Major U.S. stock indexes green; Nasdaq up ~1.4%
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Comm svcs leads S&P gainers; utilities weakest group
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Euro STOXX 600 index up ~0.3%
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Dollar, crude, bitcoin rise; gold slips
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U.S. 10-Year Treasury yield rises to 3.50%
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BIOTECH OFF TO STRONG START BUT ROCKY RECOVERY SEEN (1200 EST/1700 GMT)
Biotech firms have kicked off 2023 on a relatively upbeat note after two consecutive years of sharp declines and a sustained recovery, though challenging and likely long-drawn out, seems to be in the cards for the battered sector.
Investor interest has grown in small cap biotechs, a sector that saw a slow rebound in the second half of 2022, thanks to renewed M&A activity and several positive data readouts.
Small caps had underperformed their large-cap brethren, with investors turning to big drugmakers and other large healthcare firms with steady earnings considered "defensive" amid rising interest rates and the growing risk of a recession.
However, the tables seem to have turned this year, likely helped by the JP Morgan healthcare conference last week in San Francisco. The SPDR S&P Biotech ETF, which has holdings in several small cap biotech companies, is up 3% so far in 2023 while the broader S&P 500 healthcare sector is down 2.3%.
Clinical data updates at the conference as well as details regarding several acquisitions such as AstraZeneca's $1.8 billion deal for U.S.-based drug developer CinCor Pharma were announced.
SMBC Nikko Securities America analyst David Hoang says the "scope and quality of the science presented" was encouraging, especially by private biotechs, adding that investors now regard the prospect of a sustained recovery for biotech from a 'when and not if' viewpoint.
"Macro concerns appear to be acting as the main headwind at present, rather than any idiosyncratic risk factors unique to the sector," said Hoang in a note.
Hoang believes while recession fears will likely make for a volatile H1 2023 for small cap biotech, the set up in H2 seems to be more favorable.
DRIVING IT HOME: EXISTING HOME SALES HIT 12-YEAR LOW (1120 EST/1620 GMT)
Like the rest of us, the U.S. housing sector has been on quite a ride the last few years, rocketing to the stratosphere on a pandemic-driven demand explosion, then brought back to earth by tight supply, soaring home prices and rising interest rates.
But recent signs suggest the sector, like a roller coaster, could be close to coasting back to normal.
The sales of pre-owned U.S. homes dipped by 1.5% in December to 4.02 million units at a seasonally adjusted annualized rate (SAAR), according to the National Association of Realtors (NAR).
While that's the lowest reading since November 2010, it's still not quite as steep as the 3.2% decline analysts expected, and marks a welcome slowdown from November's 7.9% plunge.
"December was another difficult month for buyers, who continue to face limited inventory and high mortgage rates," writes Lawrence Yun, chief economist at NAR. "However, expect sales to pick up again soon since mortgage rates have markedly declined after peaking late last year."
Yun notes that while housing inventory contracted - at the current pace of sales, it would take 2.9 months to sell every available home on the market, down from November's 3.3 months supply.
And while existing home sales are down 28.5% from pre-COVID levels, recent data from Case-Shiller and the Mortgage Bankers Association show home price growth is losing momentum and the average 30-year fixed-rate contract, while up 2.6 percentage points from a year ago, has shed 0.9 percentage point since October.
Although those two things combined bode well for affordability, many believe the sector has further to fall.
"The fundamentals in the market do not offer any hope that the bottom is in," says Thomas Simons, economist at Jefferies. "There is still room for the selling rate to decline further."
Here's a look at existing home sales and inventories:
Still, even the most forward-looking housing data is viewed in the rear view mirror.
For a look at where financial markets see the sector six months to a year from now, take your cue from the stock market.
Over much of the last year, the Philadelphia SE Housing index and the S&P 1500 Homebuilder index have underperformed the broader S&P 500.
But a look at the graphic below shows that relationship has reversed over the last several weeks, with the SPCOMHOME and HGX down 3.8% and 9.4%, respectively, compared with the SPX's 13% plunge over the same time period, as of Thursday's close.
