North American News
US equities sink on the day but hold the September lows
- Relief rally on Friday? Or more selling?
Stocks traded into positive territory early today but the wheels slowly came off. The flush to session lows came late in the day before a small bid arrived just befor the close.
The chart of the S&P 500 (Nasdaq Comp is similar) indicates how crucial holding the 3886 low is.
Tomorrow will feature the prelim UMich consumer survey and there will be plenty of eyes on the inflation expectations component, including at the Fed.
Here are the closing levels:
- S&P 500 down 44 points to 3901 (-1.1%)
- Nasdaq -1.4%
- Russell 2000 -0.8%
- DJIA -0.6%
US initial jobless claims 213K vs. 226K estimate
- US initial jobless claims and continuing claims for the current week
- Prior week 222K revised to 218K
- initial jobless claims comes in stronger than expected at 213K vs. 226K estimate
- 4 week moving average 224.0K vs. 232.0K revised
- continuing claims 1.403M vs. 1.475M estimate. Prior week revised down to 1.401M from 1.473M previously reported
- 4 week moving average 1.413M vs 1.421M last week
- The largest increases in initial claims for the week ending September 3 were in Oklahoma (+1,935), Pennsylvania (+1,069), Kentucky (+824), Ohio (+659), and Indiana (+610),
- the largest decreases were in New York (-3,662), Michigan (-2,132), Connecticut (-1,285), Alabama (-314), and Virginia (-310).
US August advance retail sales +0.3% vs 0.0% expected
- August 2022 US retail sales data
- Prior was 0.0% (revised to -0.4%)
- Ex autos -0.3% vs +0.1% expected
- Prior ex autos +0.4%
- Control group 0.0% vs +0.5% expected
- Prior control group +0.8% (revised to +0.4%)
- Ex autos and gas +0.3% vs +0.7% prior
- Gasoline stations -4.2% m/m vs -2.3% prior
- Retail sales % y/y un-adjusted for inflation +9.1% vs +10.1% prior
- Sales y/y ex gasoline stations un-adjusted for inflation +29.3% vs +7.8% prior
Atlanta Fed GDPNow cut to 0.5% from 1.3% previously
- Sharp decline after the data dump in the US today
The Atlanta Fed GDPNow estimate for Q3 was marked down from 1.3% to 0.5%. In their own words:
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2022 is 0.5 percent on September 15, down from 1.3 percent on September 9. After this week’s releases from the US Department of the Treasury’s Bureau of the Fiscal Service, the US Bureau of Labor Statistics, the US Census Bureau, and the Federal Reserve Board of Governors, decreases in the nowcasts of third-quarter real personal consumption expenditures growth and third-quarter real gross private domestic investment growth from 1.7 percent and -6.1 percent, respectively, to 0.4 percent and -6.4 percent, respectively, was slightly offset by an increase in the nowcast of third-quarter real government spending growth from 1.3 percent to 2.0 percent.
Commodities
Gold hits stops on a major technical break
- Gold down $26 on a break of July low
Hopes for a major bottom in gold have been dashed as the key $1680 low from July has been broken. That sparked a run on stops below and down to $1668.
Gold nosedives to two-year lows below $1670
- Gold price tumbles to fresh 2-year lows below the $1670 mark.
- Expectations that the Fed would aggressively continue to tighten weighed on the yellow metal.
- Upbeat US Retail Sales continue to show the strength of the US economy.
Gold price tumbles below the $1700 psychological level, to fresh two-year lows at $1665.30, on expectations that the US Federal Reserve would continue to tighten monetary conditions, sparking a jump in US Treasury yields. Hence, the greenback followed suit but pared earlier gains. At the time of writing, the XAU/USD is trading at around $1666 a troy ounce.
Gold price tumbles on higher US Treasury bond yields
US Treasury yields jumped on expectations that the Fed might hike rates between 75 or 100 bps. The US 2-year bond yield, the most sensitive to interest rate hikes, peaked at 3.84%, while the 10-year benchmark note remained at 3.437%, gaining three bps. Worth noting that the yield curve further inverted, with the spread between 2s and 10s deepening to -0-403%, as market participants expected an aggressive Fed could derail the US economy, tapping it into a recession.
US Retail Sales for August, reported by the US Department of Commerce, surprisingly rose, after dropping a month earlier, with readings increasing 0.3%, exceeding estimates of -0.1%.
In the meantime, US economic data revealed by the Labor Department showed that Initial Jobless Claims for the week ending on September 10 was 213K, decreasing from the previous week’s reading and lower than estimates of 227K.
The New York and Philadelphia Fed Manufacturing Indices were reported, showing mixed results. The New York Empire State manufacturing sector improved but remained in contractionary territory, while the Philadelphia Fed index dropped to the contractionary part after rebounding in the August report.
EU News
European equity close: French equities lead the downside in third day of losses
- Closing changes for the main European bourses
It was another tough one but the periphery generally outperformed the core for the second day. UK stocks were better on news of a special budget from Kwarteng.
- Stoxx 600 -0.6%
- FTSE 100 +0.2%
- German DAX -0.4%
- French CAC -0.9%
- Italy MIB -0.4%
- Spain IBEX flat
Other News
World Bank: Core inflation excluding energy could be 5% in 2023
- World Bank weighs in on the global economy and risks
World Bank president Malpass is on the newswires speaking to the global economy:
- inflation rate excluding energy could be 5% 2023 unless supply disruptions and labor market pressures subside
- risk of global recession in 2023 rises amid simultaneous interest rate hikes by central banks
- central banks may have to raise rates by additional 2 percentage points to reach inflation targets
- central bankers should shift focus to boosting production, instead of reducing consumption
- further slowdown in global growth likely as more countries fall into recession
- further rate hikes in financial markets stress could slow global GDP growth to 0.5% in 2023, -0.4% in per capita terms, meeting the definition of recession
- now much more concerned about generalized stagflation in global economy
- today’s debt issues different than in earlier crises, private sector debt now 5 times greater than public-sector debt
Cryptocurrency News
Ethereum takes a 5% dive as the sell-the-fact trade hits
- Promises of easy money go up in smoke
Time and time again we’ve seen event-based trading in crypto go badly.
Ethereum is now down 5% in a quick fall as the post-merge glow fades.
What’s happening here?
It’s the same as all the other events. Unsophisticated traders are lured in by the promise of easy money and it gets front-run. When the event doesn’t result in easy gains, it’s a rush to the exits.
I certainly cheer on less energy use in ethereum and that should be a long-term fundamental driver but long-term fundamental drivers play out in the long term, not overnight.