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China Stocks Regain Momentum

We’ve come to the second to last trading day of the month, with only December remaining for 2022. For those still hoping we might see positive returns for the year overall, that ship has sailed: we’re -15% on the S&P 500 year to date, following gains of +27% and +16% in 2021 and 2020, respectively. Yet aside from a yield curve having now been inverted some eight months, we do not see recessionary doom in the economy the way many market participants had thought.

Yesterday, the Dow posted its first down day in the past four sessions, while the S&P and Nasdaq spent their second day in the red. Monday brought us the biggest one-day drop in the market since November 9, on renewed fears of Chinese lockdowns which are now morphing into public protests. Major indices are still holding onto gains month to date, although another -0.6% drop on the Nasdaq and that beleaguered index will be in the red once more.

Speaking of China, however, Chinese stocks in November are still looking at their best month in aggregate gains in almost 20 years. Chinese stocks closed Tuesday at session highs, on positive reports about vaccination rates among senior citizens in the country. Hong Kong’s Hang Seng index gained +5% on the day, and companies like Alibaba BABA and Pinduoduo PDD performed well overall. Both stocks are +5% ahead of the opening bell on the American indices.

The Case-Shiller Home Price Index for the month of September posted the smallest gain since December 2020: +10.65% follows the +12.9% in August. We are talking a few months in arrears now, so it bears repeating that mortgage rates in September, following the third-straight 75 basis-point (bps) Fed funds rate hike in the month, were sent up 1200 bps to +7% by the end of the month. We have seen clear evidence that this has drastically slowed the housing market, and we’re still talking late summer/early fall numbers.

After today’s open, we’ll get a new Consumer Confidence report this morning for November. This is expected to dip a tad to 100.0 from 102.5 recorded for October. However, if early holiday retail sales in the early going are any clue, we may see something of a bump up from expectations. Black Friday set new records in online sales this year — another sign that we’re still not seeing any recessionary metrics to this point in the economy; Jay Powell’s dream of a soft landing still lives.

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