North American News
US stocks close higher and near session highs
- Dow was down -263.05 points or -0.5% at the lows. S&P low was down -0.93%. NASDAQ low was -0.97%
The major US stock indices are ending higher on the day and closing near the highest levels for the day. At the session lows, the Dow was down -0.85%. The S&P was down -0.93%, and the NASDAQ was down -0.97%.
The final numbers are showing:
- Dow industrial average +197.26 points or 0.64% at 31019.69
- S&P index +26.56 points or 0.69% at 3899.88
- NASDAQ index up 86.63 points or 0.76% at 11535.03
- Russell 2014.65 points or 0.81% at 1812.84
Looking at the sectors of the S&P index only to work lower – Real estate and healthcare. The healthcare sector fell -0.54% while the real estate sector fell -0.22%.
The strongest gaining sectors were:
- materials which rose 1.63%.
- Consumer discretionary which rose 1.34%
- industrials which rose 1.33%, and
- utilities which rose 1.32%
US NAHB housing market index 46 vs 47 expected
- Sentiment survey from the National Association of Home Builders
- Prior was 49
- Current single-family home sales 54 vs 57 prior
- Sales over the next six months 46 vs 47 prior
- Index of prospective buyers 31 vs 32 prior
US 10-year yields broke the June high today but have been reeled back in
- The 3.5% barrier was taken out
The mood in markets is sour but if there’s a turnaround it might come first in bonds and the long end in particular. US 10-year yields broke the 3.5% barrier and the June high today but in the last hour have given back a big chunk of the gains.
Last they were up 3 bps to 3.478%.
Analysts at BMO say we’re near a top in yields:
” we remain in the camp that the burgeoning appeal of safe haven duration and a growing dip buying bias from real money investors will eventually trigger a positional realignment that adds to the speed and severity of a rally,” they write.
Fed could raise rates until they force unemployment higher – WSJ
- Powell scrapped his original address at Jackson Hole – WSJ
- Powell scrapped his original Jackson Hole text, changing it to be shorter and more blunt, according to two sources
- Fed officials, while reluctant to say it bluntly, could raise rates until they force unemployment higher and slow wage growth
- Notes that Powell stopped talking about a soft landing, unless asked
- Inside the Fed, one camp has argued for moving faster to around 4% (notes Bullard public remarks)
- Fed officials are anxious not to let an inflationary mindset take root
Commodities
Gold bears move in as the focus stays with the Fed
- Despite a firmer dollar, technically, gold bulls are eyeing the prospects of a move toward the prior lows in a 50% mean reversion.
- The focus remains on the global central banks as the US dollar and Treasury yields continue to dictate the show
The gold price came under some pressure at the start of the week, down some 0.20% after falling from a high of $1679 to a low of $1,659 on the day and near a 29-month low scored on Friday. The US dollar and Treasury yields continue to dictate the show as traders remain in anticipation of the Federal Reserve this week and expect the US central bank to deliver a steep interest rate hike when it meets this week.
The sentiment surrounding surging inflation and tighter monetary policy continues to strip the opportunity cost of holding zero-yield precious metals. At the same time, the greenback remains close to two-decade highs, making greenback-priced bullion more expensive for overseas buyers. The dollar index DXY which measures the currency against six counterparts, was up 0.4% at 109.98, not far from 20-year high of 110.79 hit on September. 7.
Risk-off sentiment is also contributing to a higher US dollar in the face of the aggressive tightening path that global banks are on as they try to contain uncomfortably high inflation. A slew of central banks will meet this week and Fed funds futures have priced in a 79% chance of a 75-basis-point rate hike this week and a 21% probability of a 100-basis-point increase at the conclusion of the Fed committee’s two-day policy meeting.
Meanwhile, analysts at TD Securities said they ”expect continued outflows from money managers and ETF holdings to weigh on prices, which ultimately raises the probability of a pending capitulation from the small number of family offices and proprietary trading shops who hold complacent length in gold.”
”The persistence of inflation continues to support an aggressive effort by the Fed, and we now expect the FMOC to raise the target rate by 75bp at its meeting next week, deliver another 75bp hike in November, and hike a further 50bp in December. In this context, while prices are certainly weak, precious metals’ price action could still have further to fall as the restrictive rates regime is set to last for longer.”
US SPR shifts the timing of final 10 million barrels of SPR sale into November
- Any guesses on what happens in November?
US officials are out with a clumsy statement about a 10 million barrel SPR release in November. The statement sounds like it will add another 10 million barrels but it’s just changing the timing. The 180 million barrels announced in March is unchanged, but some of it will be sold in November now.
Why November? For one, they had a tough time meeting the 1 million barrel per day pace of sales in the early going. Secondly, midterms are on November 8, and Democrats would hate to have an oil price jump just before then.
EU News
European equity close: Comeback halts a four-day losing streak
- European equities were deeply negative until late in the day
A couple hours ago it looked like European stocks were surely on their way to a five-day losing streak but they turned around (along with everything else) shortly after the US equity open.
- Stoxx 600 +0.2%
- German DAX +0.6%
- French CAC -0.1%
- Italy MIB +0.6%
- Spain IBEX +0.1%
- UK FTSE 100 – closed for holiday
Other News
USD: Another 75bps hike on Wed; Risk of USD stronger for longer – BofA
- Bank of America on the outlook for the US dollar
Bank of America Global Research discusses its expectations for this week’s FOMC policy decision on Wednesday.
“We expect the Fed to raise its policy rate by 75bp in September to 3.0-3.25% and project the target range for the federal funds rate to reach 3.75-4.0% by year-end. This would be 50bp higher than in June. We also look for the median member to project one additional 25bp hike in 2023, bringing the new terminal rate to 4.0-4.25%.
In the updated FOMC statement, we think the Fed will likely be clear that monetary policy will be moving into restrictive territory. In addition, we think the Fed will want to send the signal that a restrictive policy stance will be needed “for some time” in order to guard against market expectations of a quick pivot to rate cuts once inflation has begun to move lower,” BofA notes.
“With markets now generally looking for 75bp from the Fed, such a rate hike would likely by itself may be less directly impactful for the dollar, although of course the additional messaging will be crucial. For FX, the risks are ultimately that the USD can remain strong for longer and could even get stronger,” BofA adds.
Cryptocurrency News
Coinbase announce a new fee structure (service for fewer $)
An announcement from CoinBase:
- On Tuesday, September 20, 2022 at approximately 5pm ET, Coinbase Exchange will implement a new fee structure to account for changes in global crypto trading volumes and asset prices, lowering the monthly trading volume required to qualify for the mid and upper tiers of our fee schedule. The new fee schedule will be implemented on Coinbase Exchange, Pro, and Advanced Trade.