The stock market fell Tuesday morning as home prices tumbled and gave no sign of a Santa Claus rally looming. China’s retail stocks rose after the Asian nation said it would reopen its borders next month after lengthy Covid lockdowns.
The Nasdaq Composite fell 0.8% while the S&P 500 fell 0.5%. The Dow Jones Industrial Average fell 0.1%. The small-cap Russell 2000 Index fell 0.6%.
The Nasdaq Composite and the S&P 500 are trading at their lowest levels since early November. Last week marked the third straight week of declines for the Nasdaq and S&P, but the Dow surprised with a 0.9% gain.
Volume fell on the Nasdaq and NYSE against the same time on Friday, ahead of the holiday weekend. Volume this week is expected to be light as many investors take the week off between Christmas and New Years.
The yield on the benchmark 10-year Treasury note rose six basis points to 3.81%. Crude prices rose 0.4% to $79.90 a barrel.
Santa Rally did not arrive, but retail sales increased
The S&P CoreLogic Case-Shiller National Home Price Index, which measures median home prices in major cities, fell 0.5% in October compared with September. This marked the fourth consecutive month-over-month drop. But the index fell less than the econoday consensus estimate for a fall of 1.2%.
On a year-over-year basis, the index rose 9.2% in October, down from the 10.7% annual rate in September. Rising mortgage rates were seen as curbing the appetite of homebuyers.
“Housing prices continue to fall as mortgage rates continue to rise. The Federal Reserve is particularly focused on inflation and will continue to raise interest rates until it feels inflation falling back to its 2% target.” said Chris Zaccarelli, chief investment officer of the Independent Advisor Alliance. “For most of the economy, raising interest rates takes time to kick in, but housing is one of those parts of the economy that is most directly affected, as higher federal funds rates are quickly translate into higher mortgage rates.
While the Santa Claus rally in the stock market has yet to show, holiday retail sales rose 7.6%, down from last year’s 8.5% increase, according to Mastercard SpendingPulse. This survey tracks all types of payments, including cash and debit cards. The consensus expected an increase of 7.1%.
The odds of a 25 basis point hike by the Federal Reserve at the February meeting fell below 60% for the first time in weeks, to 59.4%. That would bring the yield into the 4.5%-4.75% range. An increase of 50 basis points is expected at 40.6%, according to the CME FedWatch Tool.
The S&P Energy Select Sector ETF (XLE) was the best performing sector of the 11 S&P sectors, rising 1.1%.
China retail stocks jump as China reopens
China stocks rose early Tuesday after officials announced plans to lift coronavirus travel restrictions and ease quarantine restrictions for incoming travelers early next month.
Some US-traded China stocks jumped on the news. The Hong Kong Stock Exchange was closed on Tuesday due to a holiday.
In the United States, airlines canceled thousands of flights due to low temperatures and snow in large parts of the country. More than 4,000 flights were canceled in the US on Monday and another 3,000 flights are expected to be canceled before noon Tuesday, according to reported flight, a flight tracking site. Of all the airlines, Southwest had by far the most canceled flights over the two days.
southwest airlines (light) invested more than 5% in cancellations. The US Department of Transportation said it is concerned about Southwest’s “unacceptable” rate of cancellations and delays. Southwest stock is still trying to get support from its 50-day line.
Stock market movers and shakers
child (INFANT) fell more than 7% after the electric vehicle maker said it cut its fourth-quarter delivery outlook amid China’s covid restrictions.
Apple (AAPL) shares fell 2% despite a analyst report alleging has recovered from shortages that reduced the availability of iPhone 14 Pro models during the holiday shopping season. JPMorgan analyst Samik Chatterjee said his company’s channel checks indicate an improved offering of premium models of the latest iPhones.
Amazon (AMZN) shares fell 1.8%.
Follow Michael Molinski on Twitter @IMmolinski
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