Market Observations - Oct 5
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Factoid?- Apple co-founder, Steve Wozniak was the first owner of the phone number 888-888-8888, but it proved unusable as he was receiving over 100 wrong numbers a day, mostly from babies playing with the phone.?
Econ Brief 10/04:
This morning, ADP reported that private-sector employment rose by 89k in September, falling short of the 150k rise expected and down from the 177k gain the month prior.
Also this morning, MBA mortgage applications dropped 6.0% in the week ending September 29, following a 1.3% decline the week prior. The 30-year mortgage rate rose 12bps to 7.53%, marking the first time mortgage rates topped 7.5% since November 2000.
Additionally, this morning, the ISM Services Index declined from 54.5 to 53.6 in September, in line with the expected decline to 53.5 and a 2-month low. In the report’s details, supplier deliveries ticked up from 48.5 to 50.4, and a backlog of orders rose 6.8 points to a reading of 48.6 in September. On the other hand, prices paid remained at 58.9 for the second consecutive month, averaging a reading of 57.4 over the past six months, while new orders declined from 57.5 to 51.8, and employment fell 1.3 points to 53.4 in September, a two-month low.
However, the key report of the week comes out Friday with the September nonfarm payrolls report. While job growth has slowed from an average pace of 399k in 2022 to 236k as of late, businesses continue to add hundreds of thousands of workers every month. This month, headline payrolls are expected to grow 165k, potentially marking a 3-month low. The unemployment rate, meanwhile, is expected to decline from 3.8% to 3.7% after rising three-tenths last month from a 3.5% pace in July. Finally, wages are expected to rise 0.3% and 4.3% year over year, matching the pace the month prior.
US Wednesday Market Wrap: We have a winner!
Signs of economic weakness have been cheered by investors in the hope that it will deter the Fed from more rate hikes. The US service sector slowed in September, according to data from the ISM, and ADP showed private sector hiring cooled more than expected. The yield on the 10y treasury slipped to 4.735%, pulling back from 2007 highs. The Dow added 127 points or 0.4%, snapping a 3-day losing streak. The S&P rose 0.8% and the Nasdaq gained 1.35%. Consumer discretionary was the best-performing S&P sector, rising nearly 2%; TSLA and NHCL were the biggest gainers within the sector. Energy was the S&P’s worst sector -3.14%, as crude prices had their worst day of losses going back to September 2022.
One of the globe’s major lithium companies split today into two independent publicly traded companies, Lithium Americas Argentina Corp. (LAAC) and Lithium Americas Corp. (LAC). Immediately following the separation, each original Lithium Americas shareholder will have the same proportionate interest in the new companies.
Automakers remain volatile, with GM securing a $6 billion credit line due to the United Auto Workers (UAW) strike costing the company $200 million so far. Ford made a new offer to the union, while General Motors furloughed more workers amid ongoing negotiations.
It’s been a rough two weeks for energy-related commodities and stocks. Today, an accelerating decline helped bring the sector back to the forefront of investors’ conversation. In very short-term fundamental news, gasoline inventories surprised to the upside today on weak demand. That caused the commodity to extend its recent selloff. But more importantly, we also saw heating oil and crude oil selloff in tandem after holding relatively strong during gasoline’s pullback.
So where will crude oil and the energy sector find support???Some traders are looking at the low 80s as a potential area of support.??Not only is 83.50 the level prices recently broke out above but the volume weighted average price (VWAP) from the June 2022 highs and June 2023 lows are also in this area.
New vehicle payments hit $736 per month.??The average monthly payment for new vehicles hit a record high in the third quarter, driven by tight supply and rapidly rising interest rates. The average annual percentage rate (APR) jumped from 5.7% a year ago to 7.4% today, with the average new-vehicle loan being $40,149. Vehicle prices have flattened out in 2023, but worker strikes, high-interest rates, and a sharp decline in affordability remain key fundamental headwinds.
The markets remain unsettled. Follow-through dollar selling has been limited today after yesterday’s pullback. Narrow ranges are prevailing, but the Norwegian krone and Canadian dollar, the weakest G10 currencies in recent days, are heavier again today. Although it seems that the BOJ did not intervene earlier this week, the dollar bulls have been chastened just the same, and the greenback is holding below yesterday’s high (~JPY149.30). Higher than expected South Korean CPI (3.7% vs. 3.5%)- is helping the won recoup yesterday’s 1% decline to lead the emerging market complex. The South African rand and Mexican peso are today's worst-performing emerging market currencies, off 1.1% and 0.7%, respectively.
Japanese stocks led the recovery in most Asia Pacific bourses today, with a 2% gain in the Topix. Taiwan’s Taiex gained 1%. The MSCI’s regional index rose for the first time this week.
Europe’s SXXP is trying to snap its 3-day slide but is struggling. And US index futures have been unable to build on yesterday’s gains.
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Bond markets are under pressure. European yields are up mostly 3-6 bps, and the peripheral premiums are widening. The 10-year US Treasury yield is little changed near 4.73%, while the 2-year yield that fell almost 10 bps yesterday is slightly below 5.04%.
Gold remains in the range set on Tuesday (~$1815-$1833).
Despite OPEC+ efforts (Saudi Arabia and Russia mostly) to support prices, November WTI continues to retrace last month’s rise. Recall that it peaked last week near $95 and today is below $84, its lowest level since September 1. It settled below its lower Bollinger Band yesterday for the first time since June and remains below it now (~$84.40).
Today’s US August trade balance and weekly jobless claims are overshadowed by tomorrow’s national jobs report. We already know that the goods deficit narrowed to a 5-month low of about $84.3b in August. That will likely translate into a possibly sub-$60b deficit for the first time since September 2020. Still, note that the current account deficit, a broader measure of trade and returns on investments (royalties, licensing fees, profits, interest, dividends), is expected to be around 3.2% of GDP this year. Before Covid, it was 2.1% of GDP.
Weekly initial jobless claims have been below 205k for the past two weeks. The 4-week moving average through September 22 is 211k, the lowest since mid-February. Despite what seemed like a strong JOLTS report, with a 32% participation rate and the decline in weekly jobless claims, labor market growth is slowing. The 3-month average is 150k for nonfarm payrolls through August. In August 2022, the three-month average was 430k. Tomorrow’s report is expected to be the 4th consecutive month of less than 200k jobs created. One has to go back to the last four months of 2018 to see that.
Crypto Market Rundown:?
The global crypto market cap is $1.09T, a 0.47% increase over the last day. BTC is up +0.37% d/d, now trading around $27,700. On the other hand, ETH is trading at $1,630, down -0.94% in the past 24 hours.?
PSA: DO NOT USE SMS 2FA. Use an authenticator application. Sim Swap attackers are on the rise. In the past two days, 234 ETH were stolen through SIM-swapping four Friend.tech users.?
In September, Bitcoin miners Marathon, Riot, and CleanSpark boosted their BTC production significantly.?
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Please note that Uphold and its affiliates do not provide investment, tax, or legal advice. This message is for informational purposes only and takes no account of particular personal or market circumstances, and should not be relied upon as investment, tax, or legal advice. For investment, tax, or legal advice, before taking any action, you should consult your own advisors. Note that digital assets such as cryptocurrencies present unique risks for investors. Please see our disclaimer regarding?risks specific to holding digital assets?before investing.