Indices Higher, Crude, Inflation, Yields Lower – Nov 17 Market Recap
- Dow 34,947, +664 or +1.93%.
- Nasdaq 14,125, +327 or +2.36%.
- MSCI EAFE 2011.90, +88.98 or +4.42%.
- S&P 4,514, +99 or +2.24%.
- USD10Y 4.441%, -18.7bp or -4.04%.
- WTI Crude $75.84/bbl, -$0.54 or -0.71%.
Indices Higher, Crude, Inflation, Yields Lower
At this time last week, a potential government shutdown and the Moody’s downgrade of the United States’ credit outlook loomed large over the markets. Monday morning came and the Moody’s downgrade was a non-event. On Tuesday, the House, against all odds, passed a clean continuing resolution funding the government through at least January 2024. The Senate quickly passed the measure and sent it to the President’s desk for his signature which was obtained on Thursday.
Meanwhile, on the economic front, the October Consumer Price index came in flat month-over- month which lowered the year-over-year number by 0.5% to 3.2%. Core CPI rose less than expected, bringing down the year-over-year number to +4.0% vs +4.1% last month. On Wednesday, the Producer Price Index fell by -0.5% in October dropping the year-over-year figure to +1.3% vs +2.1% last month. Core PPI fell by 0.1% year over year to +2.9%. Retail sales also cooled significantly in October, pressured by falling gasoline prices and manufacturing saw some signs of recovery with better numbers than expected out of New York and Philadelphia.
Third quarter earnings from the retailers were good (Home Depot, Walmart, Ross Stores, TJ Maxx) if not spectacular (Target and Gap Stores) but almost to a company, all were cautious regarding their fourth quarter estimates (Walmart actually guided expectations lower). On the tech side, 1990’s behemoth CSCO Systems reported a good quarter but guided down expectations. Applied Materials reported a great quarter and guided expectations higher only to be overshadowed by news of a Department of Justice investigation into its potentially illegal chip sales to China.
All of this is to say (TLDR), the markets experienced a very good week. Better than expected inflation data drove interest rates lower and crude oil prices continued to fall to pre-Saudi/Russia supply cut levels. Earnings were good on balance though fourth quarter results in the retail sector bare watching.
The Week in Review will be on hiatus next week and will return the week ending December 1. Happy Holidays!
Markets will be closed on Thursday for the Thanksgiving holiday but the FOMC minutes from their last meeting will be published as will October Durable Goods orders. On the earnings front, Zoom, Nordstrom and “magnificent seven” member, Nvidia are all due to report.
- Monday – October Leading Economic Indicators. Earnings: Zoom (ZM).
- Tuesday – FOMC minutes. Earnings: Nvidia (NVDA), Nordstrom (JWN).
- Wednesday – Initial Jobless Claims. October Durable Goods Orders. Earnings: N/A.
- Thursday – Markets Closed in Observance of Thanksgiving.
- Friday – November S&P Flash Manufacturing and Services PMI. Earnings: N/A.
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Nov 17 Daily Trading Recap…
Monday – Dow +54 to 34,337, Nasdaq -30 to 13,767, S&P -3 to 4,411, USD10Y +0.4bp to 4.632%.
- Six of eleven S&P sectors traded down, led lower by Utilities, Real Estate, and Technology.
- Markets brushed off the Moody’s credit outlook downgrade of the United States as investors await tomorrow and Wednesday’s CPI and PPI figures respectively.
Tuesday – Dow +489 to 34,827, Nasdaq +326 to 14,094, S&P +84 to 4,495, USD10Y -19.1bp to 4.441%.
- All eleven S&P sectors traded higher today, led by Real Estate, Utilities, and Consumer Discretionary.
- The October Consumer Price Index (CPI) was flat month over month, lowering the year over year number to +3.2% vs +3.7% last month.
- The October Core CPI increased less than expected to +0.2%, lowering the year over year number to +4.0% vs +4.1% last month.
- Earnings: Home Depot (HD) beat their numbers and offered cautious guidance.
Wednesday – Dow +163 to 34,991, Nasdaq +9 to 14,103, S&P +7 to 4,502, USD10Y +9.4bp to 4.535%.
- Seven of eleven S&P sectors traded higher today, led by Consumer Staples, Communication Services, and Financials.
- The October Producer Price Index (PPI) declined –0.5% resulting in the year over year number declining to +1.3% vs +2.2% last month.
- The October Core PPI increased by +0.1% bringing the year over year number to +2.9% vs +3.0% last month.
- October Retail Sales cooled substantially, falling by –0.1% vs +0.9% last month.
- November Empire State Manufacturing was surprisingly strong at +9.1 vs -3.0 expected and vs -4.6 last month.
- Earnings: CSCO Systems (CSCO) fell over -10% in extended trading after beating their numbers but issued light guidance on slowing orders. Target (TGT) blew out their earnings estimates on inline revenues and traded up +17.75% during the regular session. TJ Maxx (TJX) beat its numbers, raised guidance for the third time this year, and traded down -3.32%.
Thursday – Dow -45 to 34,945, Nasdaq +9 to 14,113, S&P +5 to 4,508, USD10Y -9.0bp to 4.445%.
- Seven of eleven S&P sectors traded higher today, led by Communication Services, Technology and Utilities.
- Jobless claims rose to 231,000, a 13-week high, vs 220,000 forecast and vs last week’s slightly revised higher print of 218,000 (originally 217,000).
- The November Philadelphia Federal Manufacturing Index was slightly better than expected at -5.9 vs -7.5 expected and vs last month’s -9.0 print.
- Earnings: Walmart (WMT) beat their numbers on strength in their grocery and e-commerce segments but guided their current quarter lower and traded down -8.09% during the regular session. Applied Materials (AMAT) beat their numbers, raised current quarter guidance but traded down on news of a Department of Justice investigation concerning illegal chip exports to China; AMAT traded down -7.6% in the extended session. Gap Stores (GPS) blew out their earnings estimates on slightly better revenues, issued tepid guidance for its current quarter and traded up +17.12% post close. Macy’s (M) beat their numbers on improving margins and inventories, tightened their full year guidance slightly higher and traded up +5.71 during the regular session. Ross Stores (ROST) beat their earnings and revenue expectations and maintained their current guidance for Q4.
Friday – Dow +2 to 34,947, Nasdaq +12 to 14,125, S&P +6 to 4,514, USD10Y -0.4bp to 4.441%.
- Six of eleven S&P sectors traded higher, led by Energy, Consumer Discretionary, and Industrials.
Disclaimer: This is not a recommendation to buy or sell any of the securities listed above. I personally, or a family member whose account I control, have positions in the following securities/assets…Bitcoin, Cardano, Chainlink, Ethereum, ETHE, GBTC, GM, and TSLA.