The Morning Call
11/3/22
The
Market
Technical
Wednesday in the charts.
Note: the Santa
Claus melt up has clearly experienced a rallyus interruptus. The S&P
touched its 100 DMA and quickly retreated, in the process breaking the uptrend
off its 10/13 low. Support exists at the lower boundary of its short term
downtrend (~3650) and its June low (~3633). However, many of the technical
factors driving the initial uptrend are still in place. So, which is more
powerful, those technical factors or fear of a Fed instigated recession? This
is not a time to be fiddling with the Market.
JP
Morgan thinks that it is too soon to give up on the Santa Claus rally.
More levels to watch.
https://www.zerohedge.com/the-market-ear/cdzoifsusp
Fundamental
Headlines
The
Economy
US
Weekly initial
jobless claims totaled 217,000 versus expectations of 220,000.
Q3 nonfarm productivity
increased 0.3% versus predictions of +0.6%; unit labor costs rose 3.5% versus
4.1%.
The September
trade balance was -$73.3 billion versus consensus of -$72.2 billion.
International
The October
Chinese Caixin services PMI was reported at 48.4 versus estimates of 49.1; the October
composite PMI was 48.3 versus 49.1; the October UK services PMI was 48.8 versus
47.5; the composite PMI was 48.2 versus 47.2.
Other
New home affordability reaches new low.
How job openings explain everything in the
economy right now.
https://www.tker.co/p/september-jolts-job-openings
The Fed
The FOMC wrapped
up its November meeting yesterday, raising rates another 75 basis
points---which was expected. In its official statement (see below), the
language was more dovish than many expected, specifically this comment: In determining the pace of future
increases in the target range, the Committee will take into account the
cumulative tightening of monetary policy, the lags with which monetary policy
affects economic activity and inflation, and economic and financial developments.
However, in Powell’s subsequent
presser, he completely walked back that dovish tilt stating that rates could go
higher and stay there longer than currently embodied in the ‘dot plot’---which,
as you know is contrary to my outlook (and as an aside totally screwed the day
traders that bought on the dovish official statement). If that proves the case,
then not just my but many others economic growth forecasts (and with it corporate
earnings estimates) will be coming down.
https://www.calculatedriskblog.com/2022/11/fomc-statement-raise-rates-75-bp.html
The Bank of England raises rates accompanied
by dovish rhetoric.
https://www.zerohedge.com/markets/three-things-traders-expect-bank-england
Inflation
Here is a dove’s proposal
for Fed policy. The problems with his advice is that it (1) ignores the
question of how deeply embedded inflation is in the economy, and (2) only
addresses one of the multitude of evils generated by a too loose Fed and a too
profligate federal government including the mispricing of risk (assets), the misallocation
of assets, the inequitable distribution of income to name just a few. None of these will be corrected until the Fed
(and the federal government) alters its policies, meaning shrinking the bloated
money supply, allowing the markets to set the price of risk and fulfill the
creative destruction needed to clear the dead wood out of the US economy.
https://time.com/6222613/painless-fix-high-inflation/
And he ignores ‘resilience.’
https://alhambrapartners.com/2022/10/31/weekly-market-pulse-rational-optimist/
Recession
World’s largest container ship company warns
of slowdown.
China
China’s real estate problem.
News on Stocks in Our Portfolios
Cummins press release (NYSE:CMI): Q3 EPS of $2.82 may not be comparable to
consensus of $4.83.
Revenue
of $7.3B (+22.3% Y/Y) beats by $170M.
FactSet
Research Systems (NYSE:FDS) declares $0.89/share quarterly dividend, in line with previous.
UPS (NYSE:UPS) declares $1.52/share quarterly dividend, in line with previous.
What
I am reading today
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