US and European futures are trading in a narrow range while trading volume continues to remain on the low side. Yesterday, we did see the US stock indices recording small gains, but the percentage gains in the US stock indices were still on the low side and hardly exciting enough to attract new capital. Investors are enthusiastic about China re-opening its economy. However, there are plenty of reports which suggest that covid cases are on the rise in China, which really threatens the supply chain.
Economic Data
In terms of the economic calendar, there is hardly anything that is exciting enough on the agenda. Nevertheless, we will get to see the Richmond Manufacturing Index and Pending Home Sales data at 15:00 GMT. The forecast is for -10 and -0.9%, respectively. When it comes to the housing data, it is pretty clear that the housing market is prone to a lot of risk and weakness going into 2023 as the Fed continues to embark on its hawkish monetary policy.
The Fed has already increased the interest rate a number of times, and it is widely anticipated that the Fed is unlikely to take its foot off the gas paddle next year as well. This means that the housing market in the US is most likely to slow down even further, and we will see the housing market producing even more horrible numbers in 2023.
Stocks
Tesla’s Plunge
On Tuesday, the decline in the price of Tesla shares continued, putting the stock of the electric car manufacturer on track to have its worst month, quarter, and year ever.
The stock has lost more than 42% since the beginning of December. Additionally, the share price has dropped by more than 57% since the beginning of the quarter and by about 68% in 2022. Following the publication of a story in the Wall Street Journal stating that the manufacturer of electric vehicles would prolong a production stop at its Shanghai factory for an additional week due to the increasing number of Covid cases, shares of the company dropped significantly.
CEO Elon Musk’s acquisition of Twitter has also been a factor in the decline in share price this year. Additionally, the share price is already more than 70 percent below its peak from November 2021.
Optimism About Apple
On Tuesday, shares of Apple fell further, bringing them closer to prices that haven’t been seen since June 2021. This year, Apple’s stock has lost approximately 27 percent of its value as the company’s growth has been negatively impacted by increasing interest rates. In addition to this, the firm struggled with supply problems brought on by plant shutdowns at its major supplier in China, which are just now starting to improve.
The glitches in production have lessened, demand is still high, and the problems with the supply chain should be resolved by the middle of the next month. Despite a difficult December quarter, the market anticipates that Apple will trade higher due to potential expansion in India, continued revenue growth, and a jump in services revenue.
The release of augmented and virtual reality headgear, as well as buybacks or a flight to quality, could potentially increase shares of the company that made the iPhone.”
Commodities
Oil
Brent and Crude oil prices are trading lower for the second day in a row as traders are worried about oil demand. Crude oil prices have rejected the 50-day SMA as resistance and failed to move above this level which is currently trading at 80.88. This shows that the bulls are not in control of the price and the bearish price action could easily pick up more steam.
Gold
Gold prices continue to trade above the critical support of 1,800, a level that is closely watched by both bulls and bears. This is because traders believe that as long as the price continues to trade above this price point, the price action is more likely to move in the right direction.