*
U.S. equity indexes mixed; Dow down ~0.3%
*
Real estate leads S&P 500 sector gainers; utilities
weakest
*
Euro STOXX 600 index dips ~0.2%
*
Dollar slips; bitcoin, gold up, crude up ~2%
*
U.S. 10-Year Treasury yield rises to ~3.94%
Welcome to the home for real-time coverage of markets brought to
you by Reuters reporters. You can share your thoughts with us at
GOOD NEWS: THE ECONOMY IS SOFTENING - BAD NEWS: THE ECONOMY
IS SOFTENING (1110 EST/1610 GMT)
A quartet of economic data cooperated on Tuesday by marching
in unison and all of them were headed downhill.
Ordinarily that would cramp investors' moods. But at a time
of increasingly restrictive Fed policy, economic softening
suggests that policy is having its intended effect.
The outlook of the American consumer has unexpectedly soured this month, per the good folks at The Conference Board (CB). Its Consumer Confidence Index shed 3.1 points to land at 102.9. "The decrease reflected large drops in confidence for households aged 35 to 54 and for households earning $35,000 or more," said Ataman Ozyildirim, Senior Director, Economics at The Conference Board. "Consumers may be showing early signs of pulling back spending in the face of high prices and rising interest rates," Ozyildirim adds, a notion supported by the rising saving rate seen in Friday's PCE report. The gap between near-term expectations and the current conditions component grew wider, a state of affairs which tends to be a harbinger of recession, as seen in the graphic below. Home price growth cooled significantly as we headed into winter. The S&P Case-Shiller 20-city composite dropped 0.5% on a monthly basis, pulling the year-on-year print down 2.2 percentage points to 4.6%. This marked the annual measure's eight consecutive decline. In the world of economic indicators, December is ancient history. But it does mark the slowest annual pace of home price growth since July 2020, which was just prior to its being launched into the stratosphere amid a demand explosion as potential buyers fled the cities for the more socially distant suburbs. That price boom, combined with steadily climbing mortgage rates, have since tossed cold water on demand and affordability. "The prospect of stable, or higher, interest rates means that mortgage financing remains a headwind for home prices, while economic weakness, including the possibility of a recession, may also constrain potential buyers," says Craig Lazzara, managing director at S&P DJI. "Given these prospects for a challenging macroeconomic environment, home prices may well continue to weaken." Next, the Commerce Department took its initial "advance" stab at January goods trade balance and wholesale inventories . The difference in the value of merchandise imported to the United States versus that which was imported abroad last month yawned 2% wider last month to %94.50 billion. The widening was held in check by a 4.2% increase in exports, the biggest monthly increase in ten months. But a broad-based 3.4% increase in exports - the larger piece of the trade pie - was enough to send the deficit higher. "The small increase in the January goods trade deficit pales in comparison to the huge swings over the past year, supporting our view that net trade will make a far smaller contribution to headline GDP growth during 2023," says Kieran Clancy, senior U.S. economist at Pantheon Macroeconomics.
Speaking of goods, the value of the stuff stored in wholesaler warehouses decreased by 0.4% in January, notching its first monthly decline since July 2020. This bodes ill for first quarter GDP.
In the Commerce Department's most recent reading on economic growth for the last three months of 2022, private inventories contributed 0.7% to the topline number after having been a net GDP drag for two quarters straight. "Inventory accumulation and the trade deficit are on course to be negative for real GDP growth in the first quarter after being big supports in the fourth quarter of last year," says Bill Adams, chief economist at Comerica Bank. Staying aboard the goods train, midwest factory activity contraction unexpectedly steepened in the second month of the year. The Chicago purchasing managers' index (PMI) landed at 43.1, weaker the January's 44.3 reading and moving in the opposite direction of the 45 consensus. This marks the index's sixth straight month below 50, the PMI dividing line between expansion and contraction, puts it just a hair above 43, which is generally considered recessionary. On Wednesday, the Institute for Supply Management's (ISM) broader, nationwide PMI reading is seen contracting at a shallower rate, rising from 47.4 to 48.
(Stephen Culp)
*****
U.S. STOCKS MIXED AHEAD OF MONTH-END (1000 EST/1500 GMT) U.S. stocks are mixed on Tuesday as investors rebalanced for month-end after a volatile month that saw risk appetite dented by rising rates. Investors have repriced for the likelihood that the Federal Reserve will hike rates higher and hold them there for longer as inflation remains stubbornly elevated and other economic releases show a still strong economy. Benchmark 10-year Treasury yields rose as high as 3.983% on Tuesday, the highest since Nov. 10. The Nasdaq Composite is the strongest of Wall Street’s main indexes, gaining 0.3%, while the S&P 500 is roughly flat and the Dow Jones Industrial Average is dipping 0.3%. Here’s is Tuesday’s opening snapshot:
(Karen Brettell)
*****
S&P 500 TECH: AFTER TUMULTUOUS 2022, TRADERS TAKE NOTE OF A TURN (0900 EST/1400 GMT) Going into the last trading day of the month, the S&P 500 tech sector is on track to be the only S&P 500 sector to post a rise in February. SPLRCT is clinging to a 0.5% gain for the month vs an SPX drop of 2.3%. For the year, tech is up about 10% vs a 3.7% rise for the SPX. Last year, tech lost about 29% vs a 19% decline for the S&P 500. This year's tech strength coming as chips and FANGs make a big comeback. The Philadelphia semiconductor index is up about 17% already this year, while the NYSE FANG+TM index is up 23% so far in 2023. NYFANG counts four SPLRCT names among its 10 members. Meanwhile, of note, the SPLRCT/SPX ratio topped in December 2021 exactly at its year-2000 peak:
With its Y2K top, tech then suffered a multi-year collapse and relative strength decline into its 2002 low. More recently, in early January, the SPLRCT/SPX ratio fell to its lowest level since June 2020. However, since then, tech is clearly back in favor. The ratio has reclaimed its 50 and 200-day moving averages, and overwhelmed the resistance line from its high. The ratio has since dipped back, but is so far using the broken resistance line as support. Bulls will now want to see the ratio quickly thrust higher again. Clearing the early-August high would break the pattern of lower peaks and troughs from late 2021.
(Terence Gabriel)
*****
FOR MONDAY'S LIVE MARKETS POSTS PRIOR TO 0900 EST/1400 GMT -
CLICK HERE
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
TECHSPX02282023 Monitor Consumer confidence Case Shiller Trade balance Wholesale inventories Chicago PMI ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Terence Gabriel is a Reuters market analyst. The views
expressed are his own)
