How Retail Shocks, FOMC Caution, and Global Divergences Affect the Global Economy
On Tuesday, November 21, 2023, the U.S. stock market faced a mixed session, with the Dow Jones closing 62 points lower. The S&P 500 and Nasdaq also experienced minor declines of 0.2% and 0.6%, respectively. These fluctuations were attributed to a combination of factors, including mixed quarterly results from major retailers and the release of the latest Federal Open Market Committee (FOMC) minutes.
Retail Shocks and Consumer Confidence
Major retailers faced headwinds during the session, leading to notable changes in their stock prices. Lowe’s shares fell 3.1% after revising down full-year sales and earnings guidance. Kohl’s experienced a significant drop of 8.5% due to a larger-than-expected decline in quarterly sales. While Best Buy lost 0.7% following a reported sales decrease.
Technology stocks also underperformed, with Amazon shares declining 1.5% amid reports that Jeff Bezos may sell as many as 8 million to 10 million shares. Amounting to roughly $1 billion. This comes on the heels of Bezos unloading about $240 million worth of Amazon shares the previous week. NVIDIA shares finished 0.9% lower as investors awaited clues on the company’s progress in alleviating supply constraints.
FOMC Minutes Signal Cautious Stance
The FOMC minutes revealed a cautious stance among committee members regarding future interest rate hikes. All participants agreed that the Federal Reserve should proceed carefully, basing policy decisions on incoming information and its implications for the economic outlook and risks. The minutes highlighted that further tightening of monetary policy would be considered if progress toward the inflation objective was deemed insufficient.
Despite a moderation in inflation, the FOMC acknowledged that inflation remained well above the 2% longer-run objective. The committee expressed the need for more data indicating that inflation pressures were abating to be confident in a return to the target. The target range for the federal funds rate was maintained at its 22-year high of 5.25%-5.5% for a second consecutive time in November.
Housing Market Challenges Persist in the U.S.
Sales of previously owned homes in the United States dropped 4.1% month-over-month to a seasonally adjusted annualized rate of 3.79 million units in October 2023. This marks the lowest level since August 2010, attributed to a persistent lack of housing inventory and the highest mortgage rates in a generation. NAR Chief Economist Lawrence Yun noted that while sales slid in certain regions, multiple offers continued in some segments.
Total housing inventory at the end of October was 1.15 million units, up 1.8% from September but down 5.7% from the previous year. The median existing-home price for all housing types in October rose to $391,800, reflecting a 3.4% increase from October 2022.
Argentine Markets React to Election Results
The S&P Merval Index in Argentina soared by up to 20% to the 782,000 mark, tracking the surge for Argentine ADRs from the prior session. This followed Javier Milei’s presidential election victory, triggering a selloff in Argentine parallel dollar markets. Milei’s proposed policies, including abolishing the central bank and dollarizing the economy, raised concerns about potential volatility.
Lithium Prices Decline Amidst Supply and Demand Dynamics
Lithium carbonate prices extended their decline to CNY 140,000 per tonne in November, the lowest since September 2021. Lower demand and steady supply, coupled with expectations of slowing Chinese EV sales, contributed to the decline. Battery manufacturers refrained from significant purchases during the typical restocking period. Clearing through inventories from the supply glut caused by extensive subsidies in previous years.
Currency Movements Reflect Global Economic Sentiment
The dollar index rose to 103.7, rebounding marginally from its late August lows. The FOMC’s cautious approach toward future interest rate adjustments influenced the currency markets. The Canadian dollar strengthened around 1.37 per USD, benefiting from a softer dollar and lower-than-expected inflation in October.
The Swiss franc appreciated to 0.88 per USD, its strongest in two-and-a-half months. This was driven by a weakening dollar, soft economic data in Switzerland, and eased concerns about geopolitical escalation in the Israel-Gaza conflict.
Cryptocurrency Market Update
Bitcoin and Ether experienced declines, with Ether slipping by 2.48%, reflecting broader market dynamics.
As global markets navigate through a landscape of mixed economic indicators, geopolitical events, and corporate performances. Investors continue to assess risks and opportunities in the ever-evolving financial landscape.