Powell Scares Market During Q & A (November 4 Market Recap)

November 7, 2022

Powell Scares Market During Q & A (November 4 Market Recap)

Indices

Dow 32,403 -458 or –1.4%.
Nasdaq 10,475 -627 or –5.6%.
S&P 3,770 -131 or -3.4%.
USD10Y 4.010% +14.6bp or +3.6%.
WTI Crude $92.61 bbl +$6.49 or +7.5%.

Powell Scares Market During Q & A

As expected, the Federal Reserve Open Market Committee (FOMC) raised rates another 0.75% for a fourth consecutive meeting. Wednesday’s increase makes a total of six rate hikes and 3.75% in rate hikes this year. Markets rallied initially upon the release of the Fed statement despite no real changes from the last. As Fed Chair Powell began his press conference it became painfully obvious that the market had inferred meaning into the Fed statement that was not implied, which is to say that the Fed is not ready to pivot, nor pause, and is committed to reducing inflation to 2% as measured by the Core Personal Consumption Expenditure (PCE). All indices sold off sharply and although the markets bounced a bit on Friday, it was not enough to save all three from a down week.

Another Big Week

Core and Headline CPI are the big attractions this week as earnings season winds down and multiple Fed officials speak.

Economic Calendar

Monday – N/A.
Tuesday – Election Day. Earnings: Disney (DIS), AMC Entertainment (AMC)
Wednesday – N/A.
Thursday – Initial Jobless Claims. October Headline and Core CPI. Earnings: Toast (TOST)
Friday – Veteran’s Day (Equity Markets Open).

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November 4 Daily Trading Recap…

Monday – Dow -128 to 32,732 Nasdaq -114 to 10,988, S&P -29 to 3,871, USD10Y -4.7bp to 4.077%

Ten of eleven S&P sectors traded down today, led lower by Communication Services, Technology, and Utilities.
October Chicago PMI came in light at 45.2 vs expectations of 47 and vs last month’s 45.7 print.

Tuesday – Dow -79 to 32,653, Nasdaq -97 to 10,890, S&P -15 to 3,856, USD10Y –2.5bp to 4.052%.

Six of eleven S&P sectors traded down today, led lower by Communication Services, Consumer Discretionary, and Technology.
October S&P US Manufacturing PMI (final) beat expectations at 50.4 vs 49.9 and beat September’s 49.9 print.
October ISM Manufacturing Index also beat expectations at 50.2% vs 50.0% but fell vs last month’s 50.9% print.
September Job Openings and Labor Turnover Survey (JOLTS) showed an increase of 400,000 openings for a total of 10.7 million vs August’s 10.3 million number and was 900,000 greater than expectations.
Earnings: Uber (UBER) beat revenues, lost $1.2 billion during the quarter and traded up nearly 12% on the day. Advanced Micro Devices (AMD) missed their earnings and revenue expectations, guided margins lower and traded up 4.24% post-close.

Wednesday – Dow –505 to 32,147, Nasdaq -366 to 10,524, S&P –96 to 3,759, USD10Y +0.07bp to 4.059%.

All eleven S&P sectors traded down today, led lower by Consumer Discretionary, Technology, and Communication Services.
The FOMC raised interest rates another 75bp today. The Committee has now raised rates a total of 3.75% this year with the December meeting still to come. While the initial statement published had the markets rallying with its perceived dovish tone, Chairman Powell’s subsequent press conference took a decidedly hawkish turn and sent the markets lower.
The October ADP Jobs Report was stronger than expected at 239,000 jobs added last month vs expectations of 195,000 and September’s 192,000 print. Non-Farm payrolls loom this Friday.
Earnings: Qualcomm (QCOM) reported inline earnings and a small revenue beat but lowered their Q1 guidance; QCOM is trading down 7.09% post-close. Roku (ROKU) fell 17.67% after beating their numbers but guiding down Q4 revenues. Etsy (ETSY) popped 11% after beating their numbers and reaffirming forward guidance. MGM Resorts (MGM) beat revenues but missed revenue estimates for China and Las Vegas; MGM is trading down 2.85% after hours. Robinhood (HOOD) beat their numbers and rose 3.16% in after-hours trading. Zillow (Z) beat their numbers and traded up 1.69% in the extended session. Airbnb (ABNB) beat their numbers but traded down 13.43% in the regular session after guiding down Q4 revenues.

Thursday – Dow -146 to 32,001, Nasdaq -181 to 10,342 S&P -39 to 3,719, USD10Y +6.5bp to 4.124%

Six of eleven S&P sectors traded down today, led lower by Technology, Communication Services, and Financials.
Jobless claims fell to 217,000 claims vs 220,000 expected and last week’s revised higher print of 218,000. Continuing claims ticked up 45,000 to 1.485 million.
October U.S. Services PMI beat expectations at 47.8 vs 46.6 and last month’s print of 46.6.
October ISM Services Index missed at 54.4% vs expectations of 55.5% and vs last month’s 56.7% print.
Earnings: Starbucks (SBUX) beat their numbers and traded up 2.42% post-close. Doordash (DASH) popped 11.43% after hours on a revenue beat despite losing more than expected. PayPal (PYPL) beat numbers, raised guidance, and yet the stock still traded down nearly 10% in the extended session. Twilio (TWLO) plummeted 21.94% post close despite a strong third quarter after they reduced their Q4 revenue guidance. Coinbase (COIN) traded up 4.93% despite missing their numbers.

Friday – Dow +402 to 32,403, Nasdaq +132 to 10,475, S&P +50 to 3,770, USD10Y +3.2bp to 4.156%.

Ten of eleven S&P sectors traded higher today led by Materials, Financials, and Communication.
October Non-Farm Payrolls showed an addition of 261,000 jobs vs expectations of 205,000 and last month’s 326,000 print.
October Unemployment rose slightly to 3.7% vs expectations of 3.5% and last month’s 3.5% print.

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