U.S. stocks ended higher in a quiet day, trimming some of the week's losses. Choppy action this week has come amid uncertainty regarding the ultimate economic impact of aggressive central bank monetary policy tightening, and as investors speculate on the trajectory of future rate hikes. Employment data dominated the economic calendar, as jobless claims ticked higher. Equity news was upbeat, as Ciena Corporation rallied after beating the Street's expectations, while Dow component Chevron Corporation and Exxon Mobil Corporation both said their 2023 capital expenditures will be at the high end of their guidance. Treasury yields rose, and the U.S. dollar declined, while crude oil prices lost ground, and gold was higher. Asian stocks finished mixed as Hong Kong markets jumped on optimism of further easing of COVID restrictions in the city, and European stocks were mostly lower as the global markets continued to grapple with recessionary concerns as monetary policies tighten.
The Dow Jones Industrial Average increased 184 points (0.6%) to 33,781, the S&P 500 Index went up 30 points (0.8%) to 3,964, and the Nasdaq Composite rose 123 points (1.1%) to 11,082. In moderate volume, 3.9 billion shares of NYSE-listed stocks were traded, and 4.2 billion shares changed hands on the Nasdaq. WTI crude oil lost $0.55 to $71.46 per barrel. Elsewhere, the gold spot price ticked $2.30 higher to $1,800.30 per ounce, and the Dollar Index declined 0.3% to 104.81.
Ciena Corporation (CIEN $52) reported adjusted fiscal Q4 earnings-per-share (EPS) of $0.61, well above the $0.08 FactSet estimate, as revenues declined 6.8% year-over-year (y/y) to $971 million, easily topping the Street's forecast of $850 million. The networking equipment maker said its stronger-than-expected results were driven by favorable supply chain developments in the second half of the quarter and looking ahead, it expects to deliver outsized revenue growth in 2023 given its significant backlog and continued signs of gradual supply improvement. Shares rallied nearly 20%.
Dow member Chevron Corporation (CVX $174) announced its 2023 capital expenditure plan of $14.0 billion for consolidated subsidiaries and $3.0 billion for equity affiliates, which came in near the high end of the company's guidance. CVX said its consolidated affiliate capital expenditure budget is up more than 25% from 2022, but its affiliate spending outlook is down modestly from 2022. Shares were modestly higher as crude oil prices relinquished an early rally.
Exxon Mobil Corporation (XOM $104) raised its share buyback guidance to $50 billion from $30 billion, while also announcing its 2023 capital expenditure plan that was at the high end of its range that it forecasted. XOM gained ground.
The equity markets have been choppy as investors grapple with the impact of aggressive monetary policy tightening from the Fed and how long and at what pace the Central Bank will continue to raise rates. Schwab's Chief Investment Strategist Liz Ann Sonders discusses in her U.S. Outlook: How Many More Times, Fed?, how Powell, among other Fed officials, has seemingly shifted his attention from the rear-view mirror to the windshield. She points out how inflation is a lagging indicator, but the impact of monetary policy changes is in the future.
Jobless claims tick higher
Weekly initial jobless claims came in at a level of 230,000 for the week ended December 3, matching the Bloomberg estimate, and above the prior week's upwardly revised 226,000 level. The four-week moving average rose by 1,000 to 230,000, and continuing claims for the week ended November 26 increased by 62,000 to 1,671,000, north of estimates of 1,618,000. The four-week moving average of continuing claims rose by 43,250 to 1,582,250.
Treasury rates gained ground, as the yields on the 2-year and 10-year notes rose 8 basis points (bps) to 4.32% and 3.49%, respectively, and the 30-year bond rate increased 3 bps to 3.45%.
Inflation and a tight labor market have been driving factors behind the aggressive monetary policy from the Federal Reserve. However, last week Fed Chairman Jerome Powell suggested that the Central Bank may decelerate the pace of aggressive rate hikes after raising rates by 75 bps for four-straight meetings. Treasury yields have moved higher this year amid the tightened monetary policy and Schwab's Chief Fixed Income Strategist Kathy Jones discusses in her Fixed Income Outlook: Bonds Are Back, how we see opportunities in 2023 for the bond market to provide attractive yields at lower risk than we've seen for several years.
Tomorrow’s economic calendar will introduce the start of November’s inflation picture, courtesy of the Producer Price Index (PPI), forecasted to match October’s 0.2% month-over-month (m/m) increase, and be up 7.2% y/y, versus the previously reported 8.0% growth rate. After the opening bell, we will get a read on December’s preliminary University of Michigan Consumer Sentiment Index, anticipated to increase slightly to 56.9 from last month’s 56.8 level. To round out the docket, we will get a read on October’s wholesale inventories, which is predicted to rise 0.8% m/m.
Europe mostly lower as markets remain skittish about impact of monetary policy moves
Stocks in Europe were mostly lower in subdued action as conviction remained constrained by uncertainty regarding the ultimate economic impact of the recent aggressive monetary policy tightening globally, including in the U.S., Europe and the U.K. Signs of slowing economic growth amid this backdrop have emerged but Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, discusses in his article, Central Banks Stepping Down, how central banks seem to be stepping down from aggressive rate hikes, and this could lead to a year-end "Santa Pause" rally for stocks.
The oil markets remained choppy, moving in and out of negative and positive territory, amid optimism out of China and Hong Kong that COVID restrictions may be easing, while the Keystone oil pipeline was shut down amid an apparent leak. The volatility in the oil market comes after this week, OPEC and its allies, known as OPEC+, announced that it would hold its production plans steady, while the G-7 imposed a $60 per barrel price cap on Russian oil. Additionally, Europe's new sanctions kicked off on Monday, as the European Union introduced a ban on maritime services for the transportation of Russian oil. The euro and British pound rose versus the U.S. dollar, while bond yields in the Eurozone and the U.K. gained ground.
The U.K. FTSE 100 Index and France's CAC-40 Index were down 0.2%, Switzerland's Swiss Market Index and Italy's FTSE MIB Index dipped 0.1%, and Spain's IBEX 35 Index fell 0.7%, while Germany's DAX Index was mostly unchanged.
Asia mixed as market grapple with easing COVID restrictions and recession concerns
Stocks in Asia finished mixed as the global markets continue to wrestle with recession concerns amid the backdrop of tightening global monetary policies and optimism of easing COVID restrictions in China. The Hong Kong markets led the way on reports that the city is also considering to further loosen COVID measures. China has also delivered more stimulus measures recently, including lowering the reserve requirements for its largest banks and more measures to try to help its struggling property market. In his latest Global Outlook: Recovery and Risk, Schwab's Jeffrey Kleintop notes how markets may continue to see volatility in 2023 as they navigate between global economic growth and inflation fears, with central banks' decreasing rate hikes and China's reopening.
The markets also digested some economic data as Japan's Q3 GDP was revised to a smaller contraction than initially estimated, but well below Q2's solid growth, while Australia's export growth for October unexpectedly declined month-over-month.
Japan's Nikkei 225 Index declined 0.4%, with the yen holding onto late-yesterday's gains versus the U.S. dollar. China's Shanghai Composite Index dipped 0.1%, while the Hong Kong Hang Seng Index jumped 3.4%, resuming a strong rally as of late. Additionally, Australia's S&P/ASX 200 Index fell 0.7%, South Korea's Kospi Index lost 0.5%, and India's S&P BSE Sensex 30 Index rose 0.3%.
Tomorrow’s international economic calendar will offer a variety of reports, including inflation data out of China, inflation expectations out of the U.K., and France’s Q3 nonfarm payrolls. Additionally, Spain will release data on its industrial production and consumer confidence.
© Charles Schwab
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