Stocks End Lower As Investors Mull Path for Rates
3:29 pm Wednesday, December 07th, 2022
Coming off a big retreat in the last two sessions, the stock market was showing some resilience today. The main indices were clinging to narrow trading ranges right around their flat lines despite some lingering concerns about weakening growth prospects.
A deepening inversion along the yield curve reflects these concerns, which is driving worries about 2023 earnings estimates remaining too high. The 2-yr note yield is down eight basis points to 4.27% and the 10-yr note yield is down seven basis points to 3.45%.
The bond market reacted favorably to a revised Q3 Productivity Report that showed unit labor costs have been reined in some, rising 2.4% versus the preliminary estimate of 3.5% and the 6.7% increase seen in Q2.
The decline in market rates has offered some support to the stock market today, but the overall vibe in the stock market is still more cautious.
There are other factors in play keeping focus on growth concerns, including China reporting bigger than expected decreases in imports and exports for November, and a few central banks tightening monetary policy further. Specifically, the Reserve Bank of India raised its key rate 35 basis points to 6.25% and the Bank of Canada raised its rate by 50 basis points to 4.25%.
China’s weak economic data is overshadowing any enthusiasm for the time being that may have come from reports that the government is easing up on zero-COVID related policies.
Market breadth reflects a general lack of conviction on either side of the tape. Advancers lead decliners by a 4-to-3 margin at the NYSE and decliners lead advancers by an 11-to-10 margin at the Nasdaq.
The S&P 500 sectors trade in mixed fashion, but there isn’t a single sector moving more than 0.8% in either direction. Health care (+0.8%) and real estate (+0.5%) lead the outperformers while communication services (-0.6%) and information technology (-0.5%) have fallen to the bottom of the pack, weighed down by their respective mega cap components.
