North American News
Major US indices close near the highs for the day
- S&P rises for the 2nd consecutive week
The major US indices are closing near the high for the day and ending a solid week with the Dow industrial average leading the way. The Dow is on track for the best October, and on pace for the best month since January 1976 (with one more day to go). The NASDAQ was the outperforming index today with a gain of close to 3%.
The Dow is now up for its 4th consecutive week. That is the longest streak since 2021. The S&P and NASDAQ is posting its 2nd straight weekly gain.
- Dow industrial average is up 828.52 points or 2.59% at 32861.81
- S&P index is up 93.78 points or 2.46% at 3901.07
- NASDAQ index is up 309.79 points or 2.87% at 11102.46
- Russell 2000 is up 40.59 points or 2.25% at 1846.92
For the week:
- Dow industrial average is up 5.72%
- S&P index is up 3.95%
- NASDAQ index is up 2.25%.
- Russell 2000 was the biggest performer with a 6.01% gain
For the month of October so far:
- Dow industrial average is up 14.44%
- S&P index is up 8.84%
- NASDAQ index is up 4.98%
- Russell 2000 is up 10.95%
US September PCE core inflation +0.5% m/m vs +0.5% expected
- Highlights of the Fed’s personal consumption expenditure report for September 2022
- PCE core m/m +0.5% vs +0.5% expected
- Prior m/m +0.6%
- Core PCE y/y +5.1% y/y vs +5.2% expected
- Prior was 4.9% y/y
- Headline PCE 6.2% y/y vs +6.2% prior
- Deflator m/m +0.3% vs +0.3% prior
Consumer spending and income for August:
- Personal income +0.4% vs +0.3% expected. Prior month +0.3%
- Personal spending +0.3% vs +0.4% prior
- Real personal spending +0.6% vs +0.4% expected. Prior month +0.4%
US pending home sales for September -10.2% vs. -5.0% expected
- Pending home sales for September 2022 tumbles -10.2% vs. -5.0% expected.
- Prior month revised to -1.9% from -2.0% previously reported
- The pending home sales index moved to 79.5 from 88.5 last month
- Pending home sales are down -31.0% from September 2021
- West -11.7%
- Midwest -8.8%
- South -8.1%
- Northeast -16.2%
UMich October final consumer sentiment 59.9 vs 59.8 expected
- Final sentiment survey data from December
- Prior was 58.6
- Prelim was 59.8
- Current conditions 65.6 vs 65.3 prelim
- Expectations 56.2 vs 56.2 prelim
- 1-year inflation 5.0% vs 5.1% prelim (4.7% prior)
- 5-10 year inflation 2.9% vs 2.9% prelim (2.7% prior)
Commodities
Gold pressured as core PCE jumps, justifying further Fed action
- Gold price records a fresh three-day low spurred by a strong US Dollar.
- The Fed’s preferred gauge for inflation, the Core PCE, smashed estimates, justifying additional action.
- US Treasury bond yields jumped, with the 10-year eyeing to recoup the 4% threshold.
Gold price slides and extends its losses below $1650 due to stubbornly high US inflation reported namely the Core Personal Consumption Expenditures (PCE), the Federal Reserve’s favorite gauge of inflation, which increased more than estimates, bolstering the US Dollar. Therefore, the XAUUSD is trading at $1641.62, diving 1.23%, eyeing the weekly lows of around $1638.
The Fed’s gauge of inflation justifies additional tightening
On Friday, the US Commerce Department revealed that September’s US inflation, as measured by the Core PCE, which strips volatile items like food and energy, jumped 0.5% MoM, higher than the previous reading, while annually based, escalated by 5.1%, above 4.9% forecasts by street’s analysts. In a separate report, the Employment Cost Index (ECI), an indicator used by the Fed in addressing inflation on wages, increased by 1.2% in the July-September period, as reported by the Department of Labor.
Given the backdrop, the so-called Fed pivot narrative could be tossed away as inflation remains stubbornly high and salaries are rising, despite the Federal Reserve’s effort to tame inflation.
Silver drops below $19.50 as traders brace for next week’s FOMC decision
- Silver prices tumble at the 100-day Exponential Moving Average (EMA), prolonging its losses to the 50-day EMA at $19.08.
