Bulls Celebrated

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Jerome Powell gave a nod to the market and bulls celebrated as they held rates steady but suggested three cuts in 2024.  Bond yields plunged as did the dollar on the FOMC decision spiking commodity prices, real estate, and utilities. As parabolic as the indexes appear the celebration could continue today with an ECB rate decision pending. We will also look for bullish or bearish inspiration in the Jobless Claims, Retail Sales, and a handful of notable earnings including the very parabolic Costco at record highs.  Plan carefully with indexes so extended in the short term a profit-taking wave could begin at any time.

Asian markets traded mostly higher with only the Shanghai and Nikkei exchanges seeing modest declines. European market trade is decidedly bullish across the board this morning as they wait on ECV and Bank of England rate decisions.  U.S. Futures want to keep the party going this morning pointing to another gap up open ahead of earnings and economic reports.

Economic Calendar

Earnings Calendar

Notable reports for Thursday COST, JBL, & LEN.

News & Technicals’

The Federal Reserve (Fed) decided to keep its key interest rate unchanged on Wednesday, for the third time in a row and signaled that it will lower its rate in 2024 and beyond. The Fed said that the inflation rate has moderated and the economy has remained stable, and therefore it was appropriate to maintain the benchmark overnight borrowing rate in a range of 5.25%-5.5%. The Fed also projected that it will cut its rate at least three times in 2024, by 0.25% each time. This is less than what the market expects, which is four rate cuts, but more than what the Fed had previously suggested. The Fed’s outlook reflects its balance between supporting the economic recovery and controlling the inflationary pressures.

Treasury yields dropped to their lowest levels in months on Thursday, as investors reacted to the Federal Reserve’s guidance on the future of interest rates. The Fed said on Wednesday that it will keep its interest rate unchanged for now, but signaled that it will start cutting its rate in 2024 and beyond. The Fed’s outlook reflected its balance between supporting the economic recovery and controlling the inflationary pressures. The market responded by lowering the yields on the 10-year and the 2-year Treasury bonds, which are influenced by the Fed’s policy. The 10-year yield fell below 4% for the first time since August, while the 2-year yield declined by more than 14 basis points. The yields had already fallen sharply on Wednesday, after the Fed’s announcement. The lower yields indicate that investors are expecting lower interest rates and slower economic growth in the future.

Adobe’s quarterly earnings for the fourth fiscal quarter beat the market’s forecasts, but its outlook for fiscal 2024 fell short of the projections. The software company said that it is waiting for a verdict from the U.S. Department of Justice on its proposed purchase of Figma, a design platform.

Jerome Powell spoke and the bulls celebrated moving stocks sharply higher into parabolic new record highs. The Fed decided to keep policy rates unchanged while lowering its forecasts for inflation and policy rates in 2024. Bond yields moved sharply lower as did the dollar which spiked precious metals and other commodities. The Russell 2000 Index outshined on the day, gaining over 3%, however, continues to lag way behind the other indexes despite the nearly 14% increase in a month. The sectors that performed well were the utilities and real estate sectors, which are sensitive to interest rates, both increasing by over 3%.  Today the ECB will make its rate decision along with Jobless Claims, Retail Sales, Import/Export Prices, Business Inventories, and Natural Gas reports supplying bullish or bearish inspiration. There is also a handful of notable earnings to keep traders guessing. Although the celebration is likely to continue in the short term keep in mind a substantial market pullback should be expected in the near future so plan carefully.

Trade Wisely,

Doug

Melted Higher

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After an ever so slightly higher CPI reading the indexes melted higher on lower-than-average volume in a relentless pursuit of record highs.  Interesting oil prices continued to fall on demand worries from a weakening consumer yet that has not translated into any other market sector.  Things that make you say Hmmm?  Today will be focused on the interpretation of Jerome Powell’s comments as Dovish or Hawkish with PPI, Petroleum Status, and a handful of earnings tossed in to add price volatility.  With the market convinced the Fed will soon pivot big moves are possible if that sentiment is confirmed or denied so plan your risk carefully.

During the night Asian markets traded mixed but mostly lower as they monitor the FOMC decision.  However, European markets trade cautiously bullish across the board ahead of the pending data.  U.S. futures at the time of this report point to a higher open convinced the Fed will soon pivot from its inflation-fighting stance.  We will find out at 2:30 PM Eastern as Jerome Powell takes the microphone.

Economic Calendar

Earnings Calendar

Notable reports for Wednesday ABM, ADBE, CGNT, NDSN, PLAB, & REVG.

