U.S. indexes finish higher, Nasdaq leads gains adding ~1%
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S&P sectors: consumer discretionary leads gains, energy falls 1%
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Dollar off, crude tumbles, gold rises, bitcoin up ~2%
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U.S. 10-Year Treasury yield at ~3.69%
Nov 23 - Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at
STOCKS CLOSE HIGHER; FED MINUTES OUT, TURKEY BRINING (1628 EST/2128 GMT)
Wall Street's major indexes closed higher on Wednesday after investor were put in a good mood after meeting minutes showed that a "substantial majority" of policymakers at the Federal Reserve's meeting early this month agreed it would "likely soon be appropriate" to slow the pace of interest rate hikes.
While many investors said they were not surprised by the content of the minutes, they still provided reassurance.
"The Fed minutes confirm what we’ve suspected for some time. We’re moving from a world of 75 basis point rises to one of 50 and then soon no rises at all. The Fed has raised rates faster than in any period in recent history and now they want more time to judge the impacts of their actions," said Moez Kassam, portfolio manager at Anson Funds in Toronto.
The Dow recorded its highest closing level since April 2021. Of the S&P's 11 major industry sectors, consumer discretionary was the biggest gainer, while energy was the sole loser.
With Wednesday's gain, the S&P 500 remainds down about 15% in 2022.
U.S. markets will be closed on Thursday for the Thanksgiving holiday.
Here is your closing graphic:
FED MINUTES BUOY HOPES FOR SLOWER RATE HIKES (1310 EST/1910 GMT)
Wall Street extended gains on Wednesday after minutes of the Federal Reserve's meeting earlier this month buoyed expectations that policy-makers could soon let up on their aggressive interest rate hikes.
A "substantial majority" of policymakers at the Nov. 1-2 meeting agreed it would "likely soon be appropriate" to slow the pace of interest rate hikes as debate broadened over the implications of the U.S. central bank's rapid tightening of monetary policy,
according
to the minutes from the session.
The S&P 500 hit a session high after the minutes were released. After paring gains slightly it was last up 0.5%.
The readout of the most recent meeting, at which the Fed raised its policy rate by three-quarters of a percentage point for the fourth straight time, showed officials were largely satisfied they could stop front-loading the rate increases and move in smaller, more deliberate steps as the economy adjusted to more expensive credit.
"They didn't say they're going to be pausing. Merely the fact that they're going to be slowing the pace confirms what the majority of people have been hoping to see. That's why you're seeing an equity spike initially. Obviously, we'll see where things go in the next two hours," said Michael James, managing director of equity trading at Wedbush Securities, Los Angeles.
INFLATION'S DENT ON HOLIDAY SPENDING: S&P SURVEY (1250 EST/1750 GMT) Ahead of Thursday's Thanksgiving holiday, along with planning which pies and side dishes to serve, investors are undoubtedly wondering how to prepare for the holiday shopping season which will of course be garnished heavily with decades-high inflation and infused with recession fears. With the holiday shopping season getting underway the day after Thanksgiving, otherwise known as Black Friday, S&P Global Market Intelligence checked in with some consumers ahead of the big day. Only 7% of people, responding to S&P's survey of 1,678, are planning to spend more for the holidays year-over-year compared with 26% saying that they'll spend less and 66% saying that they expect to spend roughly the same amount.
That compares with a surge in spending in the 2021 season, according to S&P.
Unsurprisingly lower-income households, making less than $50,000 a year, are being hit harder than households with income of more than $100,00 a year.
In the lower income households, 57% list inflation and 33% point to energy prices as the top economic threats to personal finances. While 38% of higher income households list inflation as the top concern, and 26% say energy.
Lower earners say they plan to increase spending on non-discretionary items like groceries, energy/utilities and housing. They plan to decrease spending on discretionary items, with travel, vacations, movie theaters and restaurants taking the biggest cuts.
Higher earners say they plan on increasing spending on both discretionary and non-discretionary items since non-discretionary items take up less of their budgets, allowing them to spend more on travel, eating out and consumer electronics, along with groceries and utilities/energy.
And 43% of respondents say they prefer to shop online, with 31% saying they expect to spend more online than in 2021, while 17% say they plan to spend more in stores.
Baby Boomers stand out as the most likely to return to in-store shopping at 22% compared with 14-15% for all other generational groups.
This shows "a consistent segment of consumers returning to in-store shopping" across all age groups, according to S&P.