- The US Core PCE expanded by 5.1% YoY, above estimates, paving the path for further tightening.
- Investors focus on November’s Fed monetary policy meeting, with expectations of the US central bank hiking 75 bps.
Silver price stumbles at a key resistance level as the New York session progresses due to US economic data justifying further Federal Reserve’s actions, while a risk-on impulse keeps safe-haven assets pressured, but the US Dollar, which bucked the trend, as the next week’s Federal Reserve monetary policy decision lurks. The XAG/USD is trading at $19.17 a troy ounce, down by 2%, after hitting a daily high at $19.63.
US core PCE justifies further Fed’s aggression
Wall Street extends its gains even though the greenback edges higher. A measurement of inflation revealed by the Commerce Department, which is also the Fed’s favorite inflation gauge, increased 0.5% MoM, above the previous month’s reading, justifying the need for additional rate hikes amidst a Fed pivot narrative circulating in the financial markets. Also, the year-over-year number jumped by 5.1%, exceeding forecasts of 4.9%
In a separate report, the Employment Cost Index (ECI), an indicator used by the Fed in addressing inflation on wages, increased by 1.2% in the July-September period, as reported by the Department of Labor.
Aside from inflation data, the University of Michigan Consumer Sentiment, on its October final reading, remained unchanged at 59.9, while inflation expectations barely moved. According to the survey, one-year horizon inflation is estimated at 5% from 5.1%, while for 5-years is estimated at 2.9%.
Of late, the Dallas Fed Trimmed Mean PCE for September edged lower from 6% to 4.3%. At the same time, the Atlanta Fed GDPNow Forecast for Q4 is 3.1%.
Silver is on the defensive as US Treasury yields jumped, underpinning the US Dollar
The market’s reaction to the US data was felt in the fixed-income markets, as treasuries sold off, which was positive news for bond yields. The US 10-year Treasury bond yield is gaining nine bps, up at 4.01%, a headwind for the precious metals segment.
In the meantime, the US Dollar Index, a gauge of the buck’s value vs. a basket of its rivals, advances 0.30% at 110.895, underpinned by
WTI crude oil settles at $87.90
- Down -$1.18 or -1.32%
The price of WTI crude oil futures are settling at $87.90. That’s down -$1.18 or -1.52%. The high price reached $88.74. The low price extended to $87.10.
Baker Hughes US oil rig count 610 vs 612 prior
- Weekly US oil and gas drilling rig data
- Prior was 610
- Natural gas rigs 157 vs 156 prior
Capital discipline in the oil patch is holding and the number of drilled by uncompleted wells continues to fall.
EU News
European stocks finish with modest gains to cap a sizzling week
- Closing changes on the day and the week
On the day:
- Stoxx 600 +0.1%
- German DAX +0.2%
- UK FTSE 100 -0.5%
- French CAC +0.5%
- Italy MIB -0.3%%
- Spain IBEX -0.3%
On the week:
- Stoxx 600 +3.7%
- German DAX +4.0%
- UK FTSE 100 +1.0%
- French CAC +4.0%
- Italy MIB +4.5
Other News
Timiraos leaking economic data as well now?
- The WSJ Fedwatcher says PCE is expected to be on the high side
WSJ Fedwatcher Nick TImiraos is tweeting about economic data at the moment and warning that PCE inflation “is expected to be on the high side”.
Given that he leaked a softening in the Fed stance on Friday, everything he writes gets extra scrutiny. That said, no one is leaking economic data to him. He’s refering to the consensus estimate on core at +0.5%, which he explicitly references.
Cryptocurrency News
Doge up over 13% on hopes that Musk will save the day. To the moon!
- Here we go again!
The Musk takeover of Twitter has the crypto crowd excited. Especially, the Doge traders.
Recall, Musk announced in May that Tesla and SpaceX merchandise could be purchased with Doge. What might stop other ideas to prop up the digital currency? If Musk is still heavily invested in the digital currency, it would certainly help lower his cost of buying Twitter if there was a significant bounce in Doge. Right? At the least, he will enhance his status as the world’s biggest influencer.
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