Morning Roundup

By Mark Masterson on October 24, 2023

Good morning,

Below are the news items moving markets today:

---

Executive Summary:

Markets looking to rebound looking ahead to some big tech earnings after hours today…..

Here is the full deck of earnings with some big names reporting this week:

Earnings Whispers 10 23 23

Another week of economic data.  I will watch the Q3 GDP on Thursday.  Most expect a solid number, but it may be the final strong print before the data weakens. 

• *SERVICES PMI (TUES.)
• *MANUFACTURING PMI (TUES.)
• *NEW HOME SALES (WED.)
• *Q3 GDP (THURS.)
• *JOBLESS CLAIMS (THURS.)
• *DURABLE GOODS ORDERS (THURS.)
• *PENDING HOME SALES (THURS.)
• *CORE PCE INFLATION (FRI.)
• *CONSUMER SENTIMENT (FRI.)

We also get more Fed speakers and another Powell speech this week:

• *FED CHAIR POWELL (WED. 4:35PM)
• *FOMC MEMBER WALLER (THURS. 9:00AM)
• *FOMC MEMBER BARR (FRI. 9:00AM)

With the Fed meeting in about a week – Powells comments will be watched closely.  I tend to agree with JP Morgan CEO Jamie Dimon as he said yesterday…..”central banks’ forecasts have been “100% dead wrong”

One of the positive catalysts yesterday was a bond rally.

Why did bonds rally?

First – yields hit 5%.  That is a big round number, and acted like a magnet for yields.  Once it gets there, it is natural resistance.

Perhaps a larger catalyst was the tweet by Bill Ackman letting everyone know he covered his bond shorts.  I always laugh when I see these tweets.  These billionaires can move markets with their tweets, and you know he positioned himself ahead of the tweet and likely went long the 10 year treasury bond.  When Ackman tweeted he covered his short, he knows algo’s are going to cover their shorts by buying the bonds back – pushing up prices and down yields.

• Billionaire investor Ackman says ‘covered our bond short’ http://reut.rs/45LK8Gh
• Bill Ackman said earlier today that he covered his short bet on US Treasuries, sparking today’s Treasury rally off earlier weakness that saw 10Y move above 5% for first time since 2007.
• Ackman also said economy slowing faster than recent data suggest, and comes after the Pershing Square founder disclosed in August a short bet on 30Y Treasuries, arguing structural changes like deglobalization and energy would add to upside risks around inflation, while supply dynamics would also push yields higher (Bloomberg).

You can see the drop in yields yesterday.

Is it the start of a trend lower – or just a one or two day pop in bonds as traders cover their shorts in bonds?

Time will tell.

If yields can pull back, that could certainly take some pressure off of markets.

Of equal importance is the US Dollar chart.

You can see it has stopped rising – but it has not started any meaningful decline either.

In fact, it is “flagging” as it moves sideways.  Often these flags are more of a pausing pattern and that does indicate there is risk the dollar could push higher.

A lower dollar would be a positive catalyst for markets – while a higher dollar will likely weigh on markets.

Bill Gross is the latest in a long list of billionaire investors sounding the alarm over the next quarter or two for the economy……

He joins the list of Ray Dalio, Paul Tudor Jones, Jeremy Grantham, Stan Druckenmiller, Jeff Gundlach, and others….

• ‘Bond King’ Bill Gross sees a recession in the 4th quarter and reveals what he’s doing with his money  https://t.co/npA9U4eUUg

Perhaps they are just looking at the below chart showing the yield curve inversions – and the de-inverting going on – which happens right before a recession…..

Ted Oakley – 10 24 23

---

Articles of Interest:

• Markets:
  • Bond volatility spilling into other assets beyond equities (Bloomberg)
  • Seven large US tech companies have driven all of the gains in global stocks this year on AI growth (FT)
  • Hedge funds have trimmed exposure to megacap tech names in recent days (Reuters)
  • Bitcoin soars to 1-1/2-year high on ETF bets (Reuters)
• Geopolitics:
  • Israel willing to delay Gaza invasion to discuss large release of hostages (Axios)
  • US readies plans for evacuation of over 600K Americans living in Israel and Lebanon if Gaza war escalates (WP)
  • Intelligence shows Iranian-backed militias ready to ramp up attacks against US forces in Middle East (CNN)
  • Ukraine says Israel-Hamas war shows West must ramp up arms production (Politico)
  • US and China held virtual meeting to discuss domestic and global macroeconomic developments (Reuters, Bloomberg)
  • China’s Foreign Minister Wang to visit Washington for high-level meetings regarding Middle-East tensions (Bloomberg)
  • EU fails to agree on call for ‘humanitarian pause’ to allow aid into Gaza (Politico)
  •  

---

Charts of the day:

Market is getting a bit oversold here.

Yesterday 71% of $SPX stocks are back below their respective 200-day moving averages. This is the lowest level seen this year and falls within the 12%ile over the past decade.

Oversold conditions do present the opportunity for a bounce…..

Tier1Alpha.com 10 23 23

Another chart showing the commodity undervaluation to stocks.

Below the Goldman Sachs Commodity Index versus the S&P 500.

When it is at these low levels, it often comes before an extended period when commodities outperform stocks. (when it is rising, commodities are outperforming stocks.  When falling, stocks are outperforming commodities)

Bloomberg.com/ Investinbest.com 10 23 23

---

Quote of the day:

“Go the extra mile. It’s never crowded there.”

-Dr. Wayne D. Dyer