Market Synopsis: Stocks Mixed, Treasury Yields Lower, Commodities Higher, Dollar Higher, Crypto Lower
Past Week Events:
This Week's Events:
Fed Minutes Highlight Rate Hike Discussions
The Federal Reserve's minutes from its September meeting highlighted that officers mentioned the possibility of increasing rates if inflation stays persistent. While the Fed had formerly indicated a more patient approach, the minutes suggest a continued concern about inflationary pressures. Some members emphasized the need to be prepared to adjust the path of rates if economic conditions change. The minutes also highlighted discussions about the reduction of the Fed's bond holdings, signaling a potential shift in its asset purchase program.
U.S. Consumer Prices Tick Up in September
Inflation in September rose by 0.4%, slightly more than predicted, translating to a 3.7% increase yr-over-year. Excluding volatile food and energy sectors, core CPI rose by 0.3% month-to-month and 4.1% yearly. Notably, housing prices saw a big 0.6% bounce, even as energy prices climbed 1.5%. Meanwhile, food prices had a modest 0.2% upward push. However, with inflation outpacing the 0.2% salary increase, real average hourly profits took a 0.2% hit last month.
Next Week:
U.S. leading economic indicators will be reported next week, and this indicator highlights trends in the broader U.S. economy. The U.S. leading economic indicator (LEI) reported down -0.4% last month, and this upcoming report is forecasted to come in at -0.4% again. The LEI has seen a contraction in the last 17 months, and analysts forecast this trend to continue.
Right before the blackout period, Fed Chairmen Jerome Powell and Fed presidents from New York, Chicago, and other major cities will speak throughout the week. The blackout period is a period when central bank members can not speak publicly about FOMC decisions, and so all these Fed members alike will get their words in about interest rate decisions and other monetary policy topics before the initiation of this period.
Market Snapshot:
his week's financial landscape was dominated by a confluence of geopolitical tensions, inflationary concerns, and the broader market's response to various economic indicators. Jamie Dimon, JPMorgan's chief, captured the prevailing mood, suggesting that the current times might be among the most perilous the world has witnessed in decades. His concerns spanned potential disruptions in energy, food markets, global trade, and the intricate web of geopolitical relationships.
Positive earnings reports from banking giants like JPMorgan, Wells Fargo, Citi, and UnitedHealth Group provided some optimism. However, this was tempered by hotter-than-expected inflation metrics, including the Consumer Price Index (CPI) and the Producer Price Index (PPI).
The geopolitical scene added to the uncertainty, especially with the recent attacks on Israel. This turmoil prompted investors to flock to traditional 'war hedges' like gold, which surged over 5% this week, breaching the $1900 threshold. Concurrently, oil prices soared, with WTI crude marking a 5% weekly increase.
In the bond market, there was a noticeable uptick in demand, particularly for long-term bonds. Yet, 2-year yields rebounded, surpassing the 5.00% mark. The equity front saw Small Caps bearing the brunt of the week's downturn, while the Nasdaq remained relatively stable. The S&P and Dow Jones eked out modest gains. Sector-wise, energy and utilities shone, but consumer sectors struggled, with airline stocks enduring their most significant weekly decline since March.
The currency landscape saw the US dollar inching up, propelled by a post-CPI surge. Meanwhile, in the crypto arena, Bitcoin maintained its position around the $26,500 mark, but Ethereum weakened in comparison to Bitcoin. Silver, akin to gold, experienced a notable rise, with futures prices touching an intraday high of $23.
Quip of the Week:"The most important quality for an investor is temperament, not intellect. You need a temperament that neither derives great pleasure from being with the crowd or against the crowd." - Gerald M. Loeb
U.S Equities:
Indexes(Week)
SPX 4,327.78(0.45%), DJIA 33,670.29(0.79%),
NASDAQ 13,407.23(-0.18%), RUT 1,719.71(-1.48%)
Sectors:
As the conflict Palestinian-Israeli conflict persits, energy supply will continue to curtail. Similiar to the invasion on Ukraine, the U.S will impose sanctions on these OPEC+ exporters like Iran which will cause supply to fall and prices to surge. This is causing oil to skyrocket explaining why energy was the top performing sector this past week. CPI data illustrated a negative picture for inflation, with it rising past analyst’s forecasts. This caused consumer discretionary, which is heavily impacted by inflation and consumer confidence, to take it hit, causing it to fall as the worst performing sector this past week.
