Overnight Market Wrap: 2 November 2022

Overnight Market Wrap: 2 November 2022

Key Points:

  • Stocks Drop in Countdown to Fed as Rally Sputters
  • Job openings post surprise increase, keeping pressure on Fed
  • Manufacturing nears stagnation, price gauge at two-year low

Stocks finished lower as data showing a solid US labor market bolstered speculation that Federal Reserve policy could remain aggressively tight even with the threat of a recession.

At a time when good news is considered bad news when it comes to policy conjectures, the S&P 500 wiped out a rally as the figures highlighted an unexpected rebound in US job openings, which may keep the pressure on the Fed. It was the 26th time in 2022 that the equity gauge erased a gain or loss of at least 1% in one session — the most for any year since the financial crisis.

Big tech weighed on equities, with Apple Inc. down almost 2% and Amazon.com Inc.’s value ending below $1 trillion for the first time since 2020.

Two-year US yields — which are more sensitive to imminent Fed moves — topped 4.5% after sliding as much as eight basis points earlier in the day.

“Hopes for a Fed dovish pivot are misplaced if today’s job openings are any guide,” said Ronald Temple, head of US equity at Lazard Asset Management. “Despite other signs of economic deceleration, the job openings data taken together with nonfarm payroll growth indicate the Fed is far from the point where it can declare victory over inflation and lift its foot off the economic brake.”

Also weighing on market sentiment was a report showing US manufacturing neared stagnation in October as orders contracted for the fourth time in five months, while an index of prices paid fell to a more than two-year low. The figures added to evidence of recession concerns as central banks step up the fight to get inflation under control.

Earlier in the day, speculation that China is preparing to gradually exit the stringent Covid Zero stance helped boost equities. A gauge of the nation’s stocks listed in Hong Kong surged almost 7% intraday. Shares pared gains after Chinese Foreign Ministry spokesman Zhao Lijian said he’s “not aware” of a committee on ending the policy.

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