Stocks Turn Higher as Energy, Financial Stocks Lead
2:40 pm Tuesday, December 20th, 2022
The session got started on a weaker note, carrying over the downside bias that has plagued the market for most of December. Things improved noticeably from opening levels, however, after the S&P 500 dipped below the 3,800 level. Buyers showed up there and brought the main indices to session highs about an hour into today’s trade.
The early reversal was predicated on the notion that the market was oversold on a short-term basis, fueling some speculative buying interest. At their lows this morning, the Nasdaq Composite and S&P 500 were down 9.7% and 7.5%, respectively, from their highs a week ago.
The main indices have pulled back from their best levels, but buyers have not been completely deterred. Advancing issues outpace declining issues by a roughly 4-to-3 margin at both the NYSE and the Nasdaq. The modest pullback coincided with a pullback in many mega cap stocks, which have remained volatile today.
Outsized price action has been reserved for the bond and currency markets following a surprise move from the Bank of Japan (BOJ). The BOJ will now allow the 10-yr JGB yield to move +/- 50 basis points from 0.00% versus its prior band of +/- 25 basis points as part of an effort “to improve market functioning” while maintaining its benchmark rate at -0.1%, as expected.
The U.S. Dollar Index is down 0.7% to 104.01 with USD/JPY -4.2% to 131.23. The 2-yr note yield is up one basis point to 4.26% after hitting 4.30% overnight. The 10-yr note yield is up ten basis points to 3.69% after hitting 3.71% overnight.
Market participants also digested some disappointing economic data ahead of the opening bell. The focal point was an 11.2% month-over-month decline in November building permits (a leading indicator) to a seasonally adjusted annual rate of 1.342 million (Briefing.com consensus 1.480 million). Single-unit permits were flat to down in every region.
The main indices are fighting to maintain a posture in positive territory, yet today’s gains still have a tenuous feel when taking into account the scope of recent losses and the modest nature so far of today’s gains. Ten of the 11 S&P 500 sectors trade in positive territory led by energy (+1.3%) and materials (+0.8%). The consumer discretionary sector (-0.8%) is the lone holdout in negative territory due to continued weakness in Tesla (TSLA).
