Monday December 19th


Stock futures are flat to start the week

U.S. stock index futures were choppy Monday after the major averages posted their second straight week of losses for the first time since September as investors weighed recession fears. Futures tied to the Dow Jones Industrial Average shed 9 points, or 0.01%, while S&P 500 and Nasdaq 100 futures advanced 0.03% and 0.09%, respectively. The moves followed another down week for stocks after the Federal Reserve delivered a 50 basis point short-term interest rate hike and signaled higher-for-longer rates. Recession fears mounted as the central bank upped its forecast for future hikes above previous expectations, saying that it now expects to hike rates to 5.1%. Stocks are set to round out a dismal monthly performance in December. On Friday, the Dow fell 281.76 points, or 0.85%. The 30-stock index shed 1.66% for the week, bringing its monthly losses to 4.83%. The S&P 500 dropped 1.11% and tumbled 2.08% for the week, upping its monthly declines to 5.58%. The Nasdaq Composite slumped 0.97% on Friday and 2.72% for the week. It’s down 6.65% this month. “Monetary policy has quickly gotten restrictive now that the Fed has raised rates by 400 basis points in 9 months,” wrote Ed Moya, senior market strategist at Oanda in a note to a client Friday. “Recession risks will only grow now that [Fed chair Jerome Powell] has signaled that we should expect ‘ongoing increases.’” The National Association of Home Builders survey, which gauges monthly sentiment, is due out Monday. Investors will also be watching for a few earnings reports due later in the week. FedEx and Nike are both scheduled to report earnings results on Tuesday after market close. As recession fears mount, earnings results will become more of a focus. “Rates and inflation may have peaked but we see that as a warning sign for profitability, a reality we believe is still underappreciated but can no longer be ignored,” wrote Michael Wilson, equity analyst at Morgan Stanley, in a Monday note. Asia-Pacific markets traded lower, with greater Chinese markets leading losses in the region despite government’s pledges to stabilize the economy in 2023. The Shanghai Composite fell 1.92% to 3,107.12 as the city announced it will shut most schools again Monday as the number of Covid cases surged. The Shenzhen Component fell 1.5% to 11,124.7 and Hong Kong’s Hang Seng index fell 0.75% in its final hour of trade. The S&P/ASX 200 in Australia traded 0.21% lower to 7,133.9. In Japan, the Nikkei 225 fell 1.05% to 27,237.64 and the Topix lost 0.76% to 1,935.4. South Korea’s Kospi was down 0.33% to 2,352.17. Oil rose on Monday after tumbling by more than $2 a barrel in the previous session as optimism over the Chinese economy outweighed concern over a global recession. China, the world’s top crude oil importer, is experiencing its first of three expected waves of Covid-19 cases after Beijing relaxed mobility restrictions but plans to step up support for the economy in 2023. “There is no doubt that demand is being adversely influenced,” said Naeem Aslam, analyst at brokerage Avatrade. “However, not everything is so negative as China has vowed to fight all pessimism about its economy, and it will do what it takes to boost economic growth.” Brent crude last gained 54 cents, or 0.54%, to $79.58 a barrel by, while U.S. West Texas Intermediate crude crude rose 42 cents, or 0.4%, to $74.71. Gold prices inched higher on Monday as a softer dollar countered pressure on the non-yielding bullion from expectations of higher interest rates in the United States for longer than earlier expected. Spot gold rose 0.16% to $1,795.24 per ounce. U.S. gold futures gained 0.3% to $1,805.10. The dollar index dipped 0.2%, making gold less expensive for overseas buyers.