News & Technicals’

The European Central Bank (ECB) is planning to reduce its balance sheet, which has grown significantly due to its bond-buying program to support the economy during the pandemic. The ECB’s balance sheet is currently over 8 trillion euros or about 75% of the eurozone’s GDP. The ECB wants to shrink its balance sheet gradually and carefully, to avoid disrupting the financial markets and the economic recovery. However, the markets are expecting the ECB to cut its interest rates next year, as inflation has fallen below the ECB’s target of 2%. Inflation dropped to 2.4% in November, and core inflation, which excludes volatile items such as food and energy, also declined. Money markets are betting on almost 150 basis points of rate cuts in 2022, which would lower the ECB’s key deposit rate from its record high of 4%. The ECB has raised its deposit rate 10 times since July 2022, when it became positive for the first time since 2011. The ECB faces a delicate balance between shrinking its balance sheet and easing its monetary policy, as it tries to achieve its inflation goal and support the eurozone’s growth.

The Bank of England (BoE) is likely to keep its interest rates unchanged on Thursday, as economists disagree on whether the BoE will need to cut rates in 2024. The market is almost certain that the BoE will not change its policy stance this week, based on the LSEG data, as the economic indicators since the BoE’s last meeting have been mixed. The real GDP growth was zero in the third quarter, which matched the BoE’s forecast, but the inflation and wage growth were lower than expected, and the domestic demand was weak. Barclays predicts that the BoE’s Monetary Policy Committee (MPC) will have a divided vote in favor of a hold, but will maintain a hawkish tone as it challenges the market’s expectation of “premature” rate cuts. The BoE faces a difficult balance between supporting the economic recovery and controlling the inflationary pressures.

The Federal Reserve (Fed) is expected to announce a policy shift on Wednesday, as it wraps up its last meeting of the year. The Fed is likely to signal that it will stop raising its interest rate, which it has done four times this year, and start preparing for the next phase of its monetary policy. The Fed will also release its updated forecasts on economic growth, inflation, and unemployment, which will reflect the impact of the pandemic, the fiscal stimulus, and the supply chain issues. The Fed Chair Jerome Powell will also hold his regular press conference, where he will explain the Fed’s decision and outlook. The market is anticipating that the Fed will start cutting its rate in May 2024, and continue to do so throughout the year, as the economy slows down and inflation eases. However, the Wall Street analysts and economists expect the Fed to be more careful and gradual in its rate cuts, as it balances the risks and uncertainties in the economy.

Stocks melted higher on lower-than-average volume after the November CPI inflation report, which came in just slightly higher than the market’s expectations. The rally was broad-based, with growth sectors, such as information technology, doing well along with cyclical sectors, such as materials and financials. The energy sector was a clear laggard, as the market worried about consumer demand which interestingly has not translated into any other consumer area.  Today we have a handful of notable earnings but the market focus will be on the PPI, figures, Petroleum Status, and the FOMC decision and future projections. No one is expecting a rate increase but the market will likely react to how the Dovish or Hawkish Jerome Powell comments are interpreted during the 2:30 PM Eastern press conference. Anything is possible so plan your risk accordingly. 

Trade Wisely,

Doug

Bulls Remain in Control

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The bulls remain in control after shaking off the deflationary China worries pushing higher in a below-average volume day. Some uncertainty or hesitation is normal as we wait on the market-moving data coming over the next couple of days.  Today the bulls or bears will look for inspiration in CPI data and traders should plan for some morning price volatility that could include some big point moves.  After that, markets may go back into a wait-and-see mode with PPI, FOMC, and the Powell press conference. Will he be dovish or hawkish?  Stay tuned and we will soon find out.

While we slept Asian markets closed in the green across the board with moderate gains with Shanghai recovering the key psychological level of 3000 by three points. European markets trade mixed in a cautious morning session waiting on the U.S inflation data.  However, U.S. futures point to a bullish opening in anticipation of the CPI numbers. Plan carefully as we will soon be thinking about the Wednesday data.

Economic Calendar

Earnings Calendar

Notable reports for Tuesday include JCI.

News & Technicals’

Oracle, the software giant, reported disappointing revenue results for its latest quarter. The company missed analysts’ expectations in three of its operating segments: cloud services and license support, cloud license and on-premise license, and hardware. The company blamed the revenue shortfall on currency headwinds, delayed deals, and competitive pressures. The stock fell sharply in after-hours trading, as investors questioned the company’s growth prospects and strategy. Oracle faces increasing competition from rivals such as Microsoft, Amazon, and Salesforce in the cloud computing market.

Ford Motor, the carmaker, announced that it will slash its production target of its all-electric F-150 Lightning pickup by about 50% next year. This is a big change from its previous plan to boost its plant capacity for the EV in 2023. The company said that the reason for the cutback was the lower-than-expected demand for EVs, as they remain expensive and interest rates are high. However, the company also said that the sales of the F-150 Lightning have been growing steadily this year and that it is confident in the long-term potential of the EV market.

