Wall Street on Edge Amid China Unrest, Jobs Report

Fed Chair Jerome Powell signaled smaller rate hikes earlier this week

Digital Content Manager
Dec 2, 2022 at 2:56 PM
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Protests in China over he country's strict zero-Covid policy were moving stocks this week, reverberating through global markets and denting the tech sector, despite 65% of residents above 80 being boosted against the disease, and cases in the region falling for the first time in over one week.

Comments from Federal Reserve Chairman Jerome Powell at the Hutchins Center on Fiscal and Monetary Policy at Brookings injected quite a bit of positivity into the markets, though. The Dow Jones Industrial Average (DJI) surged 737 points on Wednesday after Powell signaled smaller rate hikes in the future, while the S&P 500 Index (SPX) and Nasdaq Composite Index (IXIC) joined the blue-chip benchmark in notching a second-straight monthly win.

That optimism faded as Wall Street fixated on the jobs report for November, and the Institute for Supply Management (ISM) manufacturing gauge saw its lowest reading since May 2020. Losses only deepened after the Labor Department reported nonfarm payrolls rose a higher-than-expected 263,000, and average hourly earnings doubled estimates, sparking fears the central bank may not walk back its hawkish policy after all. At the time of this writing, the SPX and IXIC were eyeing weekly wins, while the DJI was lower on the week

Tech Stocks to Watch

The unrest in China weighed on Apple (AAPL), with disruptions hurting its iPhone Pro production. Chinese electric vehicle (EV) maker Nio (NIO) surged, however, after the company announced a partnership with Tencent to create self-driving and high-definition mapping technology. Workday (WDAY) and Hewlett Packard (HPE) were also enjoying tailwinds thanks to strong quarterly reports, while Salesforce (CRM) spiraled following the resignation of its CEO. Lastly, Western Digital (WDC) is the best tech stock to own this month.

Retail Stocks Making Moves

It was a big week for retail stocks as well. Despite red-hot inflation, Kroger (KR) hiked its annual same-store sales forecast amid strong demand. Meanwhile, Etsy (ETSY) and Crocs (CROX) delivered outsized gains to Schaeffer's subscribers, while Costco (COST) plummeted after net sales for November fell from last month. Speaking of underperformers, here is why investors should steer clear of Best Buy (BBY) in December. 

Discount retailers Dollar General (DG) and Five Below (FIVE) announced quarterly earnings this week as well but were moving in opposite directions after their reports. Now does not seem like a good time to bet on a move higher for Signer Jewelers (SIG), either, as the security just pulled back to a historically bearish trendline. Plus, Bath & Body Works (BBWI) looks like another retailer to avoid this month.

December to Bring More Inflation Data

The year is drawing to a close, but the economic calendar is not slowing down yet. Next week will bring the final S&P U.S. services purchasing managers' index (PMI), as well as the final demand producer prince index (PPI). In addition, AutoZone (AZO), C3.ai (AI), Chewy (CHWY), Dave & Buster's Entertainment (PLAY), DocuSign (DOCU), GameStop (GME), lululemon athletica (LULU), Oracle (ORCL), Signet Jewelers (SIG), Stitch Fix (SFIX), and United Natural Foods (UNFI) will report earnings. Until then, here's what investors can do in the event of another SPX pullback. Plus, keep tabs on these 2 Treasury indicators that could signal a recession.



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