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US equity close: Not a pretty picture but off the lows

US equities touched a two-month low early on but recovered from the worst levels of the day to finish above the lows from Friday and Monday. That’s little comfort ahead of a pivotal Fed decision and with bonds slumping.

  • S&P 500 -44 points, or 1.1%, to 3855
  • Nasdaq -0.9%
  • Russell 2000 -1.4%
  • DJIA -1.0%
  • Toronto TSX Comp -0.9%

The good news is that the best days of the year to own stocks are Fed decision days. Psychologically, people fear the worst and if there’s any silver of good news, it leads to some relief. The sun will come up on Thursday, no matter what Powell says tomorrow.

SPX daily

German utilities are reported as being close to long-term LNG deals with Qatar

Info comes via a Reuters report, in brief:

  • German utilities RWE and Uniper are close to striking long-term deals to buy liquefied natural gas (LNG) from Qatar’s North Field Expansion project to help replace Russian gas, three sources familiar with the matter said.
  • While supply deals with Qatar would be positive for Germany, they would not offer an imminent solution to Berlin’s energy crisis as the vast North Field Expansion project is not expected to come online before 2026.

An encouraging development but as it says, the new supply source is not imminent. A tough winter lies ahead for Europe.

oil gas russia pipeline pipe

World Bank President says global economic slowdown may persist well in 2023

World Bank Group President David Malpass is speaking with US TV, Fox Business.

I’m not sure that saying that the current global economic slowdown may persist well in 2023 is adding too much new to the current pool of knowledge. Energy issues (especially for Europe), global central banks ramping rates higher, China malaise … none of these are fresh issues.

wolrd bank malpass

US stocks close higher and near session highs. Erase earlier declines Dow was down -263.05 points or -0.5% at the lows. S&P low was down -0.93%. NASDAQ low was -0.97%

  • Dow industrial average +197.26 points or 0.64% at 31019.69
  • S&P index +26.56 points or 0.69% at 3899.88
  • NASDAQ index up 86.63 points or 0.76% at 11535.03
  • Russell 2014.65 points or 0.81% at 1812.84

Looking at the sectors of the S&P index only to work lower – Real estate and healthcare. The healthcare sector fell -0.54% while the real estate sector fell -0.22%.

The strongest gaining sectors were:

  • materials which rose 1.63%.
  • Consumer discretionary which rose 1.34%
  • industrials which rose 1.33%, and
  • utilities which rose 1.32%

US President Biden says US military would defend Taiwan in the event of invasion by China

US President Biden is speaking in an interview on US TV, 60 minutes.

  • We are going to get control of inflation
  • I am more optimistic than I have been in a long time
  • Ukraine is not losing the war, is making gains in certain areaws
  • US forces would defend Taiwan in the event of a Chinese invasion

—-

The defence of Taiwan comment is sure to raise eyebrows and I suspect the White House will issue some sort of retraction or clarification or muddying of the waters.

biden

ANZ believe the Fed will raise interest rates by 75bp this week, bringing the benchmark rate to 5%.

Via an ANZ note on their Federal Reserve expectations, this their main points:

• Underlying inflation is not showing any signs of abating. Moreover, the spread of inflation throughout the services sector points to “sticky” prices, implying inflation will take time to moderate.

The Fed is intensifying efforts to get inflation down and will remain resolute in its commitment to do so. We expect that the FOMC will hike by 75bp at its meeting this week, and Chair Powell will reiterate that more is needed.

• Based on current and expected price trends we now forecast a terminal fed funds range of 4.75-5.00% to be reached by Q2 2023, which is 100bp higher and almost six months later than we previously projected.

• Fed forecasts need to reflect a sustained period of restrictive policy leading to a lengthy spell of sub-trend growth. This will entail a steeper and higher dot plot, downgrades to growth and a higher unemployment rate.

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