Thursday, October 26, 2023

Morning Note: Ambiguity Remains

While Q3 GDP came in better than expectations, its underlying inflation gauge came in softer than expected... Combine the latter with higher than anticipated weekly unemployment claims (particularly continuing claims, as I highlighted in last Friday's economic update), and a clearly dovish ECB monetary policy statement, and you get a knee jerk market reaction which entirely comports with our short-term view (bad economic news = short-term good news for stocks).

Here's SP500 futures action so far this morning -- it's presently10 minutes before the open (the green arrow points to the moment the GDP and jobless claims numbers were released):

And here's the 10-year treasury yield:

While the bond market reaction comports with our intermediate-term (next several months) outlook -- i.e., bad news is good news for bonds/bad news for stocks -- clearly, ambiguity remains around current conditions (yields moving back toward pre-data-release level)... I.e., the day is still very young...

Per the title of last Friday's market update, there's quite a bit yet to play out.

Stay tuned...

Asian stocks sold off overnight, with 13 of the 16 markets we track closing lower.

Same for Europe so far this morning, with 14 of the 19 bourses we follow trading down as I type.

US equity averages are mixed to start the session: Dow down 5 points (0.02%), SP500 down 0.36%, SP500 Equal Weight up 0.04%, Nasdaq 100 down 0.55%, Nasdaq Comp down 0.55%, Russell 2000 up 0.30%.

As for yesterday’s session, US equity averages traded lower: Dow down 0.3%, SP500 down 1.4%, SP500 Equal Weight down 1.12%, Nasdaq 100 down 2.5%, Nasdaq Comp down 2.4%, Russell 2000 down 1.7%.

This morning the VIX sits at 20.63.

Oil futures are down 2.23%, nat gas futures are up 0.98%, gold's up 0.03%, silver's down 0.24%, copper futures are up 0.20% and the ag complex (DBA) is up 0.23%.

The 10-year treasury is up (yields down) and the dollar is up 0.10%.

Among our 32 core positions (excluding options hedges, cash and money market funds), 15 -- led by XLRE (REITs), XLB (materials stocks), REMX (rare earth miners), PHO (water services stocks) and EWW (Mexican equities) -- are in the green so far this morning... The losers are being led lower by VNM (Vietnam equities), URNM (uranium miners), XLC (communications stocks), XLE (energy stocks) and AT&T.

History never looks like history when you are living through it. --John W. Gardner

Have a great day!

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