Ah, the stock market! It’s like a rollercoaster that never ends, and this week was no exception. Let’s dive into the nitty-gritty of what went down, shall we?

The Good, the Bad, and the Ugly

The stock market had its ups and downs this week. While the Nasdaq and Russell 2000 managed to scrape by with some modest gains, the Dow Jones and S&P 500 weren’t so lucky, dipping 1.3% and 0.7%, respectively. There’s chatter in the air that the market might be gearing up for a bounce back, especially after the rough ride in September. But, alas, those pesky rising long-term rates kept things interesting.

Speaking of rates, the 10-yr note yield made quite the leap, jumping 13 basis points this week and a whopping 48 basis points this month, settling at 4.57%. On the flip side, the 2-yr note yield took a bit of a tumble, dropping eight basis points this week but rising 18 basis points this month to 5.04%. It’s not so much the size of these rate hikes that’s causing a stir, but the speed at which they’re happening. And guess what? It doesn’t seem to be tied to fears of more rate hikes by the Fed. Talk about a plot twist!

Sector Performance

The rate-sensitive S&P 500 utilities sector took the biggest hit this week, dropping by 7.0%. The consumer staples sector wasn’t far behind with a 2.1% decline. On the brighter side, the energy and materials sectors saw gains of 1.3% and 0.2%, respectively.

The Unexpected Slowdown in Inflation

Did you ever stop to think about how inflation affects your daily life? The Fed’s recent report might surprise you. While many anticipated a rise in the key inflation indicator for August, it grew less than expected. Excluding the volatile sectors of food and energy:

• Core PCE Index for August: A mere 0.1% increase, falling short of the projected 0.2%.
• Yearly Overview: The index rose by 3.9%, aligning with predictions.

The Alarming Rise in Personal Bankruptcies

Imagine working tirelessly, only to find yourself unable to make ends meet. Isn’t it heartbreaking? August saw:

• An 18% spike in personal bankruptcies.
• Over 39,000 Americans seeking financial protection.
• The 13th consecutive month of annual increases in claims.

Why this surge? The culprits seem to be relentless inflation and soaring interest rates. But the question remains: How long can consumers bear this burden?

The Meteoric Rise of Obesity Drugs

Have you heard of Ozempic and Wegovy? Their popularity is skyrocketing:

• Prescriptions have surged by 300% in less than three years, reaching 9 million.
• A whopping $500M spent on advertising in just the first seven months of 2023.

What’s the Fed Up To?

The fed funds futures market is giving us some mixed signals. According to the CME FedWatch Tool, there’s only a 14.2% chance of a 25-basis points rate hike come the November FOMC meeting. That’s down from 27.5% last week and a significant drop from 62.3% a month ago. So, what’s causing all this uncertainty in the Treasury market? Well, there are a few culprits:

• The Fed’s still got a long road ahead with its QT efforts.
• Other central banks might be selling Treasuries to prop up their currencies.
• And let’s not forget about concerns over the budget deficit.

Dropping New Homes Sales?

First off, let’s address the elephant in the room. New home sales took a bit of a tumble in August, dropping by 8.7%. Ouch, right? But, before we jump to conclusions, it’s worth noting that July’s figures were given a little facelift, being revised up to a not-too-shabby 739,000. So, it’s not all doom and gloom.

Now, for the silver lining: August’s seasonally adjusted rate stood at 675,000 units. That’s a whopping +5.8% increase year over year. So, while the monthly figures might have us raising an eyebrow, the annual ones are giving us a reason to smile.

A Regional Rundown

Alright, let’s break it down by region, because, as they say, “location, location, location!”

• Midwest: Hold onto your hats, folks. The Midwest saw a steep decline of -17.2%. It’s a bit of a head-scratcher, especially when you consider their year-over-year figures showed a positive swing of +24.2%.
• West: The West wasn’t far behind with a -9.4% dip. But, here’s the kicker: their year-over-year figures skyrocketed with a +44.1% increase. Talk about a rollercoaster!
• South: The South followed suit with a -7.5% decrease. And, unfortunately, their year-over-year figures weren’t too rosy either, showing a decline of -9.2%.
• Northeast: Ah, the Northeast, our beacon of hope! They bucked the trend with a +6.7% increase. And their year-over-year figures? A solid +18.5% boost. Hats off to you, Northeast!

Let’s Talk Money

When it comes to the moolah, the median new house price was a smidge lower than last year, sitting at $430,300, a decrease of -2.27%. The average sale price wasn’t faring much better, being -3.15% lower than last year at $514,000. It seems buyers might be hunting for bargains or perhaps opting for smaller, more affordable homes.

Inventory Insights

By the end of August, there were 436,000 new homes waiting for their forever families, a slight increase from July’s 431,000 units. However, year over year, new homes up for grabs were down by -5.21%. It’s a bit of a mixed bag, isn’t it?

Now, here’s a fun fact: houses under construction made up about 44% of the August new home sales. Those not yet started? They accounted for 16.7%. And the ones ready to move in? They made up roughly 39.1%. It seems there’s a little something for everyone, whether you’re looking for a brand-spanking-new build or something a bit more… established.