Wall Street is gaining in late morning trading, with market moving megacaps providing upside muscle.
Even so, all three major U.S. stock indexes were on track to snap their two-week winning streak, with the Dow looking to be set for its biggest Friday-to-Friday percentage drop since September.
WALL STREET GAINS AS NETFLIX STREAMS AHEAD (0955 EST/1455 GMT)
The S&P 500 and Nasdaq are up early on Friday as Netflix shares jump on the streaming company's increasing subscribers more than expected, but Alphabet's adding to the massive layoffs by the tech behemoths poses a possible sour note for later.
Five of the 11 S&P 500 sectors are higher, led by a more than 2% jump in communication services, while utilities lead decliners, down more than 1%.
Semiconductors, small caps and Dow transports are up, while growth is up more than double value .
The Netflix inspired gains may help the Nasdaq Composite avoid falling below its 233-week moving average, whose Fibonacci-based level is a key support point that will be watched closely at the session's end.
The growth-oriented Nasdaq also has a stronger revenue and growth outlook than value stocks helping to keep it moving up.
Growth has delivered stronger revenue and EPS growth in the fourth quarter, at 5.2% and +1.7%, respectively, than value's 3.5% and -6.3%, according to Jonathan Golub, Chief U.S. equity strategist at Credit Suisse.
Growth results are beating by 2.7% versus 2.3% for value, too, Golub says.
Below is a snapshot of early market prices:
EUROPEAN BONDS SET TO FLOOD MARKETS (0905 EST/1405 GMT)
Societe Generale analyst Ninon Bachet has flagged a deluge in supply of European bonds this year, where the domestic market will need to absorb more than 700 billion euros in net supply this year just as the European Central Bank shifts to quantitative tightening.
This is much higher than the 300 billion euros of net sovereign supply last year, Bachet saud earlier in the week.
Issuers will likely try to front-load issuance in the first quarter to secure funding amid seasonal patterns and will use syndicated transactions to achieve size, Bachet says.
However, with yield differentials and curve shapes making European bonds more attractive than U.S. debt, what was a very euro-unfriendly picture suddenly seems euro-positive, according to Societe Generale macro strategist Kit Juckes.
"European investors turned net sellers of foreign bonds in April, and the current account balance has flipped back into surplus as imported energy prices have fallen," Juckes added.
NASDAQ COMPOSITE: WEEKLY CLOSE MAY TIP TRADERS TO TILT (0900 EST/1400 GMT)
The Nasdaq Composite is on pace for its first down week of 2023. That said, with it now sitting on a key weekly moving average, traders will be watching closely to see how it finishes on Friday:
The IXIC ended Thursday at 10,852, or just slightly more than 10 points above the 233-week moving average (WMA) which is now around 10,840. This Fibonacci-based moving average had supported the Nasdaq at the depths of the 2020-pandemic crash.
Meanwhile, since around mid-September, the IXIC has been viciously gyrating in a range essentially defined by the 50% and 61.8% retracements of its March 2020-November 2021 advance at 11,422 and 10,291.
In fact, since ending below the 50% level on Sept. 23, the IXIC has seen just one marginal weekly close back above it. The Composite has yet to score a weekly close below the 61.8% retracement.
Both the 200-WMA, another long-term moving average, now at 11,406, and the 233-WMA have been residing in this zone defined by the retracement levels.
Therefore, a weekly close below the 233-WMA can put the lower end of the Fibonacci zone, and the IXIC's October and December lows, at 10,088-10,207, at risk again.
That said, with e-mini Nasdaq 100 futures suggesting a Nasdaq 100 jump of around 60 points, or 0.5%, at the open, the IXIC appears poised to bounce off the 233-WMA early Friday.
If strength can persist into the close, it may set the stage for a greater rally next week that will see the Composite once again back up to challenge the upper bounds of the zone, and its 11,572 mid-December high.
In that event, however, the IXIC would also have to contend with its descending 40-WMA, which is now about 11,445. This moving average has capped all IXIC rallies since the index ended below it in mid-January 2022.
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