Monday, October 10, 2022

Morning Note: Volatile Setup This Week

The setup for this week is, yet again, for volatility, now watch it be blah when it's all said and done ๐Ÿ˜Ž.

As for potential market-moving events, in terms of US data, today we get speeches from Fedheads Charles Evans and Lael Brainard, both lean dovish (i.e., if there's the potential for a market-friendly Fed message it'll likely come from one, or both, of these two)... 

Tomorrow, Fed governors Harker and Mester speak, now they're both hawks (although Harker doesn't get a vote this year), so any potential love the market might pick up from today's speakers could very well be jilted away come tomorrow...

On Wednesday we get the first whiff of the data everybody's eyeballing this week (that'd be inflation), with the September Producer Price Index (PPI), plus, yet another Fed speaker in the form of Michelle Bowman, another hawk... 

Thursday's the biggie, with the September CPI release at 5:30am pt... Weekly oil data will be closely watched that day as well... 

And if all that's not enough, Friday will deliver September's retail sales numbers, along with the closely monitored University of Michigan Consumer Sentiment Survey...

With regard to inflation, from what I'm gathering, given base-effects (i.e., last month's number in relation to Sept '21's number), along with the latest reads from key CPI components, there's relatively low odds of a softish surprise come Thursday... Which I suspect has something to do with the high bearish readings we're presently gleaning from our sentiment indicators... Of course that sets the stage for yet another bear market rally should, indeed, inflation surprise on the weak side... Definitely not making a prediction here.

Otherwise, and, frankly, either way, beyond September's inflation data, in our view odds favor ultimately more downside before the current bear market plays itself out.

My only hesitation is that that view seems so consensus right here, and, make no mistake, the market revels in defying the consensus.

Stay tuned...

Asian equities struggled bigtime overnight, with all of the 16 markets we track closing lower.

Europe, on the other hand, is mostly green so far this morning, with all but 5 of the bourses we follow trading up as I type.

US stocks are mixed to start the session: Dow up 117 points (0.38%), SP500 down 0.06
%, SP500 Equal Weight up 0.10%, Nasdaq 100 down 0.61%, Nasdaq Comp down 0.64%, Russell 2000 down 0.08%.

The VIX sits at 32.96, up 5.10%.

Oil futures are up 0.47%, gold's down 1.31%, silver's down 2.16%, copper futures are up 1.80% and the ag complex (DBA) is up 1.19%.

The 10-year treasury is down (yield up) and the dollar is up 0.35%

Among our 35 core positions (excluding options hedges, cash and short-term bond ETF), 17 -- led by defense stocks, utilities, ag futures, AT&T and industrial stocks -- are in the green so far this morning. The losers are being led lower by AMD, uranium miners, silver, gold, emerging market equities and Disney.

"It’s an unfortunate indictment of modern
society that so many aspects of life are viewed through a
political prism. Sad as it is to say, you can often guess
someone’s partisan affiliation simply by how they interpret the current state of economy.
That’s all the more so given the elevated level of
volatility on Wall Street, Main Street and policy. Ultimately,
though, neither the economy nor the market care about anyone’s political views, so it’s best to simply focus on the numbers."

--Bloomberg's Cameron Crise 

Have a great day!