The stock market weakened on Tuesday afternoon, sending the main indices close to the daily lows. Apparent easing of Covid restrictions in China failed to offset stock market concerns over upcoming data and Jerome Powell’s speech.
The Nasdaq Composite slipped 0.6% and the S&P 500 fell 0.4%. The Dow Jones Industrial Average lost 0.3%. Apple (AAPL) continued to weaken and fell lower below its 50-day moving average.
Small caps defied the major indices as the Russell rose 0.3% in 2000. Volume on the NYSE and Nasdaq rose compared to the same time Monday.
Today’s declines amplify Monday’s losses of around 1.5% in major indices. The S&P 500 fell back below 4,000 points in Monday’s sell-off and stayed below that level.
Hibbett (HIBB) is down more than 11% in volume, although it pared losses after bouncing off its 50-day moving average. According to FactSet, the sporting goods retailer missed sales and earnings expectations for the October quarter.
Stock market rally in China
Beijing signaled it will ease some of the Covid lockdowns that have sparked protests in several Chinese cities.
China’s national health agency downplayed the risks of the Covid-Omicron variant and announced it would increase vaccinations for the elderly. In addition, Chinese regulators eased restrictions on real estate companies looking to raise equity domestically.
The Shanghai Composite rose 2.3% to its highest close since Sept. 15, according to Dow Jones Market Data. The Hang Seng Index rose 5.2%, its best day since Nov. 11. Hong Kong’s benchmark index is up 24% month to date.
The iShares Hong Kong ETF (EWH) is up nearly 3%. The ETF has held support at the 50-day moving average since breaching it on November 11th.
A handful of Chinese stocks rallied after earnings reports. streaming video service bilibili (BILI) is up more than 22% to regain above the 50-day moving average. social media platform joyy (YY) up nearly 8% and Kanzhun (BZ) increased by 13.5%. software company Baozun (BZUN) missed the rally, down 2.2% at midday.
All of these stocks are in deep corrections.
Ecommerce Portal Pinduo (PDD) broke out of a cup base on Monday after a strong earnings report, up 6% in midday trade. It is now expanded beyond its 5% buy zone.
The Innovator IBD 50 ETF (FFTY) was flat but outperformed major stock indices. The same energy stocks that hurt the index on Monday are buoying the IBD 50 today.
Crude oil prices fell 0.2% to $77.33 a barrel. Earlier, oil prices rose about 2% on hopes of an easing of China’s lockdowns.
The housing market extended a phase of weakness.
The S&P CoreLogic Case-Shiller home price index slowed to a 10.9% gain in September from 13.1% a year earlier. According to Econoday, economists had forecast an increase of 10.9%. The index fell 1.5% mom in September – the third straight monthly decline.
SPDR S&P Homebuilders ETF (XHB) is up 0.2% and is facing resistance at the 200-day moving average.
Investors await Powell comments
On the economic front, Federal Reserve Chair Jerome Powell is set to deliver a speech at the Brookings Institution on Wednesday that will have stock market investors’ full attention. Powell will also answer some questions from attendees.
In other economic events, the November jobs report is out on Friday. The latest report on jobless claims and manufacturing data will be released on Thursday.
The Conference Board Consumer Confidence Survey for November fell to 100.2 from 102.2 the previous month. The survey marked a four-month low and it was the second straight monthly decline.
In an analysis of the survey, BMO Capital Markets economist Priscilla Thiagamoorthy said consumers have lowered their plans for big purchases over the next six months.
“This is good news for the Fed, which is trying to dampen demand and restore price stability,” she noted. “While households have so far proved more resilient than expected in the face of a strong job market and excessive savings, inflationary pressures will continue to be major headwinds for consumer sentiment and spending plans.”
Also in the survey, 45.8% of respondents said jobs remain plentiful, up from 44.8% in October. Those who believe jobs are hard to come by are held at 13%.
The 10-year Treasury note yield rose 2 basis points to 3.72%.
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