Wednesday, October 25, 2023

The Morning Call--The Taylor Rule is signaling that the Fed should be done hiking

The Morning Call

 

10/25/23

 

The Market

         

    Technical

 

            Tuesday in the charts.

            https://www.zerohedge.com/markets/bitcoin-dollar-soar-squeeze-saves-stocks-yield-curve-flattens

 

Note: after bouncing off the 23.6% Fibonacci retracement level on Monday, the S&P continued to rally yesterday, closing back above its 200 DMA, voiding its challenge.  Is the worst over or just delayed?  I don’t know.  Stay cautious for the time being.

            https://www.zerohedge.com/the-market-ear/hold-or-not-hold

           

            When does the year-end rally start?

            https://allstarcharts.com/when-year-end-rally/

 

            The pain trade is higher into year end.

            https://www.zerohedge.com/markets/pain-trade-higher-year-end

 

This analysis suggests that the S&P’s break below its 200 DMA is not a case for alarm.

https://politicalcalculations.blogspot.com/2023/10/s-500-decline-below-200-moving-day.html

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

                            

Weekly mortgage applications were down 1.0% while purchase applications were down 2.2%.

 

Month to date retail chain store sales grew slightly faster than in the prior week.

 

September building permits declined 4.5% versus forecast of -4.4%.

 

The October flash manufacturing PMI was 50.0 versus expectations of 49.5; the flash services PMI was 50.9 versus 49.8; the flash composite PMI was 51.0 versus 49.8.

 

The October Richmond Fed manufacturing index was 3.0 versus projections of -1.0.

                             https://www.advisorperspectives.com/dshort/updates/2023/10/24/richmond-fed-manufacturing-activity-changed-little-october

                                                          

                        International

 

The August Japanese leading economic indicators were reported at 109.2 versus estimates of 109.5.

 

The October German business climate index was 86.9 versus consensus of 85.9; the October current conditions index was 89.2 versus 88.5.

 

                        Other

 

            The Fed

 

              Beware of another Black Monday.

  https://www.wsj.com/articles/another-black-monday-may-be-around-the-corner-interest-rate-federal-reserve-b1df5c21?mod=hp_opin_pos_2&utm_campaign=What%20I%20Am%20Reading&utm_medium=email&_hsmi=279382479&_hsenc=p2ANqtz-8VcMiM04eThxogQbc8LJ7fknozY9IyVJ1_mQgzIQjOMOVf787DTgT4-CrjJru64dTKyHChyZ8DvxH7E0C-fy-q_wNugA&utm_content=279382479&utm_source=hs_email#cxrecs_s

 

              The Taylor Rule is signaling that the Fed should be done hiking.

              https://www.zerohedge.com/markets/taylor-rule-signals-fed-already-done-hiking

 

            Fiscal Policy

 

            Deficits, big and getting bigger.

            https://www.bloomberg.com/news/articles/2023-10-24/us-budget-deficit-rising-as-economy-grows-shows-why-yields-are-at-5?srnd=premium&sref=loFkkPMQ

 

            Civil Strife

 

              What can you do if a mob surrounds your car?

              https://www.zerohedge.com/political/what-can-you-do-if-mob-far-left-antifa-style-rioters-surrounds-your-car

 

            China

 

              China’s great leap backward.

              https://econbrowser.com/archives/2023/10/guest-contribution-chinas-great-leap-backward

 

              China’s property crisis.

  https://www.bloomberg.com/news/features/2023-10-23/china-property-crisis-country-garden-distress-crushes-investors-homebuyers?srnd=premium&sref=loFkkPMQ

 

            The Bond Market

 

              Powell needs to shut up.

              https://alhambrapartners.com/2023/10/22/weekly-market-pulse-an-ego-driven-fed/

 

              How bad is the bond market?

              https://mrzepczynski.blogspot.com/2023/10/how-bad-is-bond-market-take-look-at.html

 

     Bottom line

 

            For the bulls.

            https://finance.yahoo.com/news/stocks-place-wharton-professor-jeremy-014805657.html

 

            Active asset managers are bleeding cash.

            https://www.bloomberg.com/news/features/2023-10-22/active-vs-passive-investing-money-managers-confront-end-of-bull-market?sref=loFkkPMQ

 

            Market sentiment suggests that the Fed Funds rate has peaked.

            https://www.capitalspectator.com/market-sentiment-suggests-fed-funds-rate-has-peaked-again/

 

    News on Stocks in Our Portfolios

               

General Dynamics press release (NYSE:GD): Q3 GAAP EPS of $3.04 beats by $0.12.

Revenue of $10.6B (+6.0% Y/Y) beats by $520M.

 

Automatic Data Processing press release (NASDAQ:ADP): Q1 Non-GAAP EPS of $2.08 beats by $0.06.

Revenue of $4.5B (+7.1% Y/Y) misses by $10M

 

Microsoft press release (NASDAQ:MSFT): Q1 GAAP EPS of $2.99 beats by $0.34.

Revenue of $56.5B (+12.8% Y/Y) beats by $1.95B.

 

Canadian National Railway press release (NYSE:CNI): Q3 Non-GAAP EPS of C$1.69.

Revenue of C$4.0B (-12% Y/Y)

Operating income of C$1,517 million for the third quarter of 2023, a decrease of C$415 million, or 21% and C$4,779 million for the first nine months of 2023, a decrease of C$149 million, or 3%.

 

Canadian National Railway (NYSE:CNI) declares CAD 0.79/share quarterly dividend, in line with previous.

 

What I am reading today

 

           

 

 

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