The Dow Jones Industrial Average gained 0.2% in light trading on Monday morning, while the S&P 500 lost 0.1%. The Nasdaq composite lost 0.6%. The Russell 2000 small cap index fared better, down 0.4%.
Volume fell sharply on the Nasdaq and NYSE from Friday morning levels.
The 10-year Treasury yield rebounded to 3.87% while crude oil fell more than 2% to $ 86.70 a barrel. Gold added a few dollars after hitting a three-month high on Friday.
The SPDR Gold Shares (GLD) ETF is approaching the resistance of the moving average. Positive action in recent weeks has carved the bottom of a 35-week consolidation pattern. But it will take weeks of buying pressure to confirm a minimum.
For now, gold bugs and other enthusiasts should keep an eye on the 200-day critical moving average, which is at 168.
Cryptocurrency sentiment took another plunge over the weekend after the failed FTX exchange was hacked, draining what have been called hundreds of millions of dollars from exchange wallets. Bitcoin recorded its worst losses in five months last week and tested Wednesday’s low overnight.
The digital currency was trading at $ 16,450 early Monday, up 0.9%.
Fed governor warns investors
Fed Governor Christopher Waller warned on Sunday that the central bank has “a way to go” before rate hikes end. He scolded stock market investors, telling them that last week’s weaker-than-expected CPI report was just a data point.
Waller agreed that the Fed could slow the pace of rate hikes to 50 basis points at the December meeting, but insists it would not constitute a change in fiscal policy. He also warned that Fed interest rates will continue to rise and remain high until inflation drops near the Fed’s 2% target.
Finally, he notes that CPI reports in the coming months will need to show that inflation “is down”.
Friday’s The Big Picture highlighted the currency’s favorable winds that could support rising stock market prices.
He notes “The strong dollar has been a big headwind for the stock market, but signs of a spike in inflation have seen the currency drop in recent days. Friday’s weakness in the US dollar index extended a move that began on Thursday between the US is colder than expected consumer inflation data. ”
This reversal should support equities because “many companies have seen their profits hit due to expensive exchange rates. If the dollar continues to weaken, it will increase earnings for companies with foreign operations.”
The US dollar index was trading 0.5% higher on Monday morning, but has fallen 7% since peaking in September.
The FedWatch CME tool now expects an 80.6% share for a 50 basis point increase at the December meeting, while the crowd of 75 basis points dropped to just 19.4%.
IBD raised its outlook for “confirmed uptrend market” last week, supporting an equity exposure of between 20% and 40% of a portfolio, as major indices probe long-term moving averages.
Walmart, Nvidia Highest Earnings Calendar
Dow Jones components Walmart (WMT) e Home storage (HD) tops a long list of retail earnings releases this week. Objective (TGT), by Macy (M), TJX (TJX) and by Lowe (LOW) also reports.
Meanwhile, most tech observers will focus their attention Cisco systems (CSCO) e Nvidia (NVDA), which both report Wednesday evening.
Nvidia is expected to report third quarter earnings of 71 cents per share on revenue of $ 5.83 billion.
The chip maker halted a torrid streak of growth last quarter as earnings fell 51% year-over-year and sales increased just 3%.
Earnings growth is expected to drop 25% this year. But analysts are more optimistic about 2023, looking for a 31% increase. Funds are still unconvinced, with ownership having fallen flat over the past two quarters.
NVDA stock is down 52% from its all-time high in November 2021, but is up 51% from October’s two-year low of 108.13. However, it is still trading below the 200-day moving average.
This week’s economic calendar features October retail sales, the producer price index (PPI) and the start of housing.
Goldman Sachs now expects the basic consumer spending price index (CPE), the Fed’s preferred inflation indicator, to fall from the current 5.1% to 2.9% in December 2023. The company expects the clearing of supply chains to lower commodity prices, wage growth and rental costs, contributing to a more stable economic environment.
The New York Times recently reported that 1 million apartments are now under construction or have new permits. This marks the largest pipeline since 1974. Housing costs are expected to decline as this massive supply goes online.
Economic stocks to buy and watch: 5 to watch right now
Stock market movers and shakers
The Innovator IBD 50 ETF (FFTY) was trading up 0.5%.
Advanced microdevices (AMD) was up 2.9% at a two-month high after double updates from UBS and Robert Baird.
AMD stock fell more than 65% between November 2021 and the low of October 2022 at 54.57. It has recovered more than 20 points from the low, but is still trading below the 200-day moving average.
AMD’s Earnings Per Share Rating rose to 93, highlighting superior earnings performance in recent months. However, ownership of the funds has declined after an accumulation phase and it will take months to restore the lost sponsorship.
IBD solar leader 50 Emphasis of energy (ENPH) tagged the buy zone of a cup-and-handle base and sold on Friday, setting the 7% sell rule. ENPH stock gained 3.0% on Monday morning.
Friday was a bad day for most of the market leaders. However, leaders who are sold before the end of the year often become aggressive declining buying targets. This is because funds want their portfolios to show strong annual performance to their investors, a market phenomenon called window dressing.
Also in the IBD 50, Diamondback energy (FANG) entered a buying zone, surpassing the buy point of 162.34 on a 104-day cup base. The FANG stock is close to an all-time high, up 0.6%.
It boasts near-perfect Composite, EPS, and Timeliness ratings, but annual EPS growth is expected to flatten out in 2023, following the bumper profits of 2022.
However, investors don’t seem to care about this hurdle at the moment, with energy prices holding firmly at high levels.
Follow Alan Farley on Twitter at @msttrader.
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