What you need to know…
The S&P 500 Index ($SPX) (SPY) today is up +0.12%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.34%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.96%.
The broader indexes are higher today after positive earnings news from Amazon (AMZN) and Intel (INTC) boosted tech stocks. The Nasdaq 100 today is up +0.96%, reversing part of the sharp sell-offs of -1.89% seen on Thursday and -2.47% on Wednesday on negative Google and Meta news.
Meanwhile, the Dow Jones Industrials Index today is being weighed down by a -5.5% drop in Chevron (CVX) and a -3.1% drop in JP Morgan Chase (JPM) on news CEO Dimon is selling $141 million of stock.
Crude oil prices are up +0.82% today, and the stock market was undercut by Middle East tensions after U.S. Defense Secretary Lloyd Austin said President Biden ordered “precision self-defense strikes” against two facilities in eastern Syrian that were used by Iran’s Islamic Revolutionary Guard Corps and affiliated groups. The U.S. strikes were in response to attacks against U.S. personnel in Iraq and Syria since October 17. The market’s biggest fear is the possibility that the Israel-Hamas war could turn into a hot war between the U.S. and Iran.
Also, Israeli troops overnight conducted their second limited ground incursion into Gaza before withdrawing. The markets are waiting for Israel’s all-out ground invasion, which could spark an expansion of the war to include Hezbollah in Lebanon and other Iranian-backed groups.
Today’s U.S. PCE deflator report, which is the Fed’s preferred inflation measure, was mostly in line with market expectations and had little impact on expectations for Fed policy. The Sep PCE deflator report of +0.4% m/m was slightly higher than expectations of +0.3%, but the year-on-year figure of +3.4% was in line with market expectations. The Sep core PCE deflator report of +0.3% m/m and +3.7% y/y was in line with market expectations.
The U.S. Sep personal income report of +0.3% m/m was slightly weaker than expectations of +0.4%, but the Sep personal spending report of +0.7% m/m was stronger than expectations of +0.5%.
Today’s final-Oct U.S. consumer sentiment index from the University of Michigan was revised higher by +0.8 points to 63.8, which was stronger than expectations for an unchanged level but was still a 5-month low. The index was down by -4.1 points from September, marking the third consecutive monthly decline in consumer sentiment.
The markets are discounting a 2% chance that the FOMC will raise the funds rate by +25 bp at next week’s FOMC meeting (Oct 31-Nov 1), an 18% chance for that +25 bp rate hike at the following meeting on Dec 12-13, and a 10% chance for that +25 bp rate hike at the FOMC meeting after that on Jan 30-31, 2024. The markets are then expecting the FOMC to begin cutting rates later in 2024 in response to an expected slowdown in the U.S. economy.
U.S. and European bond yields are mixed. The 10-year T-note yield is up +0.9 bp at 4.854%. The 10-year German bund yield is down -2.7 bp at 2.834%. The 10-year UK gilt yield is down -5.6 bp at 4.540%.
Overseas stock markets are mixed. The Euro Stoxx 50 is down -0.53%. China’s Shanghai Composite Index today closed up +0.99%. Japan’s Nikkei 225 today closed up +1.27%.
Today’s stock movers…
Amazon.com (AMZN) is up +7.4% after positive earnings and revenue news and positive news about its cloud prospects.
Intel (INTC) is up +9.5% after positive management guidance for Q4 revenue and earnings.
Chevron (CVX) is down -5.5% after missing its earnings consensus and warning of lower margins.
Exxon (XOM) is down -1.9% on an earnings miss, although the company had higher-than-expected cash flow and raised its dividend more than expected.
JP Morgan Chase (JPM) is down -3.1% on news that CEO Jamie Dimon plans to sell $141 million JPM shares in 2024, ostensibly for financial diversification and tax-planning purposes.
Ford (F) is down -9.6% after an earnings miss. Ford also withdrew its guidance due to the effects of the UAW strike and as it waits for ratification of the tentative agreement with the UAW that it announced late Wednesday.
Rivian (RIVN) is up +0.1% after Cantor Fitzgerald raised its recommendation on the stock to overweight from neutral and said it expects strong EV demand to continue into 2024.
Across the markets…
December 10-year T-notes (ZNZ23) are unchanged, and the 10-year T-note yield is up +0.9 bp at 4.854%. T-note prices saw some downward pressure today after the PCE deflator report was slightly stronger than expected on a month-on-month basis at +0.4% m/m. Also, the Sep personal spending report of +0.7% m/m was stronger than expectations of +0.5%.
However, T-note prices are seeing support from safe-haven demand with the news that the U.S. carried out airstrikes against two Iranian-connected facilities in Syria. T-notes also have support from today’s small -0.5 bp decline in the 10-year breakeven inflation expectations rate to 2.419%, even in the face of higher oil prices.
The dollar index (DXY00) today is down -0.17% due to some long liquidation after the mid-week rally. The dollar has underlying support from today’s slight increase in the U.S. T-note yield. EUR/USD (^EURUSD) today is up +0.20%, and USD/JPY (^USDJPY) today is down -0.48%.
December gold (GCZ3) today is down -3.2 (-0.16%), and Dec silver (SIZ23) is up +0.097 (+0.42%). Precious metals prices are being undercut by today’s small rise in the 10-year T-note yield. However, precious metals are seeing support from today’s mildly lower dollar and safe-haven demand from the U.S. air strikes on Iranian-backed facilities.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
