Wall Street opens sharply higher, seduced by good indicators and mass distribution

Operators of the New York Stock Exchange (GETTY IMAGES NORTH AMERICA/AFP/SPENCER PLATT)

The New York Stock Exchange opened sharply higher on Tuesday, enthused by good macroeconomic indicators which confirm that inflation is running out of steam and reflect continued strong activity in the United States.

Around 2:00 p.m. GMT, in early trading, the Dow Jones gained 1.12%, the Nasdaq index advanced 2.50% and the broader S&P 500 index gained 1.73%.

For Art Hogan, of B. Riley Wealth Management, Wall Street was driven by two indicators published before the opening of the session.

On the one hand, the manufacturing activity index in the New York region returned to positive in November, at 4.5 points, against -9.1 points in October and -6.0 points expected by economists.

As for the producer price index, it only increased by 0.2 percentage point over one month in October, against 0.4 point expected. Over one year, inflation reached 8.0%, the lowest since July 2021.

“Improving inflation data justifies a slowdown in Fed (US central bank) rate hikes in the coming months,” Rubeela Farooqi of High Frequency Economics said in a note.

“Inflation shows that it is heading in the right direction”, added Art Hogan, “and the markets will salute it, as they did with the CPI”, the consumer price index, which came out below expectations last Thursday, causing a surge on Wall Street.

After these publications, the operators granted a probability of nearly 60% to the hypothesis of a key rate stopping its course at a range of 4.75% to 5% by June, when they saw it mostly exceed 5% last week.

The possibility of a breather from the Fed put bond rates under pressure. The yield on 10-year US government bonds fell to 3.75% for the first time in almost a month and a half, before recovering slightly to 3.81%.

For Patrick O’Hare, this easing in the bond market contributed to the “winds blowing at the back” of equities.

The New York market also welcomed several attractive results from large retailers.

Walmart was, in particular, acclaimed (+ 7.49% to 148.76 dollars), after the publication of a quarterly turnover well above expectations, boosted by the American market and food products, a market in which the group from Bentonville (Arkansas) is gaining market share with its low prices.

Investors did not hold it against the retail giant for its heavy loss of nearly 1.8 billion dollars, entirely attributable to an exceptional charge of 3.3 billion linked to an amicable agreement in the file of opiate drugs .

The strength of Walmart benefited the rest of the sector, whether Target (+4.38%), whose results are expected on Wednesday, or the semi-wholesale brand Costco (+3.33%) .

The DIY store chain Home Depot benefited only marginally from this momentum (+0.82% to 309.44 dollars), despite results that exceeded expectations. GlobalData analyst Neil Saunders is worried about Americans saving on home improvements and the effects of the housing market slowdown on group sales.

“The combination of good corporate news and macroeconomic data is making investors excited this morning,” concluded Art Hogan.

Resuming their yo-yo movement dictated by the oscillations of the bond market, an indicator of the cost of financing their growth, technology stocks had the wind in their sails, from Apple (+3.27%) to Amazon (+3.94 %), via Tesla (+4.83%) and Alphabet (+2.44%).

The Taiwanese semiconductor manufacturer TSMC was picking up speed (+ 13.18% to 82.39 dollars) after the announcement of a capital increase in the holding company of Warren Buffett, Berkshire Hathaway, which bought for 4.1 billion worth of group shares in the third quarter.

Several Chinese companies listed in New York jumped, investors hoping, according to Patrick O’Hare, for more support from the Chinese government for the economy after the publication on Tuesday of poor retail sales figures, down in October on a year.

E-commerce giant Alibaba (+9.76%) and electric vehicle manufacturer XPeng (+6.37%) were particularly sought after.

© 2022 AFP

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