Stocks surged yesterday without any obvious catalyst and are back down again today. Longer-duration UST, which have been doing some of the market-driving in the past month, were sideways during the day after falling earlier, after the worst feared did not occur over the weekend. The war between Israel and Hamas, though, is on a precarious ledge, so we wouldn’t read into the flip-flopping tape as a clear message. Israel’s defense minister told the US to expect a 'long war,' per Reuters.
As UBS pointed out, traders are using the S&P e-mini futures to “bully” the tape. Obviously, any market movements caused by short-term trades to make money are low quality. So, the market’s message is that a bunch of people are just making a quick buck.
Retail sales for Sep were up more than expected, +0.7% vs. the expected +0.3%. Ex-auto and gas, retail sales were up +0.6% vs. the consensus of +0.1%. On a similar note, factory production rose in Sep because of strong consumer goods demand.
Enough said…
The US gov will restrict the sale of chips that Nvidia designed specifically for the Chinese market (A800 and H800) as part of its revised export curbs designed to block China’s access to highly advanced semiconductor technology. Basically, the US wants to prevent China from accessing cutting-edge technology for military uses. Companies will have to notify the US gov before selling chips that fall below the controlled threshold, per BBG, because with enough capital to redesign slightly inferior chips, they too could be used for AI and supercomputing and therefore pose a national security risk.
Goldman had strong trading rev but lots of real estate write-downs weighing on profits, so it is earmarking an extra $690mm to pay people so they don’t have a greater exodus. BONYM jumped on the “beat” bandwagon for banks, benefitting from higher rates. J&J raised its topline 2023 outlook given strong sales for older drugs.
Xi is probably questioning his choice of partner in Putin. Sure, China’s exports to Russia have increased substantially (+57% YTD), but Xi wants to make friends around the world (e.g., Brazil trade increase, peacemaking between Saudi Arabia and Iran) and doesn’t want to get Biden’s knickers too much in a twist. Once Russia was the stronger party—but now China has the upper hand globally. So, it’s a tough partnership to maintain when the weaker one is continuing on a warpath that is not beneficial to them (Ukraine) and in fact makes them a part-pariah. Putin has to be watching the Belt and Road initiative getting a tad too close to home, though, but can’t do much at this point. In fact, Russia needs to integrate with China for a new supplier of tech, capital, and other necessities that have been blocked. But BBG rightfully points out that if/when sanctions are lifted, a lot of this investment could lose value when having to compete with global peers.
