As the opening bell approaches, stock futures are suggesting a mixed start for the major U.S. indexes. In overnight trading, markets in Asia largely gained ground, with a notable 5.2% jump for Hong Kong’s Hang Seng Index of stocks, and the European equity indexes are mostly in the green. Meanwhile, oil futures have firmed up. After hitting the lowest point in about a year on Monday, as a Covid-19 surge in China raised fears of stricter lockdowns putting the brakes on the global economy, the price of benchmark West Texas Intermediate has gained about 1.6%, to around $78.50 a barrel.
Stocks began the week with a sharp downturn, with the Dow Jones Industrial Average plummeting 497 points, or 1.5%; the S&P shedding 62 points (-1.5%), and the tech-laden NASDAQ falling 176 points (-1.6%). In addition to concerns that China’s economy could remain constricted, thus continuing to disrupt global supply chains, stocks were dragged down by comments from New York region Federal Reserve President John Williams indicating that, although the central bank appears to be making progress in its battle against inflation, interest rates still needed to go higher. Investor hopes were further dampened by Mr. Williams’ suggestion that rates may not start to come down until 2024.
In addition to speeches by a number of Federal Reserve officials, the economic calendar for this week also includes the October figures for pending home sales due out Wednesday, with the consensus calling for a decline of about 5.5%, versus the 10.2% drop recorded in September. Mortgage rates, which have jumped to over 7% of late (versus about 3% at the start of the year), are having a major impact on demand, with existing home sales down nearly 24% in September, marking eight consecutive months of declines.
Thursday brings the Personal Consumption Expenditures (PCE) Price Index for October, a closely watched inflation indicator. That same day, the Institute for Supply Management is due to release its manufacturing index for November, with activity expected to show a slight contraction. If so, it would mark an end to a 27-month expansion streak. On Friday, the Labor Department is scheduled to release its jobs report for November, and the consensus is calling for the rate of growth to slow. That report, along with the PCE, will be key topics at the Federal Open Market Committee’s (FOMC) next two-day policy meeting, which will conclude December 14th. Investors are hoping that the Fed eases the pace at which it raises its target lending rate to 50 basis points (or one-half percent), down from the 75-basis-point increases it has implemented at its last four meetings. – Mario Ferro
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
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