Q3 Earnings Season and Navigating Market Uncertainties ??????????

October 16, 2023.

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Welcome to the latest #TradewithDave update! In this edition, we'll look back at last week’s big events, and consider what’s happening in the week beginning 16th October.?

?? Q3 earnings season gets underway ????

Last Friday saw the unofficial start to the third quarter earnings season with results from JP Morgan, Citigroup, Wells Fargo, BlackRock and United Health.?The banking giants posted positive earnings reports, as did United Health. BlackRock also posted strong earnings per share, but missed on revenues.?Once again, investors are looking for reassurance that financial institutions are coping with tighter monetary policy, particularly the smaller regional banks, and those with a large exposure to commercial real estate.?

Check out JP Morgan.

?? Inflation updates ???

Last week we got two important updates on US inflation data in the form of the Producer Price Index (PPI) and the Consumer Price Index (CPI).? The PPI is a measure of wholesale inflation, and while it doesn’t get the headlines in the way that the CPI does, it can work as a forward indicator in terms of how inflation filters down from producers to consumers.?

• Unfortunately, Wednesday’s PPI came in well above expectations, although this was brushed off by equity traders.?
• On Thursday we had a mixed CPI report. Looking at the year-on-year data, Core CPI, which excludes food and energy, came in at +4.1%, as expected, and below last month’s reading of +4.3%.?This means that the downward trend in Core inflation since September last year, continues.?
• As far as Headline CPI is concerned, this was unchanged from last month at +3.7%, and was a tad higher than the +3.6% expected.?Headline CPI hit a low of +3.0% in June, from a peak of +9.1% one year earlier. However, since then it has picked up, due to continued increases in food and energy.?

Wednesday saw the S&P 500 attempt to break above 4,400 but failed at its first attempt. The index has fallen quite sharply since then.

Check out the US 500.

?? BP gaps higher ????

On Friday, BP gapped higher on the open to trade above 549 pence, over 2% up on the day. The same time last week it briefly traded below 490.?The stock has staged an impressive recovery over the last three years after falling below 200 pence in October 2020.?The share price has struggled, ever since it hit a multi-year high around 570 pence back in February. BP has been hit by a succession of lurid stories leading its CEO, Bernard Looney, to step down, along with its most senior US executive, Dave Lawler. Is confidence returning?

Check out BP.

Looking ahead to next week ??

?? Divergent opinions on the FOMC ?? ???

There appears to be a healthy difference of opinion developing between members of the US Federal Reserve’s FOMC.?

• Last Wednesday, Michelle Bowman stated that the Fed had made good progress in bringing down inflation, but continued tightness in the labour market, along with robust consumer spending, meant that further rate hikes were required to bring inflation down further.?
• However, her view contrasts with that of Lori Logan and some other FOMC members. Ms Logan feels that the sharp rise in US Treasury bond yields, of all durations, is doing the Fed’s job for them.
• As markets adjust to higher borrowing costs, this could negate the need for the Fed to raise rates further. This is an important debate, and one to keep an eye on ahead of the next FOMC meeting on 31 October/01 November.
• In the 10 days to last Friday, the yield on the 10-year US Treasury note dropped 26 basis points from a 16-year high of 4.88%.

?? Gold’s reemergence ????

At the end of the first week of October, gold was testing an area of support just a touch north of $1,800.?This area had held up prices in February and March this year, and had acted as significant resistance back in August 2022.?

• As it traded sideways in a band between $1,830 and $1,810 the MACD on the four-hour chart began to turn up.?
• Soon after, the MACD on the daily chart also turned higher.
• Since then gold has had a decent rally which has taken it above $1,880.

Where next for the yellow metal?

Check out gold.

?? This week’s Q3 earnings ?????

??Monday:?

Texas Instruments, Rio Tinto.

??Tuesday:

Bank of America, Goldman Sachs, Bank of New York Mellon, United Airlines.

??Wednesday:

Tesla, Taiwan Semiconductor Manufacturing Company, Procter & Gamble, Netflix, Morgan Stanley, Travelers, Alcoa.

??Thursday:

AT&T, Diageo, CSX Corp, Nokia, American Airlines.

??Friday:

American Express, Schlumberger, Las Vegas Sands.

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*Figures correct as of October 16, 2023.

*All views and opinions are analysis not advice. You should seek independent financial advice where required.?

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