Hey Folks, as we wind down this year the next few months promises to be more volatile than normal with key pending events coming up. Get my take on the markets in this week’s Market Round-Up.
WEEKLY SOUND BITES
The S&P finished lower after posting gains in each of the six previous weeks. Equities seemed to take cues from the U.S. Treasury market, where futures market pricing now reflects a shallower Fed rate-cutting cycle. Tesla was the best performer in the S&P 500 and led the Magnificent Seven, helping to keep the broad index from a steeper decline. On the other hand, Apple pushed the market in the other direction with analysts downgrading their calls on the stock amid lower projections for sales of the new iPhone 16. Now the markets are trying to assess the possible outcomes of 3 looming events – Big Tech earnings next week, the Nov 5th Election and the FED monetary policy decision on Nov 6th. Next Wek’s Big Tech earnings are Google on Tues, Meta and Microsoft on Wed followed my Amazon and Apple on Thurs. In addition to these big tech earnings, we will also see Visa on Tues and Mastercard on Thurs with the oil giants Chevron and Exxon on Friday.
The Fed’s Beige Book, reported little economic growth across most of the U.S. The report noted that demand for workers “eased somewhat” while “inflation continued to moderate.”
The 10-year U.S. Treasury yield climbed from a low of 3.58% last Sept to 4.23% on Oct 23rd before settling in this week at 4.20%. Market expectations for Fed rate cuts have steadily ratcheted down, reaching a total of 125 basis points of easing in the next 12 months on Friday. To me the climb higher in rates reflects stronger economic data, including better than expected jobs report and strong retail sales as well as sticky inflation readings. Also keep in mind that we just finished the fiscal 2024 budget with a shortfall of $1.8 Trillion, equal to about 6.5% of US GDP. That’s a tide of red ink unhear of except in recessions or in times of war.
Across the Eurozone, business activity remained in contractionary territory in October, as new orders continued to dwindle. An early estimate of the composite PMI, which combines activity in the manufacturing and services sectors, registered 49.7 in October, compared with 49.6 in September. The two largest economies, France and Germany, were the main sources of weakness. In the UK, an early estimate from S&P Global pegged composite PMI at an 11-month low of 51.7 in October, compared with the 52.6 recorded in September, as new order growth slowed.
In Japan, the yen weakened to the high end of the JPY 151 range against the USD, from around 149.5 at the end of the previous week. Japan’s CPI, regarded as a leading indicator of nationwide inflation, rose 1.8% year on year in October, slightly above consensus but slowing from September’s 2.0% level.
In China, it’s all about stimulus. The PBOC injected about $100 Billion US into the banking system via its medium-term lending facility (MTLF) and left the lending rate unchanged at 2%, as expected. Separately, Chinese banks lowered their one- and five-year loan prime rates by 25 basis points to 3.1% and 3.6%, respectively, making it cheaper for consumers to take out mortgages and other loans. The central bank also signaled additional easing measures in the near term, including another potential cut to the reserve requirement ratio, depending on liquidity conditions. The jobless rate for 16- to 24-year-olds, excluding students, came in at 17.6% in September, down from 18.8% in August, according to official data.
Enjoy This Week’s Round-Up
Don’t Be a Rat Brain Trader – Be the Red Stripe Zebra !!
Trade Smart!
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