UBS has the best explanation for why we saw the market move up after not great data. UBS notes that the S&P hit congestion at 4,500, which is a popular strike price ahead of today’s $4 trn with a t --triple witch expiration. Thus, they think that options traders were probably caught with a short gamma positioning and got squeezed into buying stocks to contribute to the positive momentum. Makes more sense than just saying it was the ARM IPO, right?
Taiwan Semi asked its major suppliers to delay shipment of high-end equipment (so other tech is down in sympathy), Ford and GM were hit with the strike (per the below note). Production at US factories was stagnant in Aug.
After the ECB raised rates by 25bps yesterday, German bunds actually declined, which surprised some folks. Well, the soft economic forecasts cited as the reason for the hike translated into traders’ view that the economy is in a bad place, getting worse. So, they’re hiking into a downturn, which will cause rates to fall eventually. What if this happened in the US? Imagine that.
The current market bet is that there is no rate hike here in the US, and Powell cautiously talks about a soft landing but with the potential for one more hike if the economy remains too strong. Words like data dependency will be a-plenty. Analysts expect rates in the 5.25% to 5.5% range until a first cut in May 2024.
They couldn’t avoid the auto worker strike against the big 3 Detroit carmakers at the same time, and you can’t avoid the coverage of it. Roughly 12,700 auto workers went on strike at targeted plants, including a Ford factory in Michigan that makes the Bronco SUV, a GM facility in Missouri, and a plant in Ohio that builds the Jeep Wrangler.
Equities closed out the week mostly higher in Asia. Gains were led by China-trade related names, and tech-based markets such as Australia, South Korea and Taiwan were strong. China was mixed. Japan’s Nikkei finished at six-week highs. I will be back on Singapore radio the next few months.
Salesforce is hiring 3,300 people in sales, engineering, and data cloud given potential AI growth. The company chopped 10% of its workforce earlier this year. Maybe they need to learn that people can be trained for new skills. Probably would have saved them some moolah and morale. Wonder what the activists think about it….since they were cheering on the profit increase just recently during earnings.
Macro conditions continue to pressure enterprise IT spend. Their front office applications’ growth slowed. They imply further deceleration, although they are raising prices. Probably a decent thing to remember for other companies that access the same wallet space.
BBG has an interesting piece out about US vs intl markets. They describe how it wasn’t just tech but instead improving profitability that has led the US to outperform since the GFC. So, we’re giving you a 2-for-1. Two charts for one note.
