North American News
US major indices close solidly higher ahead of the CPI data tomorrow
- Dow Industrial Average leads the charge with a gain of over 500 points
The major US indices are closing with solid gains led by the Dow Industrial Average which rose by over 500 points or 1.58% on the day. The NASDAQ index lagged but still closed higher with a gain of 1.26%..
The gains today, head of the key CPI data which were released at 8:30 AM tomorrow expectations for 0.3% for the headline and the core number. Year on year the headline numbers is expected to fall to 7.3% from 7.7%. The core is expected to dip to 6.1% from 6.3%.
The final numbers are showing:
- Dow Industrial Average up 528.34 points or 1.58% at 34004.81. The index closed above its 100 hour moving average at 33934.69
- S&P index closed up 56.19 points or 1.43% at 3990.58. Like the Dow it also closed above its 100 hour moving average currently at 3986.75 (bullish)
- NASDAQ index rose 139.13 points or 1.26% at 11143.75. Unlike the Dow and the S&P, it closed just below its 100 hour moving average at 11148.59
Leading the Dow 30:
- Boeing, +3.72%
- Microsoft, +2.89%
- Visa, +2.81%
- Caterpillar, +2.58%
- Nike +2.39%
Other gainers today included:
- Box, +7.51%
- Roblox, +5.34%
- DoorDash +5.01%
- American Airlines +4.95%
- Schlumberger, +4.52%
- Snowflake +4.44%
losers today included
- Moderna, -6.9%
- Tesla, -6.27%
- Rivian, -6.16%
- Alibaba, -2.03%
- Netflix -1.51%
U.S. Treasury auctions of $40 billion of 3 year notes at a high yield of 4.093%
- Three year WI level was at 4.096%
- High-yield 4.093%
- WI level at the time of auction 4.096%
- Tail -0.3 bps
- bid to cover 2.55x versus six-month average of 2.50X
- Directs (a measure of domestic demand) 20.44% vs six-month average of 19.8%
- Indirects (a measure of international demand) 61.71 vs six-month average of 56.3%
- Dealers (they take the rest) 17.85% vs six-month average of 22.7%
New York Fed survey on inflation: Year ahead inflation falls to 5.2% from 5.9% last month
- New York Fed survey on inflation
The NY Fed is out with surveyed results on inflation and they are positive but still elevated:
- Year ahead expected inflation falls to 5.2% from October’s 5.9%
- Expected inflation marks record month to month decline in November
- three year ahead expected inflation at 3% versus 3.1% in October
- five year and expected inflation ebbs to 2.3% from 2.4% last month
- expected home price rise weakest since May 2020 of 1%
- expected household income gain record at 4.5%
- your gasoline prices rise seen at 4.7% versus 5.3% last month
US treasury auctioned off 32 billion of 10 year notes a high yield of 3.625%
- WI at the time of auction 3.588%
- High-yield 3.625 (last month 4.14%)
- WI level at the time the auction 3.588%
- Tail 3.7 bps vs 1.8 bps average
- Bid to cover 2.31X vs six-month average of 2.40X
- DIrects (a measure of domestic demand) 18.7% vs 19.0%
- Indirects (a measure of international demand) 59.45% vs six-month average of 62.8%
- Dealers 21.86% vs 18.3%
US November budget deficit $-249 billion versus $-248 billion estimate
- US November budget deficit
- US November budget deficit -$249 billion versus -$248 billion estimate
- Deficit of -$249B versus -$190 million deficit in November 2021
- US fiscal 2023 year date deficit -$336 billion versus comparable fiscal 2022 deficit of -$356 billion
- budget outlays $-501 billion versus $-473 billion in November 2021
- receipts came in at $252 billion versus $281 billion in November 2021
Commodities
Gold bears take out key supports, eye $1,765
- Gold price bears have move din for the kill at the start of the week.
- $1,765 swing lows are now in sight and in-the-money longs below there is a target for the bears.
Gold price has started out the week on the back foot and printed a low of $1,777.68 having fallen from a high of $1,797.46. Gold price is down by some 0.96% at the time of writing while the US Dollar has cut early losses to trade higher by some 0.25% as per the DXY index at 105.20.