It should be noted that what consumers say and what they do are two different things. In fact, as seen in the graphic below, they are often at odds with each other:
Like the mad dash for the airport on the busiest travel day of the year, a traffic jam of indicators arrived on Wednesday, their cacophonous honking blending into a chorus about Fed tightening, economic softness, and soft vs. hard landings.
With no obvious place to start, lets dive in, shall we?
New orders for durable goods, which includes everything from waffle irons to fighter jets, jumped by 1% last month, breezing past the expected 0.4% increase.
"The growth trajectory for the fourth quarter is slowing but not contracting," says Jeffrey Roach, chief economist at LPL Financial. "However, the slowdown in global economic activity increases the risk of recession in 2023 but as of today, the economy is not in recession."
Core capital goods, which strips out aircraft and defense items and is widely considered a proxy for corporate spending plans, also surprised to the upside, rebounding by 0.7% versus September's 0.8% drop.
Sticking with industrial news, fewer rainbows and lollipops were to be found in the report released by S&P Global (the indicator formerly known as Markit).
Its advance "flash" purchasing managers' index (PMI) for manufacturing and services both delivered numbers under 50, the dividing line between monthly expansion and contraction.
"Companies are reporting increasing headwinds from the rising cost of living, tightening financial conditions – notably higher borrowing costs – and weakened demand across both home and export markets," writes Chris Williamson, chief business economist at S&P Global.
"In this environment, inflationary pressures should continue to cool in the months ahead, potentially markedly, but the economy meanwhile continues to head deeper into a likely recession."
Pivoting to the housing market, sales of freshly constructed U.S. homes handily beat forecasts, surging by 7.5% to 632,000 units at a seasonally adjusted annualized rate (SAAR).
That number is an impressive 10.9% higher than the SAAR 570,000 units analysts projected.
The Commerce Department's report provided a ray of sunshine for housing. The sector has lately been tormented by the gathering storm clouds of spiking home prices and rising mortgage rates which together have conspired to hoist the prospect of home ownership beyond the grasp of many potential buyers, particularly at the lower end of the market.
"Home sales have downshifted sharply, and pressure is likely to persist in the near term as low inventories, still-high prices and elevated mortgage rates weigh on activity," says Rubeela Farooqi, chief U.S. economist at High Frequency Economics.
"However, mortgage purchase applications have moved up over the last three weeks and mortgage rates have declined 47 basis points over the last two, potentially signaling some stabilization at lower levels."
Meanwhile, the cost of financing home loans eased last week, sparking a 2.2% overall gain in mortgage demand, according to the Mortgage Bankers Association (MBA).
The average 30-year fixed contract rate shed 23 basis points to 6.67%, the lowest its been since late September.
As a result, applications for loans to purchase homes and refinance existing mortgages rose by 2.8% and 1.8%, respectively.
"The decrease in mortgage rates should improve the purchasing power of prospective homebuyers, who have been largely sidelined as mortgage rates have more than doubled in the past year," says Joel Kan, deputy chief economist at MBA.
It should be noted, as shown in the chart below, overall mortgage demand remains 67.8% below the same week last year:
From the 'bad news is good news' file, the number of U.S. workers filing first-time applications for unemployment benefits jumped by 7.6% last week to 240,000 - the largest number since late August. Consensus called for 225,000.
While longer lines at the unemployment office don't usually prompt the uncorking of champagne bottles, in today's upside-down, it implies that the Fed's relentless interest rate hikes are having their intended effect of softening the market.
A dampening of hot wage growth is seen as a key step toward reining in decades-high inflation.
"Layoff announcements from larger companies have become more frequent and for larger numbers of jobs than what we saw over the Summer," writes Thomas Simons, economist at Jeffries. "So we are likely to see these numbers rise in the weeks and months ahead."
Ongoing claims, reported on a one-week delay, also landed north of expectations, at 1.551 million, but still well below the pre-pandemic level of around 1.7 million.
Last but not least, the mood of the American consumer, who represents about 70% of the economy, has brightened this month.
The University of Michigan's (UMich) final take on current-month consumer sentiment was expressed by the number 56.8 versus the even 55 projected by economists.
Even so, while rosier than UMich's initial November snapshot, it marks a slight deterioration from October's 59.9.
Joanne Hsu, UMich's director of consumer surveys, is quick to remind us that the numbers are merely a bit less dismal.
"Along with the ongoing impact of inflation, consumer attitudes have also been weighed down by rising borrowing costs, declining asset values, and weakening labor market expectations," Hsu says.
Modest improvements in "current conditions" and "expectations" drove the upgrade, while near-term inflation expectations cooled from 5.1% to 4.9% - a welcome development.
