We see that the S&P 500 is already above the expectations of even the most bullish analysts (after recent/yesterday's gains), which is causing stocks in the US to trade rather mixed today – especially after the economic data just released, which most analysts see as mixed.
US retail sales fell less than forecast in October and prior months were revised upwards (from 0.7% to 0.9%) ahead of the vacation season. Prices paid to US producers unexpectedly fell by the most since April 2020, suggesting that inflationary pressures are easing across the economy and also a sign of weakening demand. While I generally think that the decline in PPI (especially in Europe and China) is a clear sign of falling consumer demand and a decline in manufacturing, the combination of strong/robust US retail sales and cooling inflation (both at the producer and consumer level) is positive for Wall Street.
Gains went far, but we saw a mega pullback in yields yesterday and very broad gains – especially in risk/rate sensitive stocks. It is very unlikely that this positive sentiment will reverse today.
While I don't think there are enough fundamentals to trade a full recovery from here yet, and that further signs of a slowdown are likely, it's not yet time to go for the “pain trade” and trade against the market here.
Following the US economic data, which some investors believe is enough to make the Fed cautious, yields have risen again (I agree), but I believe the overall short-term downtrend in yields remains in place (even though yields are currently up, e.g. 6bps for the US 10-Y).
Analysts called yesterday's US CPI data the biggest surprise of the year – and it also hit our positioning. But the most important thing – especially as a short-term trader – is to trade the market and understand both the fundamentals but also the market sentiment.
We remain optimistic in the short term and cautious in the medium term. We expect some of the USD's oversold condition to reverse, which will also weigh on riskier currencies such as the AUD or GBP (which is additionally facing headwinds from the unexpectedly cool UK inflation data). If the USD recovers some of yesterday's sharp losses, this will also weigh on commodity prices and the energy and materials sectors.
👁 ROB'S MARKET OVERVIEW:
November 15, 2023
🇺🇸 US Markets ➡️/↗️
Cyclical Stocks ↗️
Tech/Growth Stocks ↗️
Financial Stocks ➡️
Defensive Stocks ➡️/↗️
Energy Stocks ➡️
Materials Stocks ➡️
USD ↕️/↗️ (edging higher after yesterday's overselling)
EUR, CAD, CHF ➡️/↗️
AUD, JPY ➡️/↘️
⚒ Commodity Markets ↕️/↗️
Oil prices ↘️/➡️/↗️
Natural Gas prices ↗️/➡️
Metal prices ➡️/↗️
Gold ↘️/➡️/↗️ (I expect yields to edge lower after current short-lived recovery gains)
⚡️Cryptos ↕️/↗️ (rebounding after yesterday's losses; Losses yesterday due to money pushed into stocks)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)