Stocks hold onto gains, snap 4-day loss streak
Stocks eked out a gain Tuesday, snapping a four-day streak of losses.
The Dow Jones Industrial Average rose 92.47 points, or 0.28%, to close at 32,850.01. The S&P 500 gained 0.11% to 3,821.73, while the Nasdaq Composite ticked up 0.01% to close at 10,547.11.
Bank of Japan is more hawkish sooner-than-expected, signals
The Bank of Japan’s surprise policy shift sent interest rates rising globally, as investors reacted to more evidence central bankers around the world will continue to pressure interest rates higher.
“It was definitely a surprise. I don’t think there was anyone out there who expected it,” said Ben Jeffrey, rate strategist at BMO. The Japanese central bank moved sooner-than-expected to tighten policy. The BOJ changed its yield curve policy to allow the yield on the 10-year Japanese government bond to move 50 basis poins either side of its zero target rate, up from 25 basis points.
The announcement drove rates higher around the world, as yields on Japanese government bonds (JGBs) rose to 7-year highs. Rates move opposite yield. The U.S. 10-year jumped o 3.68%.
“They were definitely the last one standing in terms of being dovish, and now they’re still dovish but less so,” said Jeffrey. “It’s obviously bearish JGBs and fixed income globally, but in the longer term it should help the yen which will make Treasurys more attractive to Japanese investors next year.”
Expect a more challenging environment ahead, says Atlantic Equities
Atlantic Equities analysts are anticipating a more challenging backdrop for the global consumer in 2023.
“Inflation may well have peaked on a headline basis but input costs still remain elevated and companies will be looking to at least hold if not take further pricing in some cases,” analyst Edward Lewis said in a note Tuesday. “That may become more challenging as levels of elasticity are beginning to normalize with U.S. retailers starting to push back against pricing, in line with where European peers have been all year.”
He highlighted Coca-Cola and Pepsi as some of his favorite consumer picks, citing “category momentum, ongoing investment and strong execution supporting elevated growth.”
— Tanaya Macheel
Stock market has shed $11.7 trillion so far this year
It’s been a rough year for stocks, which are currently in a bear market and down year to date.
From the market’s yearly high on January 3 to this morning, U.S. stocks have shed $11.7 trillion in market cap, according to data from Bespoke Group.
“The max drawdown was $13.6 trillion at the low on 9/30, so we’ve seen market cap increase by just under $2 trillion since then,” analysts wrote Tuesday. “In dollar terms, this drawdown has been more extreme than anything investors have ever experienced. That’s pretty deflationary if you ask us!”
Of the $11.7 trillion, more than $5 trillion in losses come from just five companies – Apple, Microsoft, Amazon, Alphabet, Meta and Tesla.