Hey folks, as we bring 2022 to a close this year will go down in the record books for many surprising results. What does that mean for the end of year rally and the kick-off for 2023? Get my take in this week’s round-up.
WEEKLY SOUND BITES
- Stocks gave back much of the previous two weeks’ gains, as some surprisingly strong economic data dampened hopes that the Feds might soon be able to curb its program of raising interest rates to cool inflation. The S&P recorded its worst return in five weeks, while the Russell endured its worst week since late September.
- The week started on a down note following a significant upside surprise in the ISM index of services sector activity, which rose to 56.5, near its highs over the past several months. In addition, on Friday morning we saw the PPI surprised moderately to the upside, rising 7.4% on a year-over-year basis versus consensus expectations of around 7.2%, sending stock futures sharply lower.
- The yield on the benchmark 10-year U.S. Treasury note touched a nearly three-month intraday low on Wednesday but edged higher to end the week, driven in large part by the PPI data and headlines that China is easing some of its COVID-related restrictions. However, the more consequential message the economy is sending now is that the FEDs will probably have to raise rates beyond the roughly 5% range this markets are currently expecting to get inflation under control.
- Shares in Europe fell on renewed fears of a recession as central banks tighten monetary policy to quell inflation. Revised data showed that the eurozone economy expanded 0.3% sequentially in the third quarter—up from a first estimate of 0.2%—boosted by increases in household spending and business investment. S&P Global’s composite PMI, which measures business activity in the services and manufacturing sectors, ticked up to 47.8 in November from the 47.3 reading registered in October but still in contraction territory.
- While Japan’s economy contracted less than initially estimated in the third quarter of 2022, uncertainty about the trajectory of U.S. monetary policy capped market gains. And Gov data confirmed that gross domestic product (GDP0 shrank an annualized 0.8% in the third quarter of the year, less than the 1.2% contraction indicated by initial estimates.
- And over in China, still wrestling with their Covid policies, announced a 10-point guideline to their new COVID prevention and control measures. To net things out, it is very confusing and should continue to frustrate the public. Weak trade data tempered optimism about reopening. China’s exports fell a bigger-than-forecast 8.7% in November from a year earlier, marking the steepest monthly drop in exports since February 2020. In other economic developments, China’s producer price index contracted in November and inflation fell to 1.6%, in line with expectations.
Enjoy this week’s Round-Up;
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