U.S. equities are mixed in restrained trading, with investors awaiting the next two pieces to complete the October inflation picture. The economic docket, while empty today, will offer the Producer Price Index (PPI) and the Import Price Index beginning tomorrow. The releases will come as last week's cooler-than-expected Consumer Price Index (CPI) appeared to soothe concerns about how aggressive the Fed will need to remain. Treasury yields are higher, and the U.S. dollar is trading solidly to the upside, paring some of last week's tumble. Crude oil prices are little changed, and gold has reversed to the upside. Equity news is light, with Tyson Foods missing on the bottom line, but reporting record sales for the year and upping its quarterly dividend. Stocks in Asia were mixed, with Hong Kong leading to the upside on a jump in property stocks, while markets in Europe are mostly higher in cautious trading.
At 10:50 a.m. ET, the Dow Jones Industrial Average is up 0.2%, while the S&P 500 Index is nearly unchanged, and the Nasdaq Composite is declining 0.5%. WTI crude oil is nudging $0.11 lower to $88.85 per barrel, and Brent crude oil is decreasing $0.07 at $95.92 per barrel. The gold spot price is trading $4.60 higher to $1,774.00 per ounce, and the Dollar Index is rising 0.6% to 106.93.
Tyson Foods Inc. (TSN $68) reported adjusted fiscal Q4 earnings-per-share (EPS) of $1.63, short of the $1.70 FactSet estimate, with revenues rising 7.2% year-over-year (y/y) to $13.74 billion, above the Street's forecast of $13.49 billion. The protein producer said it experienced record sales and earnings for the full year, citing a diverse portfolio and continued consumer demand for protein products. TSN said it saw historically strong operations in its beef segment and an improvement in its chicken unit, while gaining market share in foodservice and retail business lines, which include Jimmy Dean, Ballpark and Hillshire Farm. TSN also upped its quarterly dividend by 4.3% to $0.48 per share. TSN is trading higher.
Stocks rallied last week in the wake of a favorable consumer price inflation report, while Q3 earnings season is in the last innings with several high-profile retailers set to add the finishing touches. Schwab's Chief Investment Strategist Liz Ann Sonders discusses in her article, Disappearing Act: Earnings, how earnings weakness is starting to materialize across a broader swath of industries, with hits coming from a strong dollar, weaker demand, and aggressive monetary policy.
Additionally, Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, notes in his article, The End of Earnings Growth?, how the earnings outlook is dimming as the economy slows, which could result in cuts to earnings forecasts and downside for stocks. However, Jeff points out that U.K. earnings have been a surprising outperformer.
Treasury yield higher amid dormant economic calendar
Treasury yields are higher with the economic calendar void of any reports to provide any sway, with the yield on the 2-year note up 10 basis point (bps) at 4.42%, the yield on the 10-year note gaining 6 bps to 3.88%, and the 30-year bond is 1 bp higher at 4.07%.
Market volatility may continue this week, as the rest of the October inflation picture will be revealed, following last week's rally in the wake of a cooler-than-expected consumer price inflation report. Inflation has been the driving factor behind the aggressive monetary policy from the Federal Reserve. Elevated bond yields and this year's rise in the U.S. dollar have fostered the choppiness in the markets. Schwab's Chief Fixed Income Strategist Kathy Jones discusses the bond and currency markets in her article, Markets to Fed: Slow Down, You Move Too Fast, noting how if these trends continue, the Fed may end up slowing its pace of tightening—but not stopping it.
Additionally, as noted in the latest Schwab Market Perspective: Stress Cracks, as the Federal Reserve continues to ratchet up the pressure with higher interest rates, cracks are beginning to appear beneath the surface of the U.S. economy.
The economic calendar will begin to heat up tomorrow with the release of the Producer Price Index (PPI) followed by the Import Price Index on Wednesday to complete the October landscape. Housing will also be in focus with several reports slated for release, including housing starts and building permits, existing home sales, the NAHB Housing Market Index, and the weekly read on MBA Mortgage Applications. Advance retail sales will bring the first look at the all-important consumer for October, while regional manufacturing reads for New York, Kansas City and Philadelphia are also on the docket. Rounding out the calendar is initial jobless claims for the week ended November 12, and the Leading Economic Index (LEI) for October.
Europe mostly higher in cautious trading
Stocks in Europe are higher in late-day action with investors exhibiting some trepidation as the markets await more inflation data out of the U.S. and within the region this week. Some hawkish commentary from a Fed official is also keeping sentiment in check. The global markets received a boost last week from a softer-than-expected consumer inflation report, as the relentless rise in prices has been a key driver in the aggressive monetary actions across the globe. Policy moves by the Fed and Bank of England (BoE) came after October's decision by the European Central Bank (ECB) to raise its benchmark interest rate for a second time. Mounting inflation worries have also added to the market uneasiness, while being exacerbated by the persistent energy crisis in the region due to the continued war in Ukraine. However, Jeffrey Kleintop discusses in his latest article, Central Banks Stepping Down, how central banks seem to be stepping down from aggressive rate hikes, and this could lead to a year-end "Santa Pause" rally for stocks.
The British pound and euro are lower versus the U.S. dollar, with the greenback higher to pare some of last week's steep losses. Bond yields in the Eurozone and the U.K. are falling. In light economic news in the region, industrial production in the Eurozone jumped during September, and well above expectations, while consumer prices in Switzerland cooled from the prior month.
The U.K. FTSE 100 Index is increasing 1.3%, France's CAC-40 Index is up 0.9%, Germany's DAX Index is rallying 1.4%, Italy's FTSE MIB Index is advancing 0.8%, and Spain's IBEX 35 Index is gaining 1.2%, while Switzerland's Swiss Market Index is trading 0.5% lower.
Asia mixed in wake of last week's surge
Stocks in Asia were mixed amid some apparent profit-taking following last week's rally. However, markets in Hong Kong saw some follow through from last week's surge on noticeable gains in property issues. The markets also await more inflation out of the U.S. this week to complete the October landscape, while remaining cautiously optimistic after Chinese state media reported last week that COVID measures for travel will be eased. Mainland Chinese and Hong Kong stocks have been volatile as of late amid rumors that China will end its zero-COVID strategy, despite the government's attempts to dispute the reports, and as infections in Beijing are on an uptrend. The speculation surrounding China’s potential end to its policy have fostered a large amount of interest, as the country continues to try to stabilize its economy that has been hampered by COVID-induced lockdowns.
The focus on inflation comes as last week's cooler-than-expected consumer price inflation report may have eased some of the anxiety over how aggressive the Fed, as well as central banks around the globe, will need to be going forward. A number of recent global central banks have tightened monetary policy, led by the 75 bp rate hike out of the U.S., which was joined by the Reserve Bank of Australia’s (RBA) decision to raise interest rates by 25 bps for a second-straight meeting, along with further forceful moves from the BoE and ECB. In light economic news in the region, wholesale prices in Japan came in hotter than expected, but down from last month.
Japan's Nikkei 225 Index declined 1.1% amid some strength in the yen. The Hong Kong Hang Seng Index gained 1.7%, while China's Shanghai Composite Index lost 0.1%. India's S&P BSE Sensex 30 Index traded 0.2% lower, South Korea's Kospi Index declined 0.3%, and Australia's S&P/ASX 200 Index shed 0.2%.
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