Hasbro, the toy maker, announced that it will lay off 1,100 workers as it faces a decline in toy sales, according to a company memo. The company, which is known for its Transformers and My Little Pony brands, said that the job cuts are part of its restructuring plan to reduce costs and improve efficiency. The company had already eliminated about 800 jobs earlier this year, as it was hit by the pandemic, the supply chain disruptions, and the loss of a major customer, Toys R Us. Hasbro said that it will try to minimize the impact of the layoffs on its employees and customers and that it will focus on its digital and e-commerce strategies to boost its growth.

The bulls remain in control as stocks ended slightly higher on Monday on lower-than-average volume, after shaking off the deflationary data out of China. Markets were mostly in a holding pattern, waiting for the big data points of CPI, PPI, and of course the Fed’s rate decision and press conference. The sectors that performed well were consumer staples, industrials, health care, and financial services, a combination of defensive and cyclical sectors that matched the calm session in the major indexes. Today anything is possible as traders react to the CPI figures, so plan for some volatility in the morning session, and don’t be surprised if choppiness ensues in the afternoon as we wait on the PPI and the FOMC.

Trade Wisely,

Doug

Higher for Longer

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The indexes pushed higher shaking off the stronger-than-anticipated jobs data Friday with the hope it will help us dodge a possible 2024 recession and a hawkish Fed continuing its higher-for-longer stance. Although today we have light earnings and economic calendars the CPI, PPI, and Fed’s rate decision on Tuesday and Wednesday add a level of uncertainty for the Monday session.  Plan your risk carefully and expect some choppy market conditions as we wait. 

Overnight Asian markets shook off deflationary Chinese data to finish the day mixed but mostly higher.  European markets are chopping around the flat line mixed but mostly higher at the time of this report.  U.S. markets point to a flat to slightly bearish open working to recover from overnight lows and facing a big week of market-moving economic data.  Plan for substantial price volatility as the data rolls out.

Economic Calendar

Earnings Calendar

Notable reports for Monday include CASY, FECL, and ORCL.

News & Technicals’

Macy’s Inc., the iconic department store chain, has received a takeover offer from two hedge funds, Arkhouse Management and Brigade Capital Management. The offer, which was reported by sources close to the deal, values Macy’s at $5.8 billion, or $21 per share. This is a premium of about 23% over the company’s latest closing price of just over $17 per share. Macy’s has been facing a decline in sales over the past year, as the pandemic and the rise of online shopping have hurt its business. The company has been trying to adapt to the changing retail landscape by closing stores, cutting costs, and investing in e-commerce. However, it is unclear whether the offer from Arkhouse and Brigade will be accepted by Macy’s board and shareholders, or whether it will face any regulatory hurdles.

The U.S. economy is facing mixed signals about the possibility of a recession, according to a hedge fund manager. David Neuhauser, the CIO of Livermore Partners, said that “somebody has got it wrong” in interpreting the market indicators. He pointed out that the falling oil prices and rising gold prices suggest that investors are worried about a slowdown in economic growth and inflation. However, he also noted that the 10-year Treasury yields rose on Friday, which implies that investors are optimistic about a soft landing for the economy. He said, “Somebody has it wrong here, is what I’m trying to tell you … It’s hard to describe who has it [wrong] yet.” He added that he is cautious about the outlook for the U.S. economy, given the uncertainty and volatility in the markets.

The Philippines Maritime Task Force denounced the China Coast Guard for “severely damaging” one of its ships and ramming another in the South China Sea on Sunday. The Philippine ships were part of a convoy that was delivering supplies to Second Thomas Shoal, where Filipino troops were stationed on a stranded warship in the submerged reef. The reef is part of the Spratly Islands, which are claimed by both the Philippines and China, among others. The Philippines said that it has the right to access the shoal, based on the 2016 ruling by the Permanent Court of Arbitration that rejected China’s sweeping claims in the South China Sea. China, however, blamed the Philippines for “insisting on rushing into” the disputed waters and violating its sovereignty.

Stocks ended higher on Friday, as markets absorbed a jobs report that was stronger than anticipated a may keep rates higher for longer or hawkish Fed engaged for the time being.  Interest rates also ticked higher as a result, with the 10-year Treasury yield climbing back over 4.2% after dropping to 4.1% earlier this week. Despite this, traders choose to concentrate on the hope that strong job data will overcome the weakening consumer dodging recession worries for 2024.  Today we have a light day on the earnings and economic calendar as we wait for a CPI report on Tuesday a PPI report and a FOMC decision on Wednesday. That uncertainty could produce low-volume chop as we wait. With the rally now nearly two months straight up it may be wise to raise stops to protect positions should the pending data wate up the bears.

