The Morning Call--Pin action in the bond market spells trouble for stocks

 

The Morning Call

 

10/24/23

 

The Market

         

    Technical

 

            Monday in the charts.

            https://www.zerohedge.com/markets/bitcoin-bonds-bid-after-bearish-bill-bails-black-gold-buck-breakdown

 

Note: the S&P ended the day below its 200 DMA for a second day (if it stays there through the close on Wednesday, it will revert to resistance).  However, the long bond rallied and the ten year Treasury finished back below 5%---a little surprising since higher yields were what was driving stock prices down last week.  I think that reflects investor  uncertainty around key levels of support/resistance.  That suggests staying on the sidelines.)

 

Buyback blackout ends.

https://www.zerohedge.com/markets/buyback-blackout-ends-launching-billions-stock-repurchases

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

The September Chicago Fed national activity index was reported at 0.02 versus consensus of 0.05.

                          https://www.advisorperspectives.com/dshort/updates/2023/10/23/chicago-fed-national-activity-index-cfnai-economic-growth-near-historical-trend

 

                        International

 

The October Japanese flash manufacturing PMI came in at 48.5 versus estimates of 49.0; the flash services PMI was 51.1 versus 52.9; the flash composite PMI was 49.9 versus 51.5; the October German flash manufacturing PMI was 40.7 versus estimates of 40.0; the flash services PMI was 48.0 versus 50.2; the flash composite PMI was 45.8 versus 46.7;

the October EU flash manufacturing PMI was 43.0 versus 43.7; the flash services PMI was 47.8 versus 48.7; the flash composite PMI was 46.5 versus 47.4; the October UK flash manufacturing PMI was 45.2 versus 44.7; the flash services PMI was 49.2 versus 49.3; the flash composite PMI was 48.5 versus 48.7.

 

The October UK industrial trends orders index was -26 versus predictions of -12; the Q4 business optimism index was -15 versus +7.

 

                        Other

 

            Fiscal Policy

 

              Federal deficit for FY 2023 up 23%.

  https://www.reuters.com/world/us/us-budget-deficit-jumps-23-nearly-17-trillion-social-security-health-costs-rise-2023-10-20/?utm_campaign=What%20I%20Am%20Reading&utm_medium=email&_hsmi=279255628&_hsenc=p2ANqtz-_gdnjjMjaz4slTzQxy-B0M8T-GJBmNg1FvOcCqFyp3mMX5L4a6ToS9TgJYJAauu0vgqwVO8JhxxlyzUymSGW3T6qiKdA&utm_content=279255628&utm_source=hs_email

 

              While US debt surges, Europe brings its own under control.

              https://www.wsj.com/economy/global/as-u-s-debt-surges-europe-brings-its-own-under-control-2ea6e58b?mod=economy_lead_pos2

 

              Lessons from Argentina.

              https://scottgrannis.blogspot.com/2023/10/argentina-votes-as-peso-plunges.html

 

              The greatest missed opportunity of our lifetime.

              https://ritholtz.com/2023/10/the-greatest-missed-opportunity-of-our-lifetimes/

 

              David Stockman on Biden’s ‘war’ package.

              https://www.zerohedge.com/geopolitical/david-stockman-joe-bidens-hideous-106-billion-war-package

 

            Recession

 

              Instead of slowing, the economy appears to be revving up.

              https://www.wsj.com/economy/the-economy-was-supposed-to-slow-by-now-instead-its-revving-up-3c0f7a2e?mod=hp_lead_pos3

                

              The mortgage delinquency rate rose in September.

              https://www.calculatedriskblog.com/2023/10/black-knight-mortgage-delinquency-rate.html

                       

              And Goldman says that the worst is yet to come in housing.

               https://www.zerohedge.com/personal-finance/worse-come-home-sales-slide-far-over-goldman-sees-sustained-higher-mortgage-rates

 

            China

 

I have long contended that the Chinese lie about everything and that their economic numbers are fabricated.

              https://www.salon.com/2023/10/22/so-understands-the-chinese-economy-definitely-not-china/

                         

                 For example.

              https://econbrowser.com/archives/2023/10/more-on-china-q3-gdp

 

                The Bond Market

 

              Why long dated Treasury yields spiked.

              https://www.nakedcapitalism.com/2023/10/wolf-richter-why-longer-dated-treasury-yields-spiked-its-not-magic-yield-solves-all-demand-problems.html

 

  Pin action in the bond market is spelling trouble for stocks.

  https://www.bloomberg.com/news/articles/2023-10-20/bond-market-s-bad-tidings-start-to-overwhelm-miracle-stock-rally?srnd=premium&utm_campaign=What%20I%20Am%20Reading&utm_medium=email&_hsmi=279255628&_hsenc=p2ANqtz-_EYRBmXWMjwEScaLLgmruPS8U-wvLeKMV9VwTOGOkHnc6adDYC6rek85eWexXhvLKoqwuK9P3sCDEYZRJ_7FE97_9BPw&utm_content=279255628&utm_source=hs_email&sref=loFkkPMQ

 

  Bond yields likely to go higher.

  https://www.zerohedge.com/markets/bond-yields-have-more-go-retail-wises-inflation

 

  The shift in bond buyers.

  https://www.ft.com/content/b0f842ad-7ec5-45b8-9752-a6ae0252b36f

 

  Lance Roberts pushing his thesis that the next move in rates is down.

  https://www.advisorperspectives.com/commentaries/2023/10/23/restrictive-yields-feds-waterloo-lance-roberts

 

  Counterpoint.

  https://www.cnbc.com/2023/10/23/the-bond-vigilante-is-coming-back-ubs-strategist-says.html

 

 Price is information.

  https://www.adamsmith.org/blog/

 

 

      Bottom line.

 

            Investors discovering that stocks and bonds can fall together.

            https://www.zerohedge.com/personal-finance/retail-getting-message-stocks-bonds-can-fall-together

 

    News on Stocks in Our Portfolios

 

Illinois Tool Works Inc.  press release (NYSE:ITW): Q3 GAAP EPS of $2.55 beats by $0.10.

Revenue of $4B (+0.5% Y/Y) misses by $100M.

 

Sherwin Williams press release (NYSE:SHW): Q3 Non-GAAP EPS of $3.20 beats by $0.42.

Revenue of $6.12B (+1.2% Y/Y) beats by $100M.

 

3M press release (NYSE:MMM): Q3 Non-GAAP EPS of $2.68 beats by $0.33.

Adjusted EPS of $2.68 includes pre-tax restructuring related charges of $68 million, or negative $0.10 per share; restructuring program on track including forecasted full-year 2023 pre-tax restructuring charges and associated benefits.

 

Revenue of $8.31B (-3.4% Y/Y) beats by $280M.

 

What I am reading today

 

           

                        Transcending trauma.

            https://traderfeed.blogspot.com/2023/10/how-to-transcend-trauma.html

 

            Quote of the day.

            https://cafehayek.com/2023/10/quotation-of-the-day-4427.html

 

 

Visit Investing for Survival’s website (http://investingforsurvival.com/home) to learn more about our Investment Strategy, Prices Disciplines and Subscriber Service.