Very busy week in the markets everyone. And next week we will hopefully get more clarity on the FEDs thinking around their speed of interest rate reductions. The US Elections are also next week but I suspect that whatever the outcome it will be contested which could push out the eventual winner for another week or so. Either way it will be a very big week for the markets. Get me take on the current market price action and where to from here in this week’s round-up.
WEEKLY SOUND BITES:
A busy earnings and data week leaves stocks lower. Nasdaq reached record intraday highs on Wednesday before falling back sharply on Thursday and closed out the week in the red, like the S&P and the DOW. Roughly 42% of the companies in the S&P reported Q3 earnings over the week, including five of the Mag 7 (Meta, Microsoft, Google, Apple, and Amazon). Mostly due to CapEx spending on AI with Meta up 36%, MSFT CapEx up 79%, Google CapEx up 62%, Apple is essentially flat in CapEx spending and finally, Amazon CapEx spending is up 81%. Investors who saw an 17% annual returns over the past decade could only see an average return of 3% annual over the next decade according to Goldman Sachs.
The Labor Department’s JOLTS report showed that the number of job openings had fallen to 7.44 million in September, its lowest level since January 2021. On Wednesday, ADP surprised markets by announcing that its tally of private-sector jobs had expanded by 233,000 in October, roughly twice the consensus estimates. However, on Friday, in the monthly Jobs numbers we saw that nonfarm payrolls were “essentially unchanged” over the month, with employers adding only 12,000 jobs—the lowest number since December 2020 with unemployment staying the same at 4.1%. Friday also brought news that the ISM’s gauge of manufacturing activity had declined unexpectedly for the seventh straight month to 46.5, its lowest level in 15 months.
The weak manufacturing and payroll reports failed to prevent the yield on the benchmark 10-year U.S. Treasury note from moving to another four-month intraday high (4.37%) on Friday, perhaps in response to expectations for an eventual renewal inflation and growth pressures.
The eurozone economy expanded in the third quarter by 0.4% sequentially, double its second-quarter growth rate and exceeding a consensus estimate of 0.2%. Germany unexpectedly avoided a recession, growing 0.2%. Meanwhile, annual headline inflation accelerated slightly faster than forecast to 2% in October from 1.7% in September as the decline in energy prices last year dropped out of the annual comparison. Services inflation steadied at 3.9%. Core rate—which excludes prices for energy, food, alcohol, and tobacco—was unchanged at 2.7%.
In Japan, the yen initially weakened against the U.S. dollar on the election outcome, on expectations that a period of political uncertainty would ensue, potentially impacting future fiscal policy and the outlook for the BoJ’s monetary policy. At its October meeting, the BoJ held its policy rate steady at 0.25%, as widely expected. The yield on the 10-year Japanese government bond was little changed over the week at around 0.95%.
China’s factory activity expanded for the first time since April amid better demand. The official manufacturing purchasing managers’ index (PMI) rose to an above-consensus 50.1 in October from 49.8 in September. The nonmanufacturing PMI, which measures construction and services activity, increased to a lower-than-expected 50.2 in October from 50 in September. The value of new home sales by the country’s top 100 developers rose 7.1% from a year ago after September’s 37.7% drop, marking the first year-on-year growth in 2024. Taken together, the first batch of major economic indicators after the rollout of Beijing’s broad stimulus package indicated early signs of recovery in the Chinese economy.
Enjoy this week’s round-up.
Don’t Be A Rat Brain Trader – Be the Red Strip Zebra !!
Trade Smart !
hpb