Trade Wisely,

Doug

Stocks Rested

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Stocks rested though the bears briefly made an appearance after the China credit downgrade but we quickly shook off the mounting debits as traders bought the dip in the tech giant’s.  The labor market data in the JOLTS report pointed to a slowing economy but encouraged the bulls as bond yields fell that additional rate hikes are unlikely.  Today we have more labor data pending in the ADP along with Mortgage, Trade, Productivity, and Petroleum data along with a handful of notable reports to inspire traders.  Corporate buybacks will begin winding down as their blackout period begins next week so plan your risk accordingly. 

Overnight Asian markets shook off the China downgrade with the Nikkei leading the buying up 2.04% with only the Shanghai seeing modest selling.  European markets trade green across the board this morning with the DAX extending its record high. U.S. futures also point to a resurgence of buyers after a brief two-day rest ahead of earnings and economic data. 

Economic Calendar

Earnings Calendar

Notable reports for Wednesday include AI, BF.B, CPB, CHPT, CHWY, DSGX, GME, GEF, OLLI, OXM, SMTC, SPWH, THO, UNFI, VEEV, VRNT.

News & Technicals’

The world is facing a major change in 2024, according to the Danish investment bank. The bank said that the past decade’s trends are coming to an end, and that the future will be shaped by some unexpected events that could have a huge impact on the financial markets. These events are unlikely but possible, and the bank warned that investors should be prepared for them. Some of the events that the bank predicted are: a global cyberattack, a new pandemic, a war between China and Taiwan, a collapse of the European Union, and a massive solar storm. These events could disrupt the global economy, politics, and society, and create new opportunities and challenges for the financial sector.

Generative artificial intelligence, which can create realistic texts, images, and sounds, is attracting a lot of attention and investment from Big Tech companies. However, these models also consume a lot of water, which raises environmental concerns. A study by Shaolei Ren, a researcher at the University of California, Riverside, revealed that ChatGPT, a popular chatbot developed by OpenAI, uses 500 milliliters of water for every 10 to 50 prompts, depending on the location and time of its deployment. The water is needed to cool down the servers that run the model, which requires a lot of computing power. The study suggests that generative AI models should be designed and deployed more efficiently, and that their water footprint should be taken into account when evaluating their social and economic impacts.

The U.S. consumer spending, which has been the main driver of the economic growth, is facing a challenge from the high interest rates on credit cards, according to some economists. Carl Weinberg, an economist at High Frequency Economics, told CNBC that consumer spending is being financed by credit cards, where interest is “over the top, out of control, off the hook right now”. He predicted that consumers will cut back on their spending in the new year, as their debt burdens increase. However, he did not expect this to push the U.S. economy into a recession. Monica Defend, the head of the Amundi Investment Institute, had a more pessimistic view. She said that she sees a coming pullback in consumer spending as sufficient to trigger a recession in the first half. She cited the weak consumer confidence, the rising inflation, and the uncertainty over the fiscal and monetary policies as the main factors behind her forecast.

Stocks rested a second day largely shaking of the credit downgrade of China as the tech giant’s found their footing as buyer bought the dip. The JOLTS report showed signs of slowing economy, weakening bond yields as odds of additional rate hikes shrink. However, some doubts emerged about whether markets are too optimistic about rate cuts with the higher for longer theme gaining some attention. Today traders will look for inspiration in a handful of notable earnings as well as Mortgage Apps, ADP, International Trade, Productivity and Petroleum data on the economic calendar.  Corporate buybacks continue but keep in mind their blackout period is quickly approaching so a last ditch effort may well surge the market higher the rest to of the week.

Trade Wisely,

Doug

Corporate Buybacks

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The urgency of corporate buybacks as we near the beginning of the blackout period was not quite enough to recover the early selling with only the IWM managing to close the day in the green.  The rest of this week’s jobs data will be the center of attention as we head toward the market-moving Employment Situation report Friday morning.  Today we will begin with the JOLTS report and a handful of notable earnings to provide bullish or bearish inspiration. However, Moody’s credit downgrade highlighting the weakening economic conditions in China could start the day with some bearish activity so plan your risk carefully.

Overnight Asian markets have had a rough session selling off across the board after a credit downgrade adding the economic concerns in China.  However, European markets trade with modest gains and losses as Ericsson surges while Nokia plunges.  Ahead of earnings and economic reports U.S. Futures point to bearish open.

Economic Calendar

Earnings Calendar

Notable reports for Tuesday include AZO, AVAV, CRMT, ASAN, BOX, CNM, PLAY, FERG, GIII, MDB, PHR, S, SIG, SFIX, TOL, & YEXT.

