Stock futures are trading slightly higher, but bonds are lower causing yields to rise again after the recent slump. Initial jobless claims figures, which confirmed signs of a slowdown in the labor market, gave a small boost to equity markets. Overall, however, we see all markets moving sideways with little volatility and trading volume as traders await comments from Fed Char Jerome Powell and other Federal Reserve spokespeople.
Yields on 10-year Treasuries are trading 5 basis points higher. Todays's sale of $24bn worth of 30-year bonds will be another test of whether the market is able to accept higher issuance after demand for 10-year bonds was slightly lower than expected yesterday. The USD is little changed (slightly stronger), as are almost all assets with the exception of Bitcoin, which has risen to an 18-month high and surpassed the $36,000 mark on optimism over a possible approval of a Bitcoin ETF.
Markets are still betting that the steepest global tightening cycle in a generation is over and monetary easing will begin in mid-2024. We see over-optimism, especially on rate cuts – giving the Fed room to push back on dovish hopes and reiterate that rates will stay at current levels for longer (possibly more than 6 months).
Powell will speak at 14:00 Washington time (19:00 UTC+0) during a panel discussion on policy challenges. Before that, however, other key Fed members as well as ECB President Lagarde will give speeches. Today's market will be strongly influenced by the statements of the central bank (=Fed) policymakers.
If yields rise, the risk of profit-taking increases. I expect the stock market rally (which is now just a big tech rally anyway) to end today unless Fed Powell doesn't shows resolve to push back dovish hopes. Talk of a strong US economy that could avoid a relapse into recession could also help Wall Street in the short term. Overall, however, macroeconomic headwinds and uncertainty make a reversal of gains or further profit-taking increasingly likely and are fundamentally (but also technically) supported.
There is still relatively little movement on the currency markets, which remain USD and US Treasury yields driven.
👁 ROB'S MARKET OVERVIEW:
November 9, 2023
🇺🇸 US Markets ↗️/↕️/↘️ (we expect increased profit taking ~2-3 hours post NYSE opening)
Cyclical Stocks ↗️/↕️/↘️
Tech/Growth Stocks ↗️/↕️/↘️
Financial Stocks ↗️/➡️
Defensive Stocks ➡️/↗️
Energy Stocks ↗️/➡️
Materials Stocks ↗️/➡️
GBP, EUR, JPY ➡️
⚒ Commodity Markets ↗️/↕️
Oil prices ↗️/➡️/↘️
Natural Gas prices ↗️/➡️
Metal prices ↗️/➡️
Gold ➡️/↘️ (a bit more headwinds as yields likely edge higher)
⚡️Cryptos ↗️/↕️ (benefiting from ETF approval optimism, potentially testing $39K – $40k range soon)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)