At the beginning of the year, equity markets performed well compared to last year’s poor results. This was due to expectations that the inflation rate would come down and the job market would slow down, thus allowing the Federal Reserve to reduce the amount of interest rate hikes they are using to deal with high prices.
The Dow Jones Industrial Average had a streak of four consecutive positive gains before yesterday. At the same time, the Nasdaq Composite Index recorded its most extended period of consecutive gains since November 2021, at seven days. The trading volume on the American stock exchanges was 11.11 billion shares.
The Dow fell 1.81% to 33,296.96 on Wednesday on disappointing December retail sales data. Financial market participants forecast a 0.25% growth in interest rates from the US Federal Reserve on February 1 and expect interest rates to reach their highest point at 4.9% in June before easing. The Fed expects rates to exceed 5% over the next twelve months.
Morgan Stanley MS.N saw share prices rise 5.91% on Tuesday as fourth-quarter profits beat analyst expectations. Yesterday, the stock lost 0.52% to $96.58. Tuesday’s increase was attributed to fourth-quarter profit results that beat analysts’ expectations, boosted by higher trading due to volatile markets.
Data from Refinitiv suggests that S&P 500 companies’ year-over-year earnings are expected to decline 2.4% for the quarter, which is higher than the 1.6% decline previously forecast.
Meanwhile, reports revealed that manufacturing in New York state fell sharply in January, with orders plummeting and jobs progress stalling, implying a continued lack of vigor in industrial activity across the country, prompting fears of a recession.
US Treasury yields remain down, with 10-year bonds at 3.4% and two-year bonds at 4.1%. Government bonds were buoyed as producer prices fell significantly in December, indicating that inflation had reached its highest point. This is good news for the Federal Reserve, as it suggests they need to make a less drastic move with their 25 basis point hike.
St. Louis Fed Chairman James Bullard recently said in a conversation with The Wall Street Journal that by the end of 2023, interest rates would be between 5.25 and 5.5%. He also said that monetary policy is restrictive when rates exceed the 5% rate.
Meanwhile, yesterday Eurostat, the European Statistical Office, released the inflation rate for the Eurozone, which fell in December. The consumer price index increased by 9.2% compared to the same period of the previous year, which is equivalent to the first estimate.
This is a decrease from the 10.1 percent seen in the previous month. Every month, the consumer price level decreased by 0.4%, which is lower than the initially suggested -0.3% and lower than the previous months -0.1%.