Marin Wealth Advisors, LLC.

Registered investment Advisor

October 29, 2022

Rally Has Legs, As Does Inflation, Earnings Not as Bad as Feared (October 28 Market Recap)

Indices 

  • Dow 32,861 +1,779 or +5.7%. 
  • Nasdaq 11,102 +243 or +2.2%. 
  • S&P 3,901 +149 or +3.9%. 
  • USD10Y 4.010% -20.3bp or -4.8%. 
  • WTI Crude $86.12bbl +$0.12 or +0.14%.  

Rally Has Legs

The October rally continued last week as tepid economic data at the outset paired with good earnings numbers later and sent all three indices considerably higher. S&P U.S. Manufacturing missed expectations and the Services number was even worse. October Consumer Confidence was down sharply, and two different indices showed housing prices falling 7.5% and nearly 10% month over month. September New Home Sales confirmed the chill in the housing market as sales fell 13.4% vs last month. Even earnings misses by tech giants Microsoft, Alphabet, Meta, and Amazon were not enough to quash the rally as many market observers believed that these negative data points might be enough to sway the Fed to slow down, decrease, or even pause their rate hike tightening cycle. Then on Friday, the savior of the market, Apple, reported earnings, beat their numbers, and the party was on.

As Does Inflation

Despite the Fed raising interest rates by 3 full percentage points since the beginning of the year, and despite the near certainty of two more rate hikes this year, including one this coming Wednesday, both Headline and Core CPE refuse to acquiesce and move lower. The Personal Consumption Expenditure (PCE), the Fed’s preferred method to measure inflation, is now at +6.24% YoY which is 0.12% HIGHER than the January 31, 2022 print. Core PCE is now at +5.15% YoY which is just 0.06% below where it was to start the year. Interestingly, the chances of a 75bp hike in December continue to drop; last week there was a 65% chance which decreased to 53% and which is now priced at 43%. 

Earnings Not as Bad as Feared

According to Refinitiv, earnings season is halfway completed and while there have been some high-profile misses and although the number of companies that have missed expectations is higher than normal, the current earnings growth rate has remained above 4% vs 4.5% on October 1. Unfortunately, the fourth quarter is now looking rather tepid with growth rates currently estimated at only 2.6% vs 5.8% growth at the beginning of the month. 

Another Big Week to Come

The Fed, their rate hike and Chair Powell’s press conference are the headliners for this week. In addition, there is Friday’s jobs report and earnings continue with UBER, AMD, CVS, QCOM, SBUX, PYPL, and DASH among those reporting. 

Economic Calendar 

  • Monday – October Chicago PMI. 
  • Tuesday – October S&P US Manufacturing PMI (final), ISM Services Index. September JOLTS. Earnings: UBER (UBER), Advanced Micro Devices (AMD). 
  • Wednesday – FOMC Announcement, October ADP Jobs Report. Earnings: CVS (CVS), Qualcomm (QCOM) 
  • Thursday – Initial Jobless Claims. Earnings: Starbucks (SBUX), PayPal (PYPL), DoorDash (DASH). 
  • Friday – October Non-Farm Payrolls. 

 If you know of any friends or family members who could benefit from our services and these types of communiques during these unique times, we are accepting new clients and offer a complimentary one-hour review. 

October 28 Daily Trading Recap… 

Monday – Dow +417 to 31,499 Nasdaq +93 to 10,952, S&P +44 to 3,797, USD10Y +2.1bp to 4.234% 

Tuesday – Dow +337 to 31,836, Nasdaq +246 to 11,199, S&P +61 to 3,859, USD10Y –12.6bp to 4.108%. 

  • Ten of eleven S&P sectors traded higher today, led by Real Estate, Materials, and Communication Services. 
  • October Consumer Confidence was down sharply to 102.5 vs expectations of 106.2 and last month’s 107.8 print. 
  • Two different indices showed housing prices falling 7.5% and nearly 10% month over month as the Fed’s rate hikes begin to make their presence felt in the mortgage markets. 
  • Earnings: General Motors (GM) and Coca-Cola (KO) both beat their numbers and traded up 3.61% and 2.34% respectively. Alphabet (GOOG) missed earnings and revenue projections, will reduce the pace of their hiring and traded down 6.58% post-close. Microsoft (MSFT) beat top and bottom-line expectations, but their forward guidance disappointed the Street and the stock traded down 6.71% after hours. 

 Wednesday – Dow +2 to 31,839, Nasdaq -282 to 10,970, S&P –28 to 3,830, USD10Y –9.3bp to 4.015%. 

  • Six of eleven S&P sectors traded higher today, led by Energy, Health Care, and Materials  
  • September New Home Sales beat expectations at 603,000 units vs 597,000 expected but fell precipitously from last month’s 697,000 print. 
  • Earnings: Microsoft (MSFT) and Alphabet’s (GOOG) poor earnings numbers last night helped end the string of three consecutive rallies on all three indices with the former trading down 7.7% and the latter down 9.1%. Visa (V) beat expectations and traded up 4.6%. Harley-Davidson (HOG) also beat and traded up 12.6%. Boeing (BA) missed and fell 8.8%. Meta (META formerly Facebook) beat earnings but missed on revenues and guided Q4 revenues lower; META traded down nearly 20% post-close. Ford (F) missed and took a $2.7 billion charge on its investment in Argo AI; F traded down 1.25% in the extended session. 

Thursday – Dow +194 to 32,033, Nasdaq -177 to 10,793 S&P -22 to 3,808, USD10Y –7.8bp to 3.937% 

  • Eight of eleven S&P sectors traded down today,  
  • Jobless claims fell to 217,000 claims vs 220,000 expected and last week’s unrevised 214,000 print. Continuing claims ticked up 55,000 to 1.44 million. 
  • September Durable Goods Orders missed expectations @ +0.4% vs expectations of +0.7% but up from last month’s print of +0.2%. 
  • Earnings: Amazon (AMZN) missed their estimates and guided Q4 lower; AMZN traded down 6.8%. Apple (APPL) beat both top and bottom-line estimates. 

Friday – Dow +828 to 32,861, Nasdaq +309 to 11,102, S&P +93 to 3,901, USD10Y +7.3bp to 4.010%.  

  • Ten of eleven S&P sectors traded higher today led by Technology, Communication Services, and Utilities. 
  • September Headline PCE met expectations at +0.3% while the YoY number came in at +6.24% which is 0.12% HIGHER than the January 31, 2022 print. 
  • September Core PCE also met expectations at +0.5% vs +0.6% last month but the YoY number is now at +5.15% which is just 0.06 below where it was to start the year. 
  • Earnings: Intel (INTC) beat their numbers, trimmed their guidance and stated their intent to cut $3 billion in costs next year, which of course, includes layoffs; INTC traded up 10.66%. Surprising no one, both Exxon Mobil (XOM) and Chevron (CVX) posted results that beat expectations and both companies traded at all-time highs. 

If you know of any friends or family members who could benefit from our services and these types of communiques during these unique times, we are accepting new clients and offer a complimentary one-hour review. 

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, and TSLA.