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Major currencies and other assets are still maneuvering to find their way amidst uncertainties imposed by the worldwide pandemic. The US dollar kept advancing on Tuesday, posting the most advance against the Japanese yen. USD/JPY pair jumped to 116.34, its highest since January 2017, as the dollar surged alongside US bond yields. Demand for the US dollar retreated with Wall Street’s opening, as the dollar was ending the day unevenly across the major currencies.
US indexes were mixed, with the DJIA reaching a record high and holding on to gains, but the Nasdaq Composite shedding roughly 300 points. The S&P posted an all-time high but ended the day with modest losses. US Treasury yields continued to advance and further steepened their curve ahead the release of FOMC Minutes, Wednesday.
Economic Data
The biggest drop in more than a decade for the prices paid component and shorter wait times needed supplies were the two primary drivers of the 2.4-point decline in the ISM manufacturing index to 58.7 in December
The drop in December’s ISM manufacturing index to 58.7 from 61.1 in November masks what strong demand environment in the factory sector still persists. Inflation is still expected to remain stubbornly high and above the Fed’s target rate, but it will at least be slowing on a year-over-year basis.
US manufacturing slowed in December amid some cooling in demand for goods, but supply constraints are starting to ease and a measure of prices paid for inputs by factories fell by the most since early 2020 when the pandemic disrupted economic activity.
The Institute for Supply Management (ISM) said on Tuesday that its index of national factory activity fell to a reading of 58.7 last month. That was the lowest reading since last January and followed 61.1 in November.
A reading above 50 indicates expansion in manufacturing, which accounts for 11.9% of the US economy. Economists polled by Reuters had forecast the index falling to 60.1. The ISM survey’s measure of supplier deliveries declined to a reading of 64.9 from 72.2 in November. A reading above 50% indicates slower deliveries to factories.
According to new data from the Department of Labour, a record 4.5 million workers quit or changed jobs in November. Employees took advantage of better pay and benefits as labor shortages continue to remain major part of U.S. economy, while labour shortages have helped create one of the more worker friendly job climates in years. The report continues to show a trend of high turnover in the labor market, a sign of how profoundly the economy has been reshuffled in the nearly two years since the beginning of the pandemic.
The number of job openings on the last business day of November fell to 10.562 million, the US Bureau of Labor Statistics announced in its latest Job Openings and Labor Turnover Summary (JOLTS) on Tuesday. This reading came in below market expectations for 11.075 million and was lower versus October’s 11.091 million reading, which had been revised up from 11.033 million.
Other Developments
Speaking about oil surplus has been eased as the latest decision by OPEC+ Tuesday to stick to its planned increase in oil output for February largely reflects easing concern of a big surplus in the first quarter of 2022, as well as a wish to provide consistent guidance to the market.
The producer group, which comprises of the Organization of the Petroleum Exporting Countries with allies including Russia, agreed on Tuesday to raise its output target by 400,000 barrels per day (bpd) in February. The United States has urged the group to pump more crude to help the global economic recovery from the pandemic and cool fuel prices as they trade around $80 a barrel. But OPEC+ has said the market did not require extra oil.
Europe keeps reporting record coronavirus contagions, as the Union is in the middle of the peak of the Omicron wave. The number of deaths and hospitalizations is still low, but there’s some disruption in day-to-day activity.
Tesla stock traded above $1,200 a share early Tuesday, putting it close to its all-time high of $1,243.49. As the stock rises, it soared by double digits on Monday, expect more debate about how to value shares of the EV leader. Wall Street, for its part, appears to believe the stock (ticker: TSLA) is worth roughly 100 times Tesla’s per-share earnings. That is about 10 times more valuable than stocks of traditional auto makers, but it seems about right, based on one valuation methodology.
Tesla’s ability to design components in-house gave the automaker agility in making tweaks to parts and coping with supply chain problems that hit other automakers much harder.
Also Read:
Ahead FOMC Minutes, T-Yield Curve Steepens
Major Currencies Maneuvering To Find Their Way
Tesla Stock Closer To Fresh Record On Earnings
OPEC+ Latest Decision Reflects Easing Surplus Concerns
Wall Street Surges, But Tempered By Dipping Tech Stocks
Reading US ISM Data: Price Pressures Still Extraordinarily High
