The stock market traded mixed Tuesday morning as home prices fell and gave no signs that a Santa Claus rally is coming. China retail stocks surged after the Asian nation said it would reopen its borders next month after long Covid shutdowns. Tesla plunged on China vehicle registration data.
The Nasdaq composite fell 0.9% while the S&P 500 dropped 0.1%. The Dow Jones Industrial Average climbed 0.5%. The small-cap Russell 2000 index fell 0.1%.
The Nasdaq composite and 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 the S&P, but the Dow surprised with a 0.9% gain.
Volume fell on the Nasdaq and the NYSE vs. the same time on Friday, before the holiday weekend. Volume this week is expected to be light as many investors take the week off between Christmas and New Year's.
The yield on the benchmark 10-year Treasury note rose six basis points to 3.81%. Crude oil prices rose 0.4% to $79.90 per barrel.
The Innovator IBD 50 ETF gained 0.1%, led higher by footwear retail stocks Crocs and Deckers Outdoor. Crocs shares are extended past the profit-taking zone, while Deckers is forming a cuplike base with a buy point of 402.42.
Santa Rally Didn't Come, But Retail Sales Rose
The S&P CoreLogic Case-Shiller national home price index, which measures average home prices in major cities, fell 0.5% in October compared with September. This marked the fourth straight month-over-month decline. But the index fell less than the Econoday consensus estimate for a 1.2% drop.
On a year-over-year basis, the index rose 9.2% in October, down from the 10.7% annual rate in September. The rise in mortgage rates was seen as dampening homebuyers' appetite.
"Housing prices continue to go lower as mortgage rates continue to climb. The Federal Reserve is singularly focused on inflation and is going to keep raising interest rates until they feel that inflation is dropping back to their 2% target," said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance. "For most of the economy, rising interest rates take time to have an effect, but housing is one of those parts of the economy that is more directly affected as higher Fed Funds rates quickly translates into higher mortgage rates."
While the stock market Santa Claus rally hasn't appeared yet, holiday retail sales rose 7.6%, less than last year's 8.5% increase, according to Mastercard SpendingPulse. This survey tracks all kinds of payments, including cash and debit cards. The consensus expected a 7.1% increase.
Odds for 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 take the yield to the 4.5%-4.75% range. A 50-basis-point hike is expected by 40.6%, according to the CME FedWatch Tool.
The S&P Energy Select Sector ETF was the best-performing sector of all 11 S&P sectors, up 0.9%. The Technology Select Sector ETF was the worst performing, down 0.7%.
China Retail Stocks Jump As China Reopens
China announced plans to lift coronavirus travel restrictions and ease quarantine restrictions on incoming travelers early next month.
Some China stocks traded in the U.S. jumped on the news. The Hong Kong Stock Exchange was closed Tuesday due to a holiday.
Online retailers JD.com and Pinduoduo both gained more than 2% Tuesday morning.
In the U.S., carriers canceled thousands of flights due to freezing temperatures and snow across large swathes of the country. More than 4,000 U.S. flights were canceled Monday and another 3,000 or so flights are expected to be canceled by noon ET Tuesday, according to FlightAware, a flight tracking site. Of all the airlines, Southwest had by far the most canceled flights over the two days.
Southwest Airlines dumped 5% on the cancellations. The U.S. Department of Transportation said it is concerned by Southwest's "unacceptable" rate of cancellations and delays. Southwest shares are still trying to gain support from their 50-day line.
JetBlue Airways fell more than 2%, but United Airlines gained 1%.
Stock Market Movers And Shakers
Tesla sold off nearly 8% in Tuesday's stock market as weekly vehicle registration data out of China suggested the global EV giant's year-end incentives were not enough to prop up Tesla deliveries. Also, a Reuters report said the electric-vehicle giant plans to extend reduced production at its Shanghai plant into January.
Nio fell more than 8% after the electric-vehicle maker said it cut its delivery outlook for the fourth quarter amid China's Covid restrictions.
Apple fell 1.4% despite an analyst report alleging it has recovered from shortages that reduced the availability of iPhone 14 Pro models during the holiday shopping season. JPMorgan analyst Samik Chatterjee said his firm's channel checks indicate an improved supply of premium models of the latest iPhones.
Amazon lost 1.8%. Historically speaking, Amazon is one of seven widely held stocks to beat the S&P 500 in Santa Claus rallies in previous years.
Follow Michael Molinski on Twitter @IMmolinski