News & Technicals’

Moody’s, a global credit rating agency, has lowered its outlook on China’s government credit ratings from stable to negative, citing concerns over the country’s fiscal, economic, and institutional strength. Moody’s said that China’s government may have to provide more support and bailouts for local governments and state-owned enterprises that are facing financial difficulties, which could weaken China’s fiscal position and increase its debt burden. Moody’s also said that China’s economic growth may slow down further due to structural challenges and external pressures and that China’s institutional capacity may not be able to cope with the rising complexity and risks of its economy. Moody’s maintained China’s long-term rating on its sovereign bonds at “A1”, which is the fifth-highest level in its scale, but warned that it could downgrade it in the future if China’s fiscal, economic, and institutional situation deteriorates.

Some experts believe that the Fed is lagging behind the market expectations and needs to cut interest rates sooner rather than later. Paul Gambles, managing partner at MBMG Group, said that the Fed is behind the curve and that traders are anticipating a 25-basis-point cut as early as March 2024. David Roche, a veteran investor and president of Independent Strategy, said that he is “almost certain that the Fed is done raising rates” and that inflation will not go back to 2% anymore. These views suggest that the Fed may have to adjust its policy stance and communication in response to the changing economic and financial conditions.

Banque Pictet, a major Swiss bank that provides private banking services, has admitted that it helped U.S. taxpayers and others evade taxes by hiding over $5.6 billion from the IRS. The bank has reached an agreement with the U.S. prosecutors to pay about $122.9 million in restitution and penalties and to cooperate with the ongoing investigation. In exchange, the Justice Department will defer the prosecution of the bank for three years and then drop a criminal charge of conspiracy to defraud the IRS, if the bank complies with the terms of the deal. The bank is one of the several Swiss banks that have been accused of facilitating tax evasion by U.S. clients, and the latest to settle with the U.S. authorities.

The S&P 500 ended its five-week winning streak on Monday, with most of the indexes closing lower despite the energy of the corporate buybacks. The best-performing sector was real estate, while sectors that rely on growth, such as information technology and communication services, lagged. Small-cap stocks gained nearly 1% today adding to their more than 3% increase last week. Today’s market movement may reflect some profit-taking in areas like large-cap technology that have driven the market higher in the recent rally. The bulls and bears will look for inspiration in several reports on the labor market, starting with the JOLTS report today. There will also be a dozen or so notable earnings reports that have the potential to inspire price action. The Moody’s credit downgrade of China could make the bears a bit more aggressive so it may be wise to take some profits or raise stoploss orders to protect your capital.

Trade Wisely,

Doug

Declining Market Breadth

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Declining Market Breadth

After an energetic gap up to begin the Wednesday session, it faded away after more tough-talking Fed speak to end the mostly flat suffering from low-volume and declining market breadth. Today has the potential to a wild on with Jobless Claims, PCE figures, and a dozen or notable earnings events for investors to decipher.  With pre-market futures pumping hard this morning working to finish the month strong we can’t rule out the possibility of a big point whipsaw so be prepared.  If OPEC decides to cut production in today’s meeting it would be wise to keep an eye on the energy sector as well.

While we slept Asian markets closed the day green across the board despite another month of manufacturing declines in China.  European markets are also bullish this morning as they work to close November strong.  Overnight futures gained strength pointing to a gap up that may well pop the Dow to a new high for the year but be careful the data out this morning could provide considerable price volatility including big point whipsaws.

Economic Calendar

Earnings Calendar

Notable reports for Thursday include ASO, AMBA, AMWD, BIG, CBRL, DELL, DOMO, FRO, KR, PD, RY, TITN, TD, UBS, ULTA, PATH, ZUMZ.

News & Technicals’

Sweden’s bid to join NATO has been delayed by the opposition of two member states, Hungary and Turkey. Sweden, along with Finland, applied to join the military alliance in May 2022, hoping to strengthen their security and cooperation with other European countries. Finland became a full member of NATO in April 2023, but Sweden’s accession has been stalled by the veto of Hungary and Turkey, who have expressed concerns over Sweden’s stance on human rights, migration, and regional conflicts. In July 2023, at a NATO summit, Turkish President Erdogan agreed to lift his veto and allow Sweden to join the alliance, after receiving assurances from Sweden’s Prime Minister Stefan Löfven on various issues. However, the Turkish Parliament still has to ratify the decision, and it is unclear when that will happen. Sweden’s NATO membership remains uncertain, as the country awaits the final approval from its last obstacle.

