MARKETS TODAY Dec 6 (Vica Partners) – The U.S. indexes fell sharply on Tuesday extending weekly losses; as historically high wages and last week’s unexpected U.S. ISM Services PMI data keep pressure on Fed to continue to raise rate.
The Dow Jones Industrial Average fell 351 points. The S&P 500 declined 1.44%, and the Nasdaq declined 2.00%.
Key Market Statistics
- Dow, S&P 500 and Nasdaq all declined today
- 10-year Treasury yield declined to 3.52%, the 2 year Treasury yield down at 4.356%
- S. Dollar Index (DXY) up at $105.54, gaining 0.23%
- Bitcoin at $16,985 rising 0.12%
- Oil prices continue to fall after opening higher in session with Brent crude $79.58, declining 3.75%, and US West Texas Intermediate at $74.37, declining 3.33%
Traders cautious with last week’s release of the U.S. ISM Services PMI data
As the U.S. services sector activity sharply rose in November, the ISM Services PMI unexpectedly jumped to 56.5 in November of 2022, rebounding from a more than 2-year low of f 54.4 hit in October and beating market forecasts of 53.3.
The ISM surveys non-manufacturing (or services) firms’ purchasing and supply executives. The services report measures business activity for the overall economy; above 50 indicating growth, while below 50 indicating contraction.
Last week Fed Chair Powell indicated that inflation has hit its peak and is slowing
“The Fed is now open to pausing the pace of future interest rate hikes as rising inflation is now under control. It’s however nowhere close to the Fed’s 2% target”.
If CPI figures out next Tuesday continue to fall the Fed can back-off future hikes
Vica analysts expect November CPI’s to drop but not enough to ease inflation worries
- CPI (year-on-year) Vica forecast 7.4% dropping from 7.7% last month
- Core CPI (year-on-year) Vica forecast 6.0% from 6.3% last month
The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. Indexes are available for the U.S. and various geographic areas. The Core Consumer Price Index (CPI) measures the changes in the price of goods and services, excluding food and energy.
Vica Momentum Stock Report
Vale S.A. ADR NYSE (VALE) (Grade B+) 20 Day Average +19.64, 50 Day Average +32.09%, 100 Day Average +31.46, YTD +18.62%
Vale S.A., being one of the world’s largest mining companies, produces iron ore, iron ore pellets, nickel, manganese ore, ferroalloys, metallurgical & thermal coal, copper, platinum group metals, gold, silver & cobalt.
IMPORTANT TO READ; Low interest rates will return!
The Federal Reserve gave guidance that back in August of 2022 that they would raise rates to 4% and have. Rate adjustments have begun to drive down inflation and slow the pace of the economy.
Company earnings will remain mixed with stronger support for Communication services, Consumer staples, Energy, Financials and Health care. As these sectors tend to perform well during recessions
In 2023 we expect the Central Bank to initially raise rates and then by early Q3 of 2023 ease rate to avoid a deep recession. Vica analyst’s see a significant policy change coming in late 2023 with Powell reversing direction.
Energy is the Top Performing Sector in the S&P 500 Year to Date and will continue through 2023
We see continued upside for investors in the fossil fuel sector, as it will significantly outpace the S&P 500 Index over the next 18 months..
Our analysts forecast global energy consumption will grow by about 1.9% in 2023 even with a slowing economy and rising energy prices. Strained gas supplies, averse weather and wars will force many countries to rely further on fossil fuels.
Solid strategy for these type of market days include…
- Investing in companies that have solid balance sheets and offer dividends.
- Look to Communication services, Consumer staples, Energy, Financials and Health care as these sectors tend to perform well during recessions.
- When buying value and growth DON’T try to time market lows as its best to cost average buy companies that have solid profits.
- Try to resist most all tech and growth stocks where companies have negative margins.
*** Continue to watch for our daily momentum company recommendations as they are built by on our industry leading data base
*** Look to Index ETF’s like SPY to outperform stocks and most managed funds
*** Energy is the Top Performing Sector in the S&P 500 Year to Date and should continue through 2023
*** Banks will profit in the longer term from moderately higher interest rates on loans and other products which will boost margin
