Stock market mixed on lower house prices, vicious storms; China Stocks Surge; Tesla crushed

The stock market traded mixed on Tuesday morning as house prices fell and gave no sign that a Santa Claus rally is on the way. China’s retail stocks rose after the Asian nation said it would reopen its borders next month after long Covid shutdowns. Tesla (TSLA) pounced on registration data from China.

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The Nasdaq composite fell 0.9% while the S&P 500 fell 0.1%. The Dow Jones Industrial Average rose 0.5 percent. The small-cap Russell 2000 index fell 0.1%.

The Nasdaq Composite and the 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 S&P, but the Dow surprised with a 0.9% gain.

Volume fell on the Nasdaq and NYSE vs. same time on Friday, before the holiday weekend. Volume this week is expected to be low as many investors take the week off between Christmas and New Year.

The interest rate on the benchmark index for 10-year government bonds rose six basis points to 3.81%. Crude oil prices rose 0.4% to $79.90 a barrel.

The Innovator IBD 50 ETF (FFTY) rose 0.1%, led by footwear stocks Crocs (CROX) and Covers outdoors (DECK). Crocs shares are extending past the profit zone, while Deckers is forming a cup-like base with a buy point at 402.42.

The 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 consecutive month-on-month decline. But the index fell less than the Econoday consensus estimate for a 1.2% drop.

On an annual basis, the index rose 9.2% in October, down from the 10.7% annual rate in September. The increase in mortgage interest rates was seen as dampening the appetite of home buyers.

“Home prices continue to move lower as mortgage rates continue to rise. The Federal Reserve is singularly focused on inflation and is going to continue to raise interest rates until they feel inflation is falling back to their 2% target,” said Chris Zaccarelli, chief investment officer of the Independent Advisor Alliance. “For most of the economy, it takes time for rising interest rates to have an effect, but housing is one of the parts of the economy that is more directly affected as higher Fed Funds rates quickly translate into higher mortgage rates.”

While the bull market rally has yet to emerge, holiday retail sales rose 7.6%, less than last year’s 8.5% increase, according to Mastercard SpendingPulse. This survey tracks all types of payments, including cash and debit cards. The consensus expected an increase of 7.1%.

The odds of a 25 basis point hike by the Federal Reserve at its 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. An increase of 50 basis points is expected by 40.6%, according to the CME FedWatch Tool.

The S&P Energy Select Sector ETF (XLE) was the best performing sector of all 11 S&P sectors, up 0.9%. The Technology Select Sector ETF (XLK) was the worst performer, down 0.7%.

China’s 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 Chinese stocks traded in the US jumped on the news. The Hong Kong Stock Exchange was closed on Tuesday for a public holiday.

Online retailers JD.com (JD) and Pinduo duo ( PDD ) both rose more than 2% Tuesday morning.

In the US, airlines canceled thousands of flights due to freezing temperatures and snow across large parts 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 website. Of all the airlines, Southwest had by far the most canceled flights during the two days.

Southwest Airlines (LUV) dumped 5% on the cancellations. The US Department of Transportation said it is concerned about Southwest’s “unacceptable” frequency of cancellations and delays. Southwest shares are still trying to find support from their 50-day line.

JetBlue Airways (JBLU) fell more than 2%, but United Airlines (UAL) rose 1%.

Stock Market Movers And Shakers

Tesla sold off nearly 8% in Tuesday’s stock market as weekly vehicle registration data from China suggested the global electric car giant’s year-end incentives were not enough to prop up Tesla deliveries. A Reuters report also said the electric car giant plans to extend reduced production at its Shanghai plant until January.

Nine ( NIO ) fell more than 8% after the electric car maker said it cut its fourth-quarter delivery outlook amid China’s Covid restrictions.

apple ( AAPL ) fell 1.4% despite an analyst report that claimed it has recovered from a shortage that reduced availability of iPhone 14 Pro models during the holiday shopping season. JPMorgan analyst Samik Chatterjee said the firm’s channel checks indicate an improved supply of premium models of the latest iPhones.

Amazon ( AMZN ) lost 1.8%. Historically, 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

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