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A jump in rates sends Wall Street down amid gloomy economic outlooks

bear markets

US stocks fell for the fourth consecutive trading day after the Fed’s hawkish guidance last week as bond yields jumped, sparking risk-off trades across the globe. Investor sentiment deteriorated amid central banks’ jumbo rate hikes and weakening economic data a few days ahead of Christmas. The 10-year bond yield jumped 11 bps to 3.59%, the highest in one week.

While China’s reopening hopes lifted crude oil prices, gas prices slumped after EU countries reached an agreement to put a price cap, providing a mixed picture of the inflation outlook in the region. But all the EU major indices managed to finish higher, along with a strengthened Eurodollar, suggesting that the economic conditions somewhat improved due to a decline in both oil and gas prices in the past few months.

In Asia, broad equity markets also ended negatively on Monday though more stimulus policies had been ruled out by the Chinese government. It seems China’s economic recovery is a tough journey with the recent surge in Covid cases since most of the containment measures have been lifted.

  • Nasdaq continued to be hampered by rising rates as valuation woes returned.  All 11 sectors in the S&P 500 finished lower again, with Communication Services, Technology, and Consumer Discretionary leading losses, all down between 1.7% to 2%. All the tech giants’ stocks fell, with Apple down 2.1% and Amazon declining 3.4%, and Meta Platforms slumping 3.8%, three of which faced EU regulatory issues lately.
  • Tesla shares bounced off a session low of 145 and down slightly to just under 150 after Elon Musk is voted to step down as Twitter’s CEO by users. The EV maker’s share price has been badly related to Elon’s Twitter takeover. Also, Tesla cars’ demand outlook has also been weakened amid the global headwinds.   
  • Disney shares slumped 4.7% on the news that the latest Avatar movie’s ticket sales fell short of box office expectations.  The film notched $134 million at the domestic box office at its opening weekend, lower than an expected between $135 million and $150 million.
  • Crude oil gained on China’s reopening optimism and Biden’s plan to refill the US SPR, starting with a 3-million-barrel purchase of crude. However, the price bounce may intensify the global inflationary pressure again, sending bond yields higher and pressing on risk assets.
  • Gold futures continued to slide due to a jump in bond yields and the recent rebound in USD. But the metal price managed to close above key support of 1,780, showing stabilizing moves.
  • Asian equity markets are set to open lower amid the broad risk-off sentiment. ASX futures were down 0.40%, Nikkei 225 futures fell 0.37% and Hang Seng Index futures slipped 0.79%.
  • Cryptocurrencies extended losses, along with a decline in risk assets, with both Bitcoin and Ethereum falling to the lowest seen in late November. The FTX founder SBF has been sent back to a Bahamas jail. 

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