North American News
US major indices snap two day winning streak
- Modest rally into the close
The major US indices are ending the day with declines.
The final numbers are showing:
- Dow industrial average down -1% or -0.33% at 30423.81
- S&P index down -24.82 points or -0.67% at 3695.15
- NASDAQ index down -91.8 points or -0.85% at 10680.52
- Russell 2000 down -30.20 points or -1.72% at 1725.75
The moves to the downside snap a 2 day win streak.
Tesla – after the close – is reporting higher earnings-per-share but revenues are light:
- earnings-per-share $1.05 vs. $1 expected
- revenues $21.45 billion vs. expected $21.96 billion
- Tesla shares are trading $-9.88 or -4.45% at $212.80
IBM earnings beat expectations on the top and bottom lines:
- Earnings-per-share $1.81 vs. $1.77 expected
- Revenues $14.1 billion vs. $13.51 billion expected
- IBM shares are up $6 or 4.97%
Lam Research earnings beat expectations:
- EPS $10.42 vs. $9.54 estimate
- revenues $5.07 billion vs. $4.91 billion estimate
- shares are trading at $341 up $10.92 or 3.31% in after-hours trading
US treasury auctions off $12 billion a 20 year bonds at a high yield of 4.395%
- WI level at the time of the auction was 4.370%
The US treasury auctioned off $12 billion of 20 year bonds. The auction results shows:
- High yield 4.395%. The last auction came in at 3.82%
- WI level at the time of the auction 4.370%
- Tail +2.5 basis points vs. six-month average of -1.3 basis points
- Bid to cover 2.50X vs. six-month average of 2.69X
- Directs 19.86% vs. six-month average of 18.5%
- Indirects 63.7% vs six-month average is 72.2%
- Dealers 16.43% vs six-month average of 9.3%
Atlanta Fed GDPNow Q3 growth estimate rises to 2.9% from 2.8% last
- Atlanta Fed GDP model estimate for Q3 growth
In their own words:
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2022 is 2.9 percent on October 19, up from 2.8 percent on October 14. After recent releases from the Federal Reserve Board of Governors and the US Census Bureau, the nowcast of third-quarter real gross private domestic investment growth increased from -3.6 percent to -3.3 percent.
US 30 fixed year mortgage rate hits a 20 year high of 7.22%
- 30 year fixed rate mortgage
The US 30 year fixed mortgage rate hits a 20 year high of 7.22% today thanks to the surge in the 10 year yield. The 10 year yield is trading at 4.108% currently.
Pres. Biden: Gas prices are squeezing family budgets. US to sell 15M barrels from SPR
- Pres. Biden speaking at the White House
Pres. Biden confirms the selling of 15 million additional barrels from the SPR. This is expected
- The SPR is more than 1/2 full
- SPR is more than enough to account for emergencies
- Extra oil can be made available for sale.
- US is producing 12 million barrels per oil per day
- US is on track for record oil production 2023
- US will purchase oil prices at $70 per barrel going forward (I thought the price was $80 in the past). There is some confusion if the floor is $70 or $72.
- Says the bid at $70 puts a floor for oil producers to encourage them to drill for more oi isl
- Gas prices at the pump should be lower
- US consumers should be spending $0.60 per gallon lower.
Commodities
Gold dives to fresh three-week lows below $1,630
- Gold accelerates its decline and hits fresh three-week lows below $1,630.
- The USD rallies on Fed tightening hopes and higher US yields.
- XAU/USD focusing on $1.614 or lower – Credit Suisse.
Gold futures accelerated their downtrend on Wednesday to reach fresh three-week lows right below $1,630. The yellow metal dives nearly 1.5% so far today on the back of a strong USD recovery as risk appetite waned.
Fed tightening hopes and higher bond yields boost the USD
After the moderate decline of the previous two days, the dollar is going through a solid recovery on Wednesday. The USD has bounced back amid a sourer market mood and the rebound on US Treasury bond yields. The benchmark 10-year bond yield has jumped to 4.12%, its highest level since the 2007 crisis
Beyond that, the investors have shifted their focus to the Federal Reserve’s monetary policy meeting due on November 1 and 2. With the market anticipating another 75 basis point hike, the aggressive tightening cycle of the US central bank is acting as a tailwind for the USD.
The USD has regained most of the ground lost over the previous two days. The US Dollar Index bounced up from levels right below 112.00 and has rallied beyond 1% on the day, returning to the 113.00 area at the time of writing.
XAU/USD: Next support is $1,614 – Credit Suisse
Analysts at Credit Suisse point out that gold futures have activated a double top, which anticipates further declines: “Gold below $1,691/76 has reinforced its existing large ‘double top’. Hence, with a top in place, we expect gold to come under renewed pressure. We note that the next support is seen at $1,614, then $1,560, and eventually $1,451/40.”
Silver drops due to heightened global inflation as bond yields rise
- Silver extends its losses below $19.00 as inflation rising justifies the need for higher interest rates.