Here's a look at one- and five-year inflation expectations, and where they ride relative to CPI:
NEW 3-MONTH HIGH FOR THE STOXX (1156 EST/1656 GMT)
European shares finished the day close to its session highs after weakness in U.S. economic data pressured the dollar, helping global equities stretch higher to extend their bounce from October lows.
That drove the STOXX 600 as much as 0.68%, which brought it to its highest level since August 19, supported by strength across industrials, materials and technology. Energy stocks lagged as talks over a price caps on Russian oil sent crude down sharply.
In the snapshot you see the pan-European equity benchmark index at highest levels in more than three months:
THANK GOODNESS IT'S THANKSGIVING (1006 EST/1506 GMT)
U.S. equity markets tend to perform better in the Thanksgiving holiday week, when trading volume tends to be thinner than usual, said John Plassard, director at Mirabaud Group in a note.
Over the past 50 years, the S&P 500 has gained an average of 0.54% during the week, with 68% positive returns. All other weeks the index rose 0.16% on average and posted a positive return 56% of the time, data showed.
The Wednesday before Thanksgiving was positive 78% of the time, with an average gain of 0.30%. The day after Thanksgiving has averaged a return of 0.22% over the past 50 years and has been positive 66% of the time, Plassard noted.
At a sectoral level, travel & leisure, personal goods and retail outperform in the run-up to the holiday, which is a popular time for traveling to see friends and family and of course the day before the start of the gift-shopping season.
On the flipside, oil and utilities stocks tend to be out of favor this time of year.
Equity markets will remain shut on Thursday as traders instead get busy roasting turkeys and baking pies.
At the time of writing, the S&P 500 had risen 1.5% so far this week as investors also waited for the minutes from the Federal Reserve's last policy meeting due later in the day.
WALL ST UP SLIGHTLY WITH FED MINUTES, HOLIDAY SHOPPING IN VIEW (0953 EST/1453 GMT)
Wall Street's major indexes were up slightly on Wednesday ahead of the scheduled release at 1400 EST (1900 GMT) of the minutes from the last Federal Reserve meeting held earlier this month from which investors search for clues about the central bank's thinking around future rate hikes.
While investors prepared for their Thanksgiving turkey - with U.S. markets set to close for Thursday's holiday - they were also keeping a close eye on consumer spending ahead of the all-important winter holiday gift buying season, which starts unofficially on Friday.
Causing some concern was retailer Nordstrom Inc, which late Tuesday reported a third-quarter net sales decline of 3.4% at its stores and trimmed its net profit forecast for the year ending in January. Its shares were down 6.5%.
Still, among the S&P 500's 11 major industry sectors one of the biggest gainers was consumer discretionary with electric car maker Tesla and toy maker Hasbro leading the percentage gains.
Another S&P sector gaining ground was industrials, which had a big boost from Deere & Co, up 7.1% after the farm equipment maker reported a higher-than-expected quarterly profit on strong sales accelerated by price hikes.
The weakest sector was energy as oil futures were falling.
Here is your early trading graphic:
HAWKISH FED EXPECTED AS YIELD CURVE INVERSION HURTLES TOWARD 100 BPS(0901 EST/1401 GMT)
Minutes from the Federal Reserve’s November meeting released on Wednesday afternoon are likely to remind investors that rate hikes will continue, despite hopes that the U.S. central bank could be nearing a pivot on monetary tightening.
Investors have been optimistic that a slowing economy and less severe inflation will cause a turnaround in Fed policy.
However, BMO analysts Ian Lyngen and Benjamin Jeffery said in a note on Wednesday that they “anticipate that the hawkish tone from this afternoon’s FOMC minutes release will serve as a bearish reminder for the front-end that policymakers still have several future hikes scheduled.”
Inflation, while improving, remains historically high, with consumer prices rising at an annual rate of 7.7% in October. At the same time the jobs picture has remained resilient, and the Fed may be unlikely to change course until unemployment worsens.
“Powell is seeking to reestablish the credibility that it took the Fed decades to establish and is clearly willing to err on the side of excess demand destruction during this cycle if that’s the cost of longer-term price stability,” BMO said.
A key part of the U.S. Treasury yield curve may invert further as investors adjust for the likelihood of higher rates and slower growth. The two-year, 10-year curve reached minus 86 basis points on Wednesday and appears on track to move back beyond 100 basis points, the most inverted level since at least 1999.
Investors are currently pricing for the Fed to hike rates by another 50 basis points in December. The fed funds rate is expected to peak at 5.12% in June, up from 3.83% now.
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