Treasuries:
U.S. Treasury Yields Climb Following Inflation Data Following the release of the September inflation data.
The 10-year Treasury note yield, a benchmark for various financial products, rose to 4.23%, while the 2-year yield, which is more sensitive to short-term rate expectations, increased to 3.92%. The surge in yields reflects the market's anticipation of potential actions by the Federal Reserve to counteract rising inflation. Investors are concerned that their may be future rate hikes.
Commodities:
Oil
Global Risks Amplify Oil and Gas Price Volatility Amidst a complex backdrop of geopolitical tensions and energy crises, oil and gas prices are witnessing significant escalations. The Middle East, a pivotal region for global oil supply, is rife with tensions, particularly between Iran and Saudi Arabia, adding layers of uncertainty to the market dynamics. Concurrently, Europe grapples with its own energy predicament, and China's power shortages further exacerbate the situation. The repercussions are palpable in the U.S., where consumers are confronting rising fuel costs. Market analysts caution that unless there's a resolution to these intertwined geopolitical and energy challenges, the volatility in the energy sector may persist.
Gold
Gold saw its best week in 7 months as it rallied over 5% amidst war in the middle east and optimism that we are at the end of Fed rate hikes. Gold, which is known as the safe-haven asset, was turned to by investors amidst these tense geopolitical tensions. Also with market confidence that we are at the end of the long rate hike, gold, a non-yielding asset, benefits. A great week for gold may mark its return into investors’ bucket list.
Crypto:
BTC -26.868, -2.64% ETH - 1,553, -1.67%
BTC Graph (5-day)
Ferrari has initiated a program allowing customers in the U.S. to purchase their luxury sports cars using cryptocurrency, a move driven by demands from their affluent clientele. This venture places Ferrari among the few high-end companies embracing cryptocurrencies despite their known volatility and regulatory inconsistencies, which have deterred many blue-chip companies. Unlike Tesla, which temporarily accepted Bitcoin before retracting due to environmental concerns, Ferrari acknowledges efforts within the crypto realm to minimize carbon emissions via new software and increased utilization of renewable resources, aligning with their goal for carbon neutrality by 2030. The decision, stemming from market and dealer requests, opens doors to a new cohort of potential buyers, especially young or traditional investors keen on diversifying their portfolios with cryptocurrencies. Though the exact number of cars expected to be sold via crypto remains undisclosed, the robust order portfolio extending till 2025 hints at a promising venture. While the crypto payment scheme, currently facilitated by BitPay, is set to extend to Europe by next year's first quarter, Ferrari ensures price consistency whether payments are made via crypto or traditional currencies, safeguarding both dealers and the company from crypto's price volatility. The initiative not only reflects a significant step towards modernizing luxury car purchases but also posits Ferrari in a pioneering stance within the high-end automotive sector regarding cryptocurrency acceptance
Europe:
Stoxx 600- 449.18, 0.95% DAX- 15,186, -0.28% FTSE 100 -7,559, 1.40%
DAX Chart (5-day)
The International Monetary Fund's (IMF) steering committee has urged a review of quota funding to be finalized by December 15, advocating for a rise that at least sustains the IMF's overall lending capacity as existing bilateral borrowing agreements come to a close. Spearheaded by the committee's chair, Spanish economy minister Nadia Calvino, a call was also made for suggestions to amend the IMF's shareholding structure by June 2025. While the discourse didn't disclose any particular funding figures, it did hint at a potential near-term augment in funding, sans any immediate alterations in shareholding. To ensure the continuity of the IMF's present resource scope until an effective quota boost, the committee has requested the Executive Board to lay down interim plans1.
Asia:
XJO (Australia)-7,051, 1.39% Shanghai 180 Index-7,928, -0.79% Nikkei 225- 32,315, 4.26%
XJO Chart (5-day)
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