Market Insights on Thursday 14 December 2023
The financial markets experienced mixed results on Thursday December 14th, 2023, with stocks closing mostly lower while cryptocurrencies saw gains. Volatility remains high across markets as investors continue weighing signs of slowing economic growth against still hot inflation reports.
Market Insights for Stock Market
U.S. stocks closed slightly lower on Thursday, giving back some gains from the prior session. Concerns over corporate earnings outlooks weighed on sentiment even as weekly jobless claims fell to their lowest level since September.
Key Index Performances
- The S&P 500 index fell 0.3% to close at 3,946.
- The Dow Jones Industrial Average shed 0.1% to end at 33,974.
- The tech-heavy Nasdaq composite dropped 0.3% to finish at 11,066.
The S&P 500 and Nasdaq snapped two-day winning streaks amid a lack of clear catalysts to extend the rebound from last week’s rout which saw the S&P 500 dip into bear market territory again. Impact from the latest inflation data showing signs of moderation as well as comments from Federal Reserve officials affirming plans to slow the pace of interest rate hikes appear largely priced in at current levels according to analysts.
“We’re seeing some positioning and profit-taking today,” said Mike Loewengart, head of model portfolio construction at Morgan Stanley Global Investment Office. “It’s not surprising given the sizable move we’ve had off the recent bottom.”
Market breadth finished negative with decliners outnumbering advancers on the NYSE and Nasdaq. All 11 S&P 500 sectors closed lower on Thursday, led by real estate and utilities. Energy and communication services stocks posted the smallest declines.
Notable Stock Movers
- Adobe Inc. (ADBE) – Get Free Report shares sank over 10% after the software company provided disappointing earnings guidance for 2023. Adobe forecast revenue growth to slow substantially year-over-year.
- Lululemon Athletica Inc. (LULU) – Get Free Report fell almost 9% after the athletic apparel maker projected fourth-quarter earnings that missed Wall Street estimates. Lululemon sees supply chain constraints impacting sales and margins despite strong holiday demand.
- Costco Wholesale Corporation (COST) – Get Free Report bucked the downtrend, rising over 7% after the membership warehouse retailer posted fiscal first-quarter earnings that topped expectations. Costco also reported better-than-expected revenue boosted by strong food inflation impacts.
Forex Market
The U.S. dollar retreated from a one-week high against a basket of major currencies on Thursday as traders weighed the potential for smaller Fed rate hikes ahead.
The U.S. Dollar Currency Index, which measures the greenback against six other major currencies, was down 0.6% at 104.57 – backing away after briefly topping 106 earlier this week.
Key Currency Pairs Performance
- EUR/USD rose 0.7% to 1.0594 as the shared currency gained ground.
- GBP/USD climbed 0.5% to 1.2267 even with the Bank of England hiking interest rates by 50 basis points.
- USD/JPY gave back 0.6% to 136.56 as the safe haven yen strengthened modestly.
The dollar pullback takes a pause from this week’s rally fueled by stronger-than-expected U.S. inflation. November’s consumer price index rose 7.1% year-over-year, hotter than the 6.8% pace economists predicted. This keeps pressure on the Federal Reserve to maintain its aggressive course of rate hikes despite growing recession worries.
“The buck may consolidate, or even correct lower in the next couple days as markets further digest the possibility of smaller Fed rate hikes at coming meetings,” noted Edward Moya, senior market analyst at OANDA.
On the data front, U.S. jobless claims for the week ended December 10 declined by 3,000 to 206,000 – marking the second straight week below 230,000 as the labor market remains resilient. Further U.S. reports due this week include retail sales, regional manufacturing indexes, and industrial production.
Central Bank Focus
The Bank of England on Thursday announced its 10th straight interest rate increase, raising the key benchmark by 50 basis points to 3.50% as expected. The half percentage point hike comes even after the UK reported its economy shrank by 0.3% in November.
The European Central Bank and Federal Reserve hold their final policy meetings of 2022 next week. The ECB is seen delivering another 50 basis point hike while Fed policymakers are projected to scale back to a half point rise – down from four consecutive 0.75 percentage point increases.
Cryptocurrency Market
Cryptocurrencies bounced higher on Thursday thanks to broad risk appetite returning to markets. Bitcoin climbed back above the key $17,000 level while Ethereum neared $1,300.
Major Cryptocurrencies Performance
- Bitcoin (BTC) gained 4% to trade around $17,180 after falling below $16,500 yesterday.
- Ethereum (ETH) rallied over 5% to $1,280 as developers continue progress towards its potentially bullish “Shanghai” upgrade.
- XRP (XRP) surged 11% to $0.4025 as the token benefitted from the wider altcoin resurgence.
Bitcoin and cryptocurrencies rose in sympathy with U.S. equity markets rebounding this week after steep sell-offs drove crypto prices to their lowest since 2020. complete capitulation by leveraged speculators appears to have run its course, at least temporarily, with crypto displaying big bounces from oversold technical levels.
“Now that the latest purge has cleared out most, if not all, of the leverage, crypto prices could stage a decent rally into year-end should equities and other risk assets do the same,” noted OANDA’s Moya.
In the altcoin arena, Terra’s Luna cryptocurrency spiked over 45% higher to rank as the best performer among top 100 coins by market value on signs community rebuilding efforts were gaining traction after last quarter’s catastrophic collapse. Crypto traders also cheered Elon Musk revealing his friendship with FTX founder Sam Bankman-Fried remains intact even after the exchange’s fallout.
Regulatory Developments
In regulatory news, Brazil’s incoming administration under President-elect Luiz Inácio Lula da Silva was said to be putting together a bill focused on regulating the local cryptocurrency industry. Da Silva’s transition team met this week with industry groups to discuss plans to boost oversight of crypto trading and mining with aims to implement formal legislation by next year according to reports.
The potential crypto regulations come as digital asset adoption steadily rises in Brazil, now counting as Latin America’s biggest cryptocurrency hub with over 10 million users. The move adds to an expanding list of national governments seeking to implement formal rules around digital currencies.
In summary, global financial markets face ongoing uncertainty driven by recession risks, geopolitical tensions, and questions about growth in 2023. The dollar remains in demand as a safe haven play. In the near-term, volatility is likely to remain elevated across stocks, currencies and crypto heading into year-end. Investors need to brace for more choppiness.
DISCLAIMER: THE INFORMATION PROVIDED IN THIS ANALYSIS IS SOLELY FOR INFORMATIONAL PURPOSES AND SHOULD NOT BE CONSIDERED AS FINANCIAL OR INVESTMENT ADVICE. WEMASTERTRADE DOES NOT ASSUME ANY RESPONSIBILITY FOR ANY TRADING DECISIONS MADE BASED ON THE INFORMATION PROVIDED IN THIS REPORT
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