China’s factory activity contracted for the second consecutive month in November, as the country faced slowing demand and supply chain disruptions amid the COVID-19 pandemic. According to the official manufacturing Purchasing Managers’ Index (PMI), which measures the activity level of large and state-owned enterprises, China’s manufacturing sector shrank to 49.4 in November, down from 49.5 in October and below the median forecast of 49.7. A reading below 50 indicates contraction, while a reading above 50 indicates expansion. China’s non-manufacturing PMI, which covers the services and construction sectors, also weakened to 50.2 in November, from 50.6 in October. The data suggests that China’s economic recovery is losing momentum, as the country faces challenges from domestic outbreaks, power shortages, environmental regulations, and external pressures. China’s central bank has recently taken steps to ease monetary policy and support growth, such as cutting the reserve requirement ratio for banks and injecting liquidity into the financial system. However, analysts expect that China’s growth will remain subdued in the fourth quarter and the first half of 2024.

The Fed may face a difficult decision in 2024, as the market expects it to slash interest rates aggressively to support a weakening economy and a rising unemployment rate. According to Fed funds futures, which reflect the market’s expectations of future monetary policy, the Fed is expected to cut its benchmark rate by 1.25 percentage points in 2024, or five times by 0.25 percentage points each. However, some analysts doubt that the Fed will deliver such a dovish policy stance, as it may have to balance the risks of inflation, financial stability, and policy effectiveness. “The market keeps trying to front-run these rate cuts, only to be disappointed,” said Kathy Jones, chief fixed income strategist at Charles Schwab. The Fed has indicated that it will be data-dependent and flexible in its policy decisions, but it may face challenges in communicating and managing the market’s expectations.

The stock market ended the day mostly flat, whipsawing on low-volume and declining market breadth after attempting a break to a new annual high Dow. However, investors continued efforts to front-run lower interest rates but one might have to consider the hot 5.2 GDP provides the Fed all the coverage it needs to keep rates up. Today, we will look to Jobless Claims, PCE, PMI, Pending Home Sales, and several notable reports to find inspiration to keep the buying party going until the end of the month. It may be wise to keep an eye on the energy sector as well if Thursday’s OPEC+ meeting results in an overall production cut due to the weakening demand. With the big effort to gap the market higher this morning watch for clues of whipsaw from this very extended market condition.

Trade Wisely,

Doug

Investors Weighed Data

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Equity markets sea-sawed on low-volume Tuesday as investors weighed better-than-expected consumer confidence data against the mixed signals on inflation and rates from the Fed governors. The one thing consistent with their statements is the 2% inflation target that they say will require the rate to stay higher for longer.  That aside, today traders will grapple with GDP, International Trade, Inventories, Petroleum Status, Fed Speak and Beige Book reports.  Along with that busy day of earnings with a theme of retail for the bulls or bears to find inspiration.  Futures are popping with confidence this morning but expect considerable price volatility traders react to the data.

Asian markets closed the day mostly lower with China hitting a one-month low and the tech-heavy HIS declined more than 2%.  However, European markets trade mostly bullish this morning hoping to finish the month strong with only the FTSE trading modestly lower.  U.S. futures point to another gap-up bullish open seemingly very confident the pending data with support the higher prices but remember anything is possible so be prepared!  

Economic Calendar

Earnings Calendar

Notable reports for Wednesday include ARWR, BILI, CRDO, CRM, DCI, DLTR, FTCH, FIVE, FL, HRL, LZB, NTNX, OKTA, PDCO, WOOF, PVH, SNOW, SNPS, VSTS, VSCO, ZUO.

News & Technicals’

Apple, the tech giant, is considering ending its partnership with Goldman Sachs, the bank, on its credit-card and savings account products, according to a report by Bloomberg. Apple has reportedly given Goldman Sachs a proposal to terminate the partnership within the next 12 to 15 months. The partnership, which was launched in 2019, involved offering the Apple Card, a credit card that is integrated with Apple Pay and the iPhone, and the Apple Savings, a savings account that offers high-interest rates and cash-back rewards. The partnership was seen as one of the most prominent examples of the collaboration between a tech company and a bank and was expected to attract millions of customers and generate billions of dollars in revenue. However, the partnership has also faced some challenges, such as regulatory scrutiny, customer complaints, and technical glitches. The report said that Apple and Goldman Sachs have not reached a final decision on the partnership and that both companies declined to comment on the matter.

The economic outlook for the G7 countries in 2024 is very pessimistic, according to some of the major banks and asset managers. Deutsche Bank has the most gloomy forecast, predicting that Canada will have the highest GDP growth among the G7 at only 0.8%, while the other countries will have negative or zero growth. Goldman Sachs Asset Management economists are also skeptical about the prospects of a rate cut by the Fed next year unless the growth slows down much more than expected. JPMorgan Asset Management strategists also warn that the risk of a U.S. recession is not gone, but only postponed, as the higher interest rates will eventually hurt the economy. These forecasts suggest that the G7 countries will face a lot of challenges and uncertainties in 2024, as they try to recover from the pandemic and deal with the inflation and debt pressures.

