The market was going about its uneventful day when a crummy UST 30-yr bond auction in the early afternoon (Bloomberg) sent long-duration yields up. Systematics sold equities. The -1.4% SPY reversal shows how fleeting trading environments can be. UBS rightfully pointed out that yesterday’s fall was a reminder of 9/16/18, when a late-day slide interrupted what otherwise would have been a technically constructive session. The S&P then fell almost -20% until bottoming during the Christmas week.
Investors may be trying to maintain performance and upping hedges, which can keep vol higher and other participants sidelined. So, upcoming events and data releases will be extra important.
Investors are turning to safe havens on the news of a potential ground invasion of Gaza. WTI crude hit $87/barrel (also because of tighter sanctions on Russian crude sales). Treasuries are up, with the 10-yr yield down 10 bps. EZ bonds gained, with the German 10-yr yield down 7 bps as well. Traders are watching to see if the war could draw in Iran, which BBG says could move crude to $150/barrel and reduce global economic output by $1trn.
JPM’s 3Q23 profit was up 35% y/y, and the co beat on the top and bottom lines. $JPM generated more interest income than expected, and credit costs came in lower. Plus, to no one’s surprise, its sweet purchase of First Republic is going well. $WFC also put out a 3Q23 beat to get the earning season kicked off. Their CEO said $WFC “benefited from higher rates and the investments we are making in our businesses.” So, when you’re hurting from higher rates, you know who’s benefitting… Citi also had a good quarter with solid trading revs. The co is going to remove five management layers in a reorg. What were all those people doing, if you could really work without them?
We’ll be looking for the retail sales data next week, followed by the PCE report on the 27th to see how resilient the economy really is.
Our friends at 42Macro are pointing out that investors should fear bullish breakouts in the USD, bond vol, and currency vol—which we have right now—because each is a headwind for global liquidity.
Netflix is going to open stores with retail, dining, and live experiences, according to BBG? Just get your content right.
Kaiser reached a tentative deal with striking unions. Maybe they can give guidance to Ford. The co is offering a 23% pay raise, per Reuters. I guess workers should be pretty angry if a company can stomach a 23% pay raise…
Movie theaters are welcoming Taylor Swift’s concert film this weekend, which could be the biggest film of the year.
The UK and the EZ may delay the start of post-Brexit tariffs on EVs for at least 2 years. With inflation running hot and growth slowing globally, they’re figuring out there could be a win-win situation.
The MSFT-ATVI deal is closing. Finally. Regulators in the UK blessed the deal, per Reuters.
Keep watching the weather, man. As Bloomberg pointed out, the EZ is getting scared about gas prices due to potential winter supply threats.
GS says that options suggest a lackluster end of the year rally, as the single stock put-call skew level suggests a +2% equity return this quarter.
