was off 0.8% to 106.40.  The market is expecting the latest minutes of the Federal Open Market Committee meeting, which will be published tomorrow to provide clues on whether the Fed is set to end its pace of sharp interest rate hikes in response to evolving economic conditions.

Gold futures settle higher amid flurry of economic data, as traders await Fed minutes

Federal Reserve officials earlier this month agreed that smaller interest rate increases should happen soon as they evaluate the impact policy is having on the economy, meeting minutes indicated.  Reflecting statements that multiple officials have made over the past several weeks, the meeting summary pointed to small rate hikes coming.  Markets widely expect the rate-setting FOMC to step down to a 0.5 percentage point increase in Dec, following 4 straight 0.75 percentage point hikes.  Though hinting that smaller moves were ahead, officials said they still see little signs of inflation abating.  However, some committee members expressed concern about risks to the financial system should the Fed continue to press forward at the same aggressive pace.  “A substantial majority of participants judged that a slowing in the pace of increase would likely soon be appropriate,” the minutes stated.  “The uncertain lags and magnitudes associated with the effects of monetary policy actions on economic activity and inflation were among the reasons cited regarding why such an assessment was important.”  The minutes noted that the smaller hikes would give policymakers a chance to evaluate the impact of the succession of rate hikes.  The central bank's next interest rate decision is Dec 14.  The summary noted that a few members indicated that “slowing the pace of increase could reduce the risk of instability in the financial system.”  Others said they'd like to wait to ease up on the pace.  Officials said they see the balance of risks on the economy now skewed to the downside.

Fed officials see smaller rate hikes coming ‘soon,’ minutes show

Oil futures closed lower as investors kept tabs on Group of Seven talks on a price cap for Russian oil.  The US & its allies are trying to agree on a price cap for the warring nation’s crude.  A report in early trading, had officials discussing a level around $60 a barrel & the cap still could be set as high as $70.  A later report said talks between EU nations on where to set a proposed price cap on Russian oil had stalled.  The report said govs were split over how to design the plan.  West Texas Intermediate crude for Jan fell $3.01 (3.7%) to settle at $77.94 a barrel.  Jan Brent crude, the global benchmark, was down $2.95, or 3.3%, at $85.41 a barrel, while Feb Brent, the most actively traded contract, was off $2.56, (2.9%) at $85.14 a barrel.  It was reported that US officials want to set the cap high enough to provide Russia incentive to keep selling crude on to the global market, with prewar prices of around $65 a barrel.  Russian oil has traded at around a $26 a barrel discount to Brent in recent days.  The Russian cap news added to demand concerns around China that have persisted over several trading sessions.  China, among the world’s largest energy users, has been grappling with a surge in COVID-19 cases.  Shanghai tightened some rules on public life today.  Demand concerns were also fueled by the latest economic assessment from the Federal Reserve.

Oil price sinks as talks continue over Russia price-cap plan

The Dow was a little higher after the Fed minutes were released.  But some traders are away on holiday, so price changes may not be meaningful.  Best holiday wishes to everybody!!!

Dow Jones Industrials