Okta, a leading provider of identity and access management solutions, has admitted that a recent cyberattack compromised the data of all its customers. The company had initially claimed that the breach only affected less than 1% of its clients, but a new message sent on Tuesday revealed the full extent of the damage. The hackers exploited a vulnerability in Okta’s customer support system and gained access to sensitive information such as names, email addresses, passwords, and security questions. The news of the massive data breach sent Okta’s stock price tumbling by 11% on Tuesday, adding more pressure on the company as it prepares to announce its third-quarter earnings on Wednesday. Okta has apologized for the incident and said it is working with law enforcement and security experts to investigate the attack and prevent future ones.

Equity markets ended the day slightly higher on Tuesday, as investors weighed data from a consumer confidence report against the mixed signals from Fed officials about the future course of monetary policy. While Fed Governor Waller expressed confidence that the current policy stance is adequate to bring inflation back to 2%, Fed Governor Bowman warned that the Fed may need to tighten policy further to lower inflation to 2%, as inflation readings have not eased enough in recent months. Higher for long has been the montara of the but overall the market seems convinced the Fed will soon cut rates. However, those decisions are a bit further down the road while the task at hand will be today’s earnings events and the pending GDP figures.  Futures are pushing with confidence that those numbers will support more bullishness but if it happens to disappoint be prepared for a morning of volatility if the bears wake up.

Trade Wisely,

Doug

Anemic Volume

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Anemic Volume

The indexes struggled to find momentum on Monday suffering from post-holiday anemic volume which is pretty typical as traders extend vacations and travel home.  With a GDP reading on Wednesday and the Core PCE numbers on Thursday, it is possible the light volume chop could continue today.  However, we have some earnings and economic reports today that may well inspire the bulls or bears so be prepared for just about anything in this short-term very extended condition.

Asian markets closed mixed overnight with modest gains and losses trying to shake off the growing real estate crisis in China.  However, European markets trade in the red across the board this morning with modest losses as momentum stalls.  Ahead of earnings and economic data, the U.S. futures suggest a flat to slightly bearish lean but that could quickly improve or get worse depending on the reaction to pending data.

Economic Calendar

Earnings Calendar

Notable reports for Tuesday include AZEK, BMO, CRWD, HPE, INTU, LESL, NTAP, PDD, SPLK, & WDAY.

News & Technicals’

Some regional banks in the U.S. are facing the risk of being acquired by their more profitable rivals, according to a report by KBW, a financial services research firm. KBW analysts said that Comerica, Zions, and First Horizon are among the banks that might be targeted for takeover, as they have lower returns and weaker growth prospects than their peers. On the other hand, larger banks with strong returns, such as Huntington, Fifth Third, M&T, and Regions Financial, are well-positioned to expand their market share and scale by buying smaller banks. KBW analysts also said that two other banks, Western Alliance and Webster Financial, could also consider selling themselves, as they have attractive franchises and valuations. The report said that the consolidation in the regional banking sector is likely to continue, as the banks face competitive pressures, regulatory challenges, and technological changes.

Wells Fargo Securities has released its 2024 stock market forecast, and it is not very optimistic. The firm’s head of equity strategy, Chris Harvey, predicts that the S&P 500 will end 2024 at 4,575, which is only 75 points higher than its closing level on Monday. Harvey expects the stock market to face a lot of volatility and uncertainty in the first half of 2024, as the economic growth and the Federal Reserve’s policy will be in a dilemma. He said that if the economy grows faster, the Fed will not ease its monetary policy, and if the economy slows down, the earnings will be lower, and the Fed will eventually cut its interest rate. He said that the second half of 2024 will be better, but the first half will be “really, really sloppy.” Harvey’s forecast is based on his analysis of the economic, earnings, valuation, sentiment, and technical factors that affect the stock market. He also shared his views on the sector and style preferences, as well as the risks and opportunities for investors.

The European tech sector has faced a significant drop in funding in 2023, according to a report by Atomico, a venture capital firm. The report, titled “State of European Tech”, showed that the total funding for European tech companies backed by venture capital is expected to decline by 45% in 2023, compared to 2022. The report attributed the decline to the reduced inflow of institutional capital from the U.S. and Asia, which had boosted the European tech market in 2020 and 2021, but retreated in the last year due to the macroeconomic uncertainties. The report also highlighted the bright spot of artificial intelligence, which attracted 11 mega funding rounds of $100 million or more in 2023, showing the strong potential and innovation of the European AI sector. The report also covered other aspects of the European tech ecosystem, such as talent, diversity, regulation, and social impact. You can read the full report here.

