It was a rough one of equities this week with the S&P 500 dropping 3.37% and the tech heavy NASDAQ losing 3.99%.
Fed and China Updates
Stocks were mixed later in the week after falling towards the close on Friday. A bearish start to week started with markets suggesting that the Federal Reserve will need to raise rates higher than previously projected. A higher than expected ISM-Non Manufacturing reading for November fueled more hawkish expectations from the central bank while also pushing yields higher.
Meanwhile, China dominated headlines once again with Beijing announcing earlier in the week that it will scrap its Covid testing requirements for a majority of public venues. The easing of its zero-Covid policies comes after a series of protests from its citizens over the extreme regulations. Additionally, Tesla (TSLA) reported that it will suspend output at its Shanghai factory from the end of this month to early January following reports earlier in the week that it might cut production in China.
Economic Data
A moderately busy week for economic data was highlighted by the November Producer Price Index (PPI) which was released Friday morning. Overall producer prices rose 0.3% for the third straight month, a higher increase than the expected 0.2% gain. Core prices (excluding food and energy) meanwhile increased 0.4%, versus the projected 0.2% hike, while October’s core prices were revised from no change to a 0.1% increase. A large 3.3% drop in energy prices pushed the DOCUnumber lower than core prices.
Meanwhile, the surprisingly higher than expected ISM Non-Manufacturing reading of 56.5% following October’s 54.4% which was projected to drop to 53.5% led to investors expecting a more hawkish stance from the Fed going forward still. Initial claims on the other hand rose from 226,000 to 230,000 claims while analysts had estimated a drop to 220,000. Lastly, the University of Michigan Consumer Sentiment preliminary December reading came in at 59.1, surpassing expectations for a reading of 57.0.
Earnings
Quarterly reports were pretty light this week with the biggest names having released on Thursday including Costco (COST), Broadcom (AVGO), Chewy (CHWY), lululemon athletica (LULU), and DocuSign (DOCU). DocuSign saw its share price rise the most (12%) among those after a strong earnings beat while surpassing estimates for billings, subscriptions renewals, and sales to existing customers. Lululemon on the other hand was the biggest loser as its shares fell 15% following a weak fourth-quarter outlook. The rest saw their shares moderately increase despite Costco missing on earnings and revenue estimates.
Elsewhere, GameStop (GME) reported earnings after close on Wednesday and missed on both earnings and revenue projections while reporting that it may explore acquisition opportunities. Traders responded positively to the report on Thursday before shares fell back down to end the week.
All in all, the S&P 500 fell 3.37%, the Dow Jones Industrial Average lost 2.77%, and the NASDAQ dropped 3.99%.
