North American News
US stocks fail to hold gains
- Major indices snatch defeat from the jaws of victory
The major US indices are closing lower on the day for the second consecutive day. The market could not hold onto earlier gains that saw the Dow Industrial Average up as much as 303 points, the S&P up is much is 38.38 points, and the NASDAQ index up as much is 160.44 points. Those three indices close down -249.13 points for the Dow, -36.34 points for the S&P, and -120.93 points for the NASDAQ.
The final numbers are showing:
- Dow Industrial Average -249.13 points or -0.73% at 33699.87
- S&P index -36.34 points or -0.88% at 4081.51
- NASDAQ index -120.93 points or -1.02% at 11789.59
- Russell 2000 fell -27.25 points or -1.40% at 1915.33
earnings after the close:
Lyft:
- EPS $-0.74 versus plus $0.13 expected
- Revenues $1.18 billion versus $1.16 billion expected
- Shares of LYFT are down $-3.22 or -19.95% in after-hours trading
Expedia
- earnings-per-share $1.26 versus $1.65 expected
- revenues $2.62 billion versus $2.71 billion expected
- Shares of EXPE are trading down $-7.79 or -6.62% in after-hours trading
Paypal
- EPS $1.24 vs $1.20
- Revenue $7.38B vs 7.39B est
- Shares of PYPL are trading at up $1.61 or 2.05%
U.S. Treasury auctions off $21 billion of 30 year bonds at a high yield of 3.686%
- WI level at the time of the auction 3.654%
- High-yield 3.686%
- WI level at the time of the auction 3.654%
- Tail 3.2 basis points versus six-month average of -0.4 basis points.
- Bid to cover 2.25X versus six-month average of 2.37X
- Directs (a measure of domestic demand) 18.94% vs six-month average of 19.0%
- Indirects (a measure of international demand) 65.21% vs six-month average of 69.7%
- Dealers 15.84% vs six-month average of 11.3%
Terrible bond auction sends risk assets tumbling
The bond market is a mess.
There used to be periods where you went years without +3 basis point auction misses and now we’ve had two this week. Yesterday’s 10-year sale was extremely strong and today’s 30-year reopening was terrible, with a tail of 3.2 bps.
US weekly initial jobless claims 196K versus 190K estimate
- Weekly initial jobs claims and continuing claims for the week ending February 4, 2023
- Prior was 183K
- 4-week moving average 189.2K vs 191.75K prior
- Continuing claims 1688K vs 1658K expected
- Prior continuing claims 1655K
Fed’s Barkin: Effects of Fed tightening have been substantial
- Comments from the Richmond Fed President
- Inflation is likely past its peak but still elevated
- It will take longer for pullback in demand to further slow the pace of price increases
- Data continues to push back recession risk
- Makes sense for Fed to steer ‘more deliberately’ from here due to lagged effects of policy
- While average inflation has peaked, the decline has been distorted by a few goods; median has stayed high
- Confident that the FEd has its ‘foot unequivocally on the brake’
US 2s10s threaten a new closing low for the cycle
- The previous low close was -85 bps
The spread between US 2-year and 10-year notes is down 4.5 bps today and it’s flirting with some important levels.
It remains deeply inverted at -85.4, which is just below the low cycle close of -85.2 in December. There was a brief trade below that in November and December but we’re flirting with uncharted territory here.
Commodities
Gold getting hit hard
- Gold price dives and eyes a break to new weekly lows below $1860.44.
- Downbeat economic data in the United States spurred Gold’s jump to its daily high at $1890.21.
- Gold Price Forecast: Short term, is downward biased, and it might test $1850.00.
Gold prices remained downward pressured on Thursday. Meanwhile, US Treasury bond yields extended their losses from around weekly highs at 3.692% to 3.592%, a tailwind for Gold prices. Despite all that, the XAU/USD is trading below its opening price, exchanging hands at 1867.54, a troy ounce.
Natural Gas Futures: Door open to extra weakness
Open interest in natural gas futures markets extended the uptrend and rose by around 5.7K contracts on Wednesday according to preliminary readings from CME Group. On the other hand, volume went down by around 75.6K contracts, partially offsetting the previous sharp daily build.
Natural Gas: A test of $2.00 looms closer
Thursday’s marked retracement in prices of the natural gas was accompanied by increasing open interest and leaves unchanged the prospects for further decline in the very near term. That said, the next target of note remains at the $2.00 mark per MMBtu.
EU News
European equity close: Off the highs again but another decent day of gains
- Another good day of trading
The dream start to the year or European stocks is continuing as it shakes off the recent turmoil in US markets.
- Stoxx 600 +0.6%
- German DAX +0.8%
- Francis CAC +1.0%
- UK’s FTSE 100 +0.4%
- Spain’s Ibex +0.3%
- Italy’s FTSE MIB +1.2%
Other News
Timiraos: The services industry is finding it easier to recruit and fill jobs
- WSJ Fedwatcher Nick Timiraos on the jobs market
Fresh off his interview with NY Fed President John Williams, WSJ Fedwatcher Nick Timiraos is back at it today, writing about the jobs market.
It’s a good reminder that service sector employment is an enormous part of the US economy. He writes that healthcare, education, leisure and hospitality and other services such as dry cleaning and automotive repair account for about 36% of all private-sector payrolls in the country. That compares to 2% of workers in information technology. The headlines in the past few months have been about job cuts in the tech industry; so while Google, Microsoft and Apple remain a big part of our lives, they’re a tiny part of the economy.
Notably, Timiraos writes this:
Now, with the effects of the pandemic diminishing, many executives and business owners in services industries say they are finding it easier to recruit and fill jobs.
He relies on anecdotal information afterwards but they’re good anecdotes. The days of the towering signs of fast food restaurants calling for workers appear to have passed.
He noted that women are flowing back into the labor force with the prime-age women’s participation rate back to pre-pandemic levels.
So while non-farm payrolls beat estimates, the jobs market is slowly returning to balance.
Cryptocurrency News
Bitcoin breaks support and plunges. SEC crackdown eyed
- Not a good sign for the risk trade
Bitcoin had a look at the late-January lows in Asian trading but support held. This time it didn’t and it’s been a quick plunge lower, falling to $21,950 from $22,500 in minutes.
That’s not a good sign for crypto and ethereum is lagging, down 5% to Bitcoin’s 4%. It’s also not a good sign for broad risk trades, which have tracked — and tended to lead — BTC for much of the past year.
For crypto specifically, the SEC is going hard after brokers and that’s going to make life tough in the space.
“We’re hearing rumors that the SEC would like to get rid of crypto staking in the U.S. for retail customers,” Coinbase’s said today.
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