Market causing you a bit of heartburn? Well do I have the drug for you…The afternoon perked up some on the ruling by the judge in the Zantac case to grant summary judgement ie dismiss the case.*** While not binding on the Ninth Circuit, it was a stunning rebuke of the plaintiffs case and unequivocally good news for the parties involved ie nearly everyone in the pharma/distribution channel.
Was that Prince playing in the background during Powell’s appearance today or was my mind playing tricks on me? It was a tale of two sessions…pre-Jerome and post. One could also say it was a case of two Jeromes, the one we got back at Jackson Hole where he did his best Marcellus Wallace impression, and the far softer version we got today.
While not the greatest of weeks for trading activity, the Thanksgiving holiday provides the Street a nice little mini-break before gearing up for the end of year home stretch. Equities have been “on one” as the saying goes since hitting their yearly low mid-October. Whether they can continue that momentum for what’s left of 2022 will depend on factors that have little to do with the fundamental health of the companies themselves.
Enjoying the job thus far Liz? Talk about making an entrance. Her favorability rating plummeted but at least she stuck by her guns and didn’t deviate from her plan within a week of announcing it. Umm…and while I’m not sure thanking her is the correct way to put it, at the minimum she’s introduced many of us to the concept of LDIs! The UK tax cut that wasn’t is just one of many macro headlines keeping markets on their toes. Judging by the green on the screen, they’re actually on the balls of their feet as they sprint higher. But those of you that read the View religiously knew this would happen because we told you as much on Friday. We jest but October has historically gone better post a poor September and that box was surely ticked last month. Seasonal trends are no match for the intensity of negative sentiment markets have been subjected to but for now Q4 is off to a strong start.
On the bright side, at least you’re not one of the 4 grandchildren in Denmark that was stripped of their royal titles…
We currently reside in a bit of an information gap at the moment – the FOMC is now behind us but boy did that leave a mark. And while it feels like earnings never actually stop per se, Q3 figures won’t come for another 3 weeks. So we’re left to contemplate what to make of a week that’s seen global rate hikes of nearly 600bps. Like someone that was late to a not so surprise party, the Fed and its ilk are racing with a lead foot to get where they need to go.
“She was more than a monarch, she defined an era.” – Those felt like appropriate words to reiterate, and I’m thankful someone came up with them. It was a struggle to open the day’s recap without first acknowledging the passing of Queen Elizabeth II, an iconic figure to say the very least. As the Queen herself said: “grief is the price we pay for love”.
Well, at least it wasn’t a nothing done? It was short and not very sweet. An address that was expected to last 30 minutes barely reached 10 and quite frankly, the Fed Chairman probably didn’t even need that long. The funereal look on Jerome’s face suggested “good” news was not coming and on that front at least, he delivered. It’s been a series of fits and starts for the market as investors have listened to (and subsequently ignored) what the Fed intends to do. The collective “No we haven’t” we heard when the Street started prematurely assuming a pivot was in place had been recognized and corrected for. Or so we thought. We are always parsing Mr. Powell’s language for clues within the message and his phrase “requires using our tools forcefully” is one that surely stood out. While we didn’t get further clarity on an increase of the funds rate ceiling, nor did he allude to one, the prospect for elevated rates for far longer than the market expected was clear. Despite various data points pointing to peak inflation having passed, the Fed is far from comfortable with the current level of inflation and will result in a restrictive policy stance for some time. And for good measure, Kashkari continues to enjoy his view from the cheap seats (non-voting) as he called inflation a “raging inferno.”
Saw the Tina Turner musical over the weekend (it’s been quite the trip down memory lane pop-culture wise for yours truly lately) and it was outstanding. But it wasn’t all peaches and cream for the Queen of Rock ‘n’ Roll with a series of ups and downs until making the ultimate comeback. The market has been on a similar journey of late, but it’s comeback hasn’t been as warmly received as Private Dancer. The summer season and its accompanying light volumes have provided the right tonic for a market that many still question. But like Proud Mary it keeps on rolling, today’s move higher somewhat perplexing given the data we got before the session got underway. There have been various canaries in the coal mine emanating from China for some time, and the misses on industrial production and retail sales overnight did little to dissuade that thought. The US data we received wasn’t much better, orders and shipments for the empire mfg index coming in at shockingly low levels. This was accompanied by a weak housing sentiment figure, with the buyer traffic number hitting the lowest levels in 8 years. And yet…
Admittedly I’m a bit late to the game but over the weekend I finally did it. After a slow-ish August week, I felt the need for speed. The sequel to the iconic 80’s movie based on the elite Navy pilots included all of the sentimental checks: breathtaking fight scenes in the sky, a cheesy beach montage and of course, Tom Cruise’s impish grin. The 2 hours of brain candy come highly recommended. Markets were feeling similarly nostalgic to start the week, and by nostalgic I’m of course referring to the meme mania from last year. All the familiar faces from wat back then were here for it. There are even rumors that fashionable trade of buying out of the money calls was back ‘en vogue’ after taking a long hiatus. Why now? Much like the producers of a sequel 36 years after the first, the answer is most likely, why not? Despite the roster of Fed speakers last week doing their best to suggest a pivot was not in the offing any time soon, the retail army forged forward but they were far from alone. There were a host of risk on signals to help lift equities early on. The 10-yr yield resumed its descent despite practically the entire Fed roster exhorting the market they were not done on hikes. Palladium is making 3m highs while US high yield credit spreads are lower for the 4th straight day – a break below the May lows would provide another. Things were going swimmingly early on, with all eyes on the S&P as it broke through key levels (4177/4200)…