All eyes on the Federal Reserve
Investors are potentially moving to the sidelines ahead of the US data events this week that kick off with the US Consumer Price Index on Tuesday. This data comes ahead of the showdown event for the week in the Federal Open Markey Committee meeting that will conclude a week’s long blackout period of Federal Reserve speakers. Gold price would be expected to suffer if the peak for the Fed funds tilts higher than expected should inflation becomes entrenched.
Money markets are currently pricing an almost 75% chance that the US central bank will hike rates by 50 basis points after delivering four successive 75 basis point rate increases. However, some analysts anticipate a hawkish outcome from the event.
”We expect a more hawkish tone than what he delivered to the Brookings Institution last month,” analysts at Brown Brothers Harriman said who argued that ”the Fed narrative remains too dovish.”
‘With both Average Hourly Earnings (AHE) and core Personal Consumption Expenditures (PCE) flat-lining near 5% for most of this year, we don’t think this expected tightening path will get inflation back to target, not when the labour market remains so firm and consumption is holding up,” the analysts explained. ”Furthermore, the swaps market continues to price in an easing cycle in H2 2023. This seems highly unlikely and so the mispricing continues,” the analysts argued.
WTI crude oil futures settle at $73.17
- Up $2.15 or 3.03%
The price of the WTI crude oil futures are settling at $73.17. The low for the day was at $70.27. The high for the day reached $73.96.
Looking at the hourly chart above, the price extended above its 100 hour moving average currently at $72.74. That tilted the short-term bias to the upside. Going forward, staying above that moving average would keep the buyers in control in the short term.
EU News
Most European major indices close lower on the day
- German DAX falls -0.45%. Italy’s FTSE MIB rises modestly
The major European indices are ending the day modestly lower
- German DAX, -0.45%
- France’s CAC, -0.41%
- UK’s FTSE 100 -0.41%
- Spain’s Ibex -0.37%
- Italy’s FTSE MIB bucked the trend and rose by 0.1%
Other News
Goldman Sachs is cutting hundreds more jobs
- Financial markets starting to feel the pinch
Bloomberg is reporting that Goldman Sachs is reportedly looking to cut hundred more jobs and is moving beyond routine culls.
The financial sector is starting to feel some of the pinch from higher rates and lower deal activity. Below are some recent headlines from financial institutions as companies look to cut costs.
CNBC Survey: Expect 50 bps this week and another 75 BP next year
- Terminal target 5% to 5.25%
The CNBC investor survey shows the Fed is likely to continue to tighen but the worst is mosly behind us:
- 50 bps hike next week
- Additional 75 basis points in 2023
Although the Fed is expected to increase rates, the survey shows that the S&P is expected to rise in 2023 and 2024
- Current at 3934
- End of 2023 at 4044
- End of 2024 at 4418 (+12.3% from currently levels)
Chance of the S&P increasing/decreasing 10% from current levels
- Increase up to 51%
- Decrease 35%
- Risk reward -16%
It was at 43% for both increase and decrease in June 2022.
As far as rates, the 10 year yield outlook shows:
- 3.58% current
- 3.67% at the end of 2023
- 3.60% in 2024
Cryptocurrency News
Bitcoin showing cracks after rumors that massive selling occurred over weekend
- Bitcoin price is under pressure as several blogs and media outlets reported on big sell orders.
- BTC slides nearly 1% during the European trading session.
- Expect volatility to pick up in the coming two weeks before the holiday season kicks in.
Bitcoin price slid lower Monday after it lost ground over the weekend after the US Producer Price Index (PPI) numbers on Friday showed a slight tilt higher. However, the number was still lower than its last number, which was revised upwards, making the drop even bigger. Nonetheless, traders disregarded this and stayed bearish as the new number came out slightly higher than the median expectations, putting pressure on cryptocurrencies overall.
Will Powell save the day?
Bitcoin price got additional headwinds over the weekend as several blogs, Twitter feeds and news outlets reported that massive chunks of sell orders were placed in BTC. The apparent motivation behind it was that traders do not see a turnaround before next year and rather want to dump the stack than sit on it and risk more losses. Once regular trading started on Sunday night in Asia, it appeared stable with no massive sell-off, while the US Dollar backed off.
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