The 10-yr UST yield moved past 5% for the 1st time since 2007, increasing > 40 bps this month given stronger-than-expected US data and Fed speak. How long ago was 2007? Pelosi became Speaker of the House, and Rihanna came out with mega hits Umbrella and Shut Up and Drive.
US consumers are falling behind on their car loans at the highest rate on record, with those 60+ days past due rising to 6.11% in September, the most in data going back to 1994, per Fitch. How long ago was 1994? NAFTA was established, and China got connected to the Internet.
Officials in China plan to convene a key financial policy gathering, where Xi and his peeps will discuss risks including the property crisis and LGFVs.
Foreign firms are getting nervous because Chinese regulators launched a probe into Foxconn over taxes and land use. Foxconn is Apple supplier Hon Hai’s parent co. Also, there are the arrests across industries and missing military leaders…if you have been reading our notes. It’s hard to see companies confidently investing in China until the ground stops moving.
Roche is using AI to find patients after trial results showed that its drug Alecensa cut the risk of cancer recurrence and death. They’re working to alert doctors when to use CT scans to find tumors before they spread.
Chevron is buying Hess in an all-stock transaction at ~$53 billion, making it the 2nd mega deal in the sector this month. The price is just under a 5% premium.
Exports in South Korea for the first 20 days of Oct returned to growth for the first time in more than a year. In Japan, BOJ officials are trying to decide whether to tweak yield-curve control settings because long-term rates are moving higher in tandem with those in the US, per the Nikkei.
On an equal-weight basis, there is now only one sector that is trading above its 200 DMA: Energy. On a cap-weighted basis, there are 3 sectors: Energy, Info Tech, Comm Services. Per BTIG, the cap-weighted S&P 500 Technology Index (S5INFT) is up ~34% YTD, versus the equal-weight S&P 500 Technology Index (RSPT), which is up <12% YTD. BTIG is flagging both as vulnerable. Semis? Same thing, with the SMH +41% YTD vs. the XSD +8.2%. BTIG is also flagging caution with the QQQ. They compared it to the GS HF VIP index, which is a basket of the 50 names key to hedge funds, and the chart is basically the same, so they are flagging its crowd mentality.
Global CPI is estimated to end 2023 at 6.4%, per BBG. That is not 2%, and the Fed knows simple math.
According to Morgan Stanley’s Michael Wilson, odds of a year-end rally in US stocks are looking more bleak as investors face a multitude of risks from elevated profit estimates. He said he “would not be surprised” to see further declines in the S&P 500 with “earnings expectations likely too high for the fourth quarter and 2024, and policy tightening likely to be felt from both a monetary and fiscal standpoint.”