- Global bond yields climb, led by US Treasury yields, a headwind for silver.
- US 10-year TIPS, a proxy for real yields, surpasses the 1.70% threshold.
Silver price slid for the first time in the week following the release of UK, EU, and Canada inflation data, which remained stubbornly high, sparking a jump in global bond yields, a headwind for the precious metals segment, namely silver and gold. At the time of writing, the XAG/USD is trading at $18,42, below its opening price.
Inflation is the name of the game
In the European session, the Eurozone (EU) and the UK reported inflation, which remained stubbornly high, with the EU’s HICP for September jumping by 9.9% YoY, a tick lower than August’s reading, while UK CPI rose 10.1% YoY. Given the backdrop, market players are betting that the European Central Bank (ECB) and the Bank of England (BoE) would need to tighten further, probably 75 bps each, as they try to tame inflation.
Also, Canada added to the mix before Wall Street opened, with September’s inflation steadily hanging to the previous month’s readings, except for the core Consumer Price Index (CPI) on its monthly/annual readings, exceeding estimates by a tick.
Bond yields rally, pressuring precious metals
Worldwide bond yields jumped on data, with the US 10-year T-bond yield extending its gains above the 4.10% threshold, a headwind for silver, which appreciates as nominal and real yields fall. Speaking about the latter, the US 10-year TIPS bond rate, a proxy for real yields, keeps going north at 1.716%, up by ten bps.
Consequently, the greenback is printing gains. The US Dollar Index, a gauge of the buck’s value against a basket of peers, is back above the 113.00 figure, gaining close to 1%, propelled by US T-bond yields.
Elsewhere, the Minnesota Fed President Neil Kashkari reiterated that inflation is too high. Kashkari added that If the Federal funds rate (FFR) hits 4.5-4.75% and inflation remains high, he does not see the case for pausing interest-rate increases.
EIA weekly crude oil inventories -1.725M vs expectations of a build of 1.380M
- EIA weekly inventory data
- crude oil inventory draw of -1.725M vs an expected build of 1.380M
- gasoline a draw of -0.114M vs. an expected draw of -1.114M
- distillates a build of 0.124M vs. an expected draw of -2.167M
- refinery utilization -0.4% vs. -0.3% estimate
Crude oil now up $3.00 session high of $85.91
- It’s buy the fact after Pres. Biden’s 15 million barrel SPR release
The price of WTI crude oil futures has moved to a new high of $86.09. Currently the prices trading at $85.93. That’s up $3.11 from the $82.82 settlement price yesterday or 3.75%.
The move to the upside has the price testing its 100 hour moving average at $85.93. The price has found resistance sellers against the 100 hour moving average going back to to October 11th through October 17. Will the sellers come in near the level again?
EU News
Major European indices close the session lower
- France’s CAC -0.43% the biggest loser
The European indices are closing the day with declines led by the France’s CAC which fell -0.43%. A look at the closing levels shows:
- German DAX, -0.19%
- France’s CAC, -0.43%
- UK’s FTSE 100, -0.17%
- Spain’s Ibex, -0.36%
- Italy’s FTSE MIB, -0.20%
Other News
Fed’s Kashkari: Sees little evidence a labor market softening
- Minneapolis Fed Pres. Neel Kashkari
Minneapolis Fed Pres. Kashkari is speaking (2023 voting member). Once a dove is now more of a hawk says:
- seeing little evidence of a labor market softening
- surging mortgage costs having profound impact on housing sector
- still working hard to achieve soft landing
- some data points to slower consumer spending
- mixed signals make it hard to get firm read on economy
- it is possible headline inflation has peaked
- does not see any evidence that core inflation has peaked
- committed to get inflation back down to 2%
- open to discussing inflation target level once price pressures back to 2%
- some evidence pointed to improving supply chains
- wages are trying to catch up to inflation not drive inflation
- risk of under shooting on rate hikes bigger than overdoing it
- takes a year or 2 for rate hikes to work through economy
- best guess is that the Fed can pause on rate hikes sometime next year
- fairly confident stagflation won’t occur
- Does not think, US economy was in recession in first 6 months of the year
- On the margin, lower government spending would help inflation.
Cryptocurrency News
Ethereum Price: Network activity signals red days ahead
- Ethereum price shows a significant influx of investors actively participating in the network.
- The bears have successfully breached the 8-day exponential moving average.
- Invalidation of the bearish thesis is a breach above $1,330.
Ethereum price could become problematic for long-term investors as a sweep-the-lows event is becoming more self-fulfilling. Key levels have been identified.
Ethereum price is setting up for a correction
Ethereum price displays concerning on-chain metrics that investors should be aware of. According to Santiment’s 30-Day Active Addresses Indicator, more than 750,000 addresses have become active in October. Statistically, whenever the indicator begins ramping higher, a sharp correction in price occurs shortly after.
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