Stock market showed some signs of recovery in the initial hours after the major indices experienced significant decline on Wednesday (18 Dec) due to FOMC’s decision which suggested that interest rates are expected to remain elevated for an extended period.
The market breadth was positive, with gains in mega-cap stocks providing an additional boost. But we saw the market conditions began to deteriorate as the trading session progressed which resulted in S&P 500 and NASDAQ closing 0.09% and 0.10% lower than the previous day. This decline was deemed to be due to rising interest rates and a downturn in mega-cap stocks.
Lower Weekly Initial Claims Seem To Suggest Reluctance To Lay Off Staff
On Thursday, we have the economic data showing weekly initial claims came in at 220K with consensus at 237K while previous was recorded at 242K, this low level seems to indicate employers' reluctance to lay off staff.
We also saw Q3 GDP - Third Estimate came in higher at 3.1% than consensus at 2.8% while previous remain unchanged at 2.8%, this highlights the surprising strength of the U.S. economy amid rate hikes.
We also have the December Philadelphia Fed Index which came in lower at -16.4 as compared to consensus at 3.0 while previous was at -5.5.
Coming to the housing data, we saw November Existing Home Sales reported higher at 4.15 million, compared to consensus at 4.10 million while previous was at 3.96 million. Lower mortgage rates have driven sales, but rising rates may temper future strength due to affordability issues.
This resulted in November Leading Indicators reported higher at 0.3% compared to consensus at -0.1%, while previous was at -0.4%.
Friday Economic Data
At 8:30 ET, we will be expecting November Personal Income with consensus expected at 0.4% while the previous was recorded at 0.6%.
We will also be seeing the report on Personal Spending with consensus at 0.5% while previous was recorded at 0.4%.
Next we will see the PCE Prices which has a consensus of 0.2% similar to the previous. We are also expecting the Core PCE Prices which is one of Fed measuring tool for inflation, consensus is expected at 0.2% which is lower than a previous of 0.3%.
At 10:00 ET, we will also be seeing the Final December University of Michigan Consumer Sentiment which have a consensus at 74.2 which is higher than the previous of 74.0.
S&P 500 Utilities Sector Top The Group
Shares of power producers rose as traders sought out defensive sectors in light of concerns about interest rates and a potential government shutdown. This helped the utilities sector to be up 0.48%,
Next financials sector was up by 0.40% contributed partly by $FactSet Research(FDS)$ which reported Q1 profit increases and beat estimates, the stock went up 3.53%, and some of the fintech and insurance companies which gained between 1% to 3%.
Some stocks managed to rise despite the market downturn, particularly ahead of their earnings reports:- FedEx (FDX) up 1.0%) and NIKE (NKE) up 0.20 +0.3% with Carnival Corp. (CCL) up +1.5%.
Mega-cap technology stocks were mixed on Thursday. Apple (AAPL), Nvidia (NVDA) and Amazon (AMZN) finished slightly higher, while Microsoft (MSFT), Alphabet (GOOGL), Meta Platforms (META), Tesla (TSLA) and Broadcom (AVGO) lost ground. This resulted in a lacklustre performance on the S&P 500 Information Technology sector, which only managed a 0.19%.
Gain from Carnival and Amazon help the consumer discretionary sector to have a modest gain of 0.08%, despite losses in Tesla.
Disappointing earnings and guidance from certain companies contributed to the negative sentiment:- Micron (MU) down -16.2% and Lennar Corp. (LEN) down -5.2%. This negatively affected stocks in their respective sectors, with the SPDR S&P Homebuilder ETF (XHB) down 2.2% and the PHLX Semiconductor Index (SOX) down 1.6%.
This also caused the technology to turn in a lacklustre performance by Micron and Lennar also affected the consumer discretionary sector.
Note Yield Was Higher
The yield on 10-year Treasurys, which is sensitive to expectations about where interest rates are headed, rose to 4.57% on Thursday, up from 4.50% on Wednesday, before trading lower at 4.561% and trading at its highest levels since May.
2-year yield was also higher at 4.317% compared to 4.25% the previous market day.
Stocks To Watch
A beat-and-raise quarter also helped lift shares of $Accenture PLC(ACN)$ , which jumped 7.1% after the professional services and consulting firm topped revenue and net income forecasts and increased its full-year sales outlook. Year-over-year growth in artificial intelligence bookings contributed to Accenture's successful quarter.
If you have followed my previous article on Accenture earnings, I did highlight that the improvement in its consulting new bookings would be key to its earning beat. Looking at the sales outlook for 2024 full year.
I believe ACN could have longer upside movement for its stock price, we are seeing ACN trading comfortably above the short-term and long-term MA on 19 Dec, and we are seeing a potential bullish MACD crossover.
And MTF is giving us a good signal of strong upward trend, so this might be one of the software consulting stock for AI we can consider.
$FedEx(FDX)$ shares jumped in extended trading Thursday after the shipping giant announced plans to spin off its Freight business as a standalone company. FedEx (FDX, Financial) announced its intention to pursue a tax-free separation of its FedEx Freight division, creating two publicly-traded entities. This move, expected to be completed within 18 months, led to a more than 10% increase in FedEx shares during after-hours trading. The separation aims to unlock value for FedEx's Freight business, which reported $9.4 billion in revenue this year. UPS (UPS) shares also rose by 1% following the announcement.
With this news of spinning off its Freight business as a standalone company, this could help to bring FDX to trade above the short-term and long-term MA, as we are also seeing a potential MACD forming bullish crossover.
This might be a good time for us to consider FDX as I expect MTF to also make a similar signal for upward trend.
$Nike(NKE)$ reported its Q2 financial results, with a GAAP EPS of $0.78, surpassing expectations by $0.15. The company's revenue reached $12.35 billion, beating estimates by $240 million, although it was down 7.8% year-over-year. Nike Direct revenues fell by 13% on a reported basis, and wholesale revenues decreased by 3%. The company's gross margin decreased by 100 basis points to 43.6%, with inventories remaining flat at $8 billion.
$Lumen Technologies(LUMN)$ saw a 5% increase in its stock price after reports emerged about the company's plans to sell its consumer fiber operations, valued between $6 billion to $9 billion. Lumen is working with investment banks to explore options, including selling a stake or forming a joint venture for its fiber assets.
Summary
I think the stock market might continue to trade in a mixed mode as some stocks might try to make another attempt at recovery from the previous sell-off but it could be thwarted by another downturn as investors comprehend the PCE data.
So we might want to remain cautious as there might be opportunities lying ahead as well as some unknown landmines.
Appreciate if you could share your thoughts in the comment section whether you think market might try to make another attempt at recovery from Wednesday’s sell-off?
@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.
Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.
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