The indexes ended the day with modest losses on Monday, suffering from anemic volume which is pretty normal after a holiday shutdown. Today we have a bit more inspiration for the bulls and bears on the economic calendar and several notable earnings that have the potential to be market-moving as they are in the tech sector. However, the T2122 indicator continues to signal a short-term over-bought condition so guard yourself from getting caught up in the fear of missing out and chasing already extended stocks. That said the bulls remain in control and the so-called magnificent seven seem to have the ability to lift three of the indexes without the help of other stocks so it would be unwise to ignore the bullish enthusiasm.

Trade Wisely,

Doug

Unchanged over the Holiday

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Markets largely unchanged after the Thanksgiving holiday and its possible it could be a light and choppy Monday as many traders likely traveling home or extending their vacation time with family.  The T2122 indicator continues to display a short-term overbought condition but there is no clue in the price action that the bulls are ready to stop buying just yet.  Today we will look for inspiration in the New Home Sales and Dallas Fed MFG numbers with a very light day of earnings.  However, with pending GDP and PCE numbers mid-week we can expect substantial volatility as the market reacts. 

Asian markets sold off across the board while we slept with Chinese real estate decline and a Japanese surge of 2.3% in service inflation bringing out the bears.  European markets are also starting the week lower across the board modestly giving up some of last week’s gains.  U.S. futures point to a slightly lower open with eyes on the market moving GDP and PCE numbers pending mid-week. 

Economic Calendar

Earnings Calendar

Notable reports for Tuesday include CRNC,& ZS.

News & Technicals’

Nuclear power is one of the most controversial topics in the global efforts to reduce greenhouse gas emissions and fight climate change. Nuclear power is a low-carbon source of energy, but it also poses significant risks and challenges, such as safety, waste management, proliferation, and cost. Nuclear power is expected to be a key issue at the COP28 conference in Dubai, where world leaders and experts will discuss how to achieve net-zero emissions by 2050. One of the events that will focus on nuclear power is the “Atoms4NetZero” ministerial event on Dec. 5, where representatives from countries that use or plan to use nuclear power will share their views and experiences. The event will also address the role of nuclear innovation and technology in the energy transition. The event is organized by the International Atomic Energy Agency (IAEA), the United Nations agency that promotes the peaceful use of nuclear energy. The event aims to highlight the potential benefits and challenges of nuclear power, and to foster dialogue and cooperation among stakeholders.

The stock markets in the Asia-Pacific region fell on Monday, as the Chinese market was dragged down by the slump in the property sector, while the Japanese market faced the pressure of rising service inflation. The Chinese property firms suffered from the ongoing debt crisis of Evergrande, the largest real estate developer in China, which missed another bond payment deadline last week. The property sector accounts for a large share of the Chinese economy, and its troubles have dampened the investor sentiment and the consumer confidence. The Chinese industrial profits also declined for the third consecutive month in November, but at a slower pace than before, indicating some signs of recovery. The Chinese market will be closely watching the official and the Caixin manufacturing data for November, which will be released later this week. The Japanese market was also under stress, as the service producer price index, which measures the changes in the prices of services, rose to 2.3% in October, the highest level since January 2020. This was higher than the 2% increase in September, and reflected the impact of higher energy and transportation costs. The service inflation added to the worries of the Bank of Japan, which has been struggling to achieve its 2% inflation target for years.

U.S. consumers spent $9.8 billion online on Black Friday, the biggest shopping day of the year, according to Adobe Analytics. This was a 7.5% increase from last year, and showed that consumers were eager to take advantage of the big discounts offered by retailers. Consumers also found it easier to compare prices and deals online, rather than going to physical stores. However, the online spending spree is expected to slow down after Cyber Monday, the next big deal day, as retailers will reduce their discounts for the rest of the holiday season.

The stock market was almost unchanged on Friday, after the Thanksgiving holiday. The S&P 500 had a small 1% increase for the week, extending its positive streak for the fourth week in a row. There was not much news to move the market today, from the economic or the earnings front. The market seems to be waiting for the PCE inflation report next week, which is the Fed’s preferred measure of inflation. The interest rates on Treasury bonds rose slightly, with the 10-year yield ending at around 4.45%. The Asian markets struggled do to the sharp declines in real estate price while Japanese service inflation surged 2.3% bring out the bears. We have a light day on the earnings calendar but we have New Home Sales and the Dallas Fed numbers for the bulls or bears to find inspiration.  Keep in mind many traders will be traveling home from the holiday so don’t be surprised if the volume is light.

Trade Wisely,

Doug