Wrapping It Up

In the grand scheme of things, the world of new home sales is as unpredictable as a cat on catnip. One month it’s up, the next it’s down. I do expect them to slow down in the near future.

Target’s Urban Exodus

Safety first, right? Target seems to think so:

• Plans to shut down nine stores in major cities.
• Anticipated losses of $500M this year due to shrinkage.
• Store closures in prime locations like NYC, Seattle, SF, and Portland.

In conclusion, while some sectors are booming, others face unprecedented challenges. The real question is, are we prepared for what’s next?

Oil’s Well That Ends Well?- Inflation Concerns

WTI crude oil futures saw a significant jump this month, settling at a cool $90.78/bbl. This has raised some eyebrows and concerns about inflation expectations, rising gas prices, and a potential slowdown in consumer spending.

Wrapping Up

So, there you have it, folks! A week full of twists and turns in the stock market. It’s always a wild ride, but that’s what makes it so darn exciting. Here’s to hoping next week brings more ups than downs!

CALENDAR & MOVERS

• Tuesday: JOLTs Job Openings (August)
• Wednesday: Services PMI (September)
• Friday: Unemployment Rate

The commencement of the fourth quarter is upon us, marking a crucial juncture for global markets. Reflecting on the third quarter, the trajectory wasn’t as favorable as anticipated. Here’s a snapshot:

• S&P 500: Experienced a decline of approximately 3.6%.
• Dow Jones: Witnessed a drop of 2.6%.
• Nasdaq: The tech-centric index saw a reduction of 4.1%.

Furthermore, bond yields have been on an upward trend, primarily influenced by the Federal Reserve’s stance. The institution has been dropping hints about potential rate hikes, emphasizing that rate reductions aren’t on their immediate agenda. As we navigate the final quarter of 2023, investors are keenly observing the market dynamics, as it could provide insights into the financial landscape of 2024.

Deciphering the U.S. Labor Market

The upcoming U.S. jobs report, scheduled for release on Friday, is anticipated to portray a robust labor market. Key data to watch:

• Unemployment Rate: Expected to remain steady at 3.8%.

Before this pivotal release, investors will be treated to a preview of the labor scenario. Two significant reports are on the horizon:

• JOLTS jobs report for August.
• ADP National Employment report.

Any unexpected deviations in these reports could heavily influence the Federal Reserve’s decisions, especially concerning the speculated rate hike in November.

Central Bank Luminaries Take the Stage

This week is packed with insights from prominent figures in major central banks:

• U.S. Perspective: Fed Chair Jay Powell and Philadelphia Fed President Patrick Harker are slated to engage with workers and small business proprietors, delving into the economic landscape. While there’s been headway in inflation metrics, escalating oil prices suggest that achieving the Fed’s 2% target might be a prolonged endeavor.
• European Insights: All eyes will be on ECB President Christine Lagarde as she addresses the audience on Wednesday. The primary focus? Any indications that the European Central Bank might reconsider its rate hike strategy, especially after witnessing the lowest inflation rates in the past two years this September.

Global Financial Highlights

Diverse financial events are unfolding across the globe:

• Australasia’s Monetary Policy: Both Australia and New Zealand’s central banks are convening for policy discussions this week. The prevailing expectation is that interest rates will remain unaltered. However, analysts are vigilant, seeking clues about potential rate adjustments in the future.
• Global Food Inflation: The FAO Food Price Index is set to be unveiled on Friday, offering a comprehensive perspective on global food inflation trends.
• Earnings Spotlight: On the corporate front, a significant event to watch is the earnings announcement from the consumer goods titan, McCormick (MKC). The company is scheduled to disclose its financials on Tuesday, before the trading bell rings.

In conclusion, as the fourth quarter unfolds, it promises a plethora of financial insights, shaping investor strategies and providing a glimpse into the potential economic landscape of 2024.

BONDS

Have you ever stopped to wonder what’s happening in the world of bonds? Why, just this Friday, ahead of the opening bell, we saw Treasury yields taking a dip. But what’s the reason behind this? Let’s dive deep and unravel the story.

Thursday’s Movement

• The 10-year note yield? It dropped a significant four basis points (0.04%) to 4.57%.
• The 30-year bond yield? A decrease of two basis points (0.02%) brought it to 4.70%.
• And the two-year note? A whopping decrease of eight basis points (0.08%) to 5.06%.

Why the decline, you ask? Investors had their eyes glued to the weekly jobless claims report. And guess what? The numbers were better than expected, painting a picture of a strong and unwavering labor market.

Mortgage Rates on the Rise

Hold onto your hats! Mortgage rates have soared to their highest in almost 23 years. The latest figures?

• The 30-year fixed mortgage rate? A leap of 12 basis points (0.12%) to 7.31%.
• The 15-year fixed rate? An increase of 18 basis points (0.18%) to 6.72%.

Municipal Market Commentary

In a surprising twist, the Bloomberg 30-day visible supply plummeted by $1.343 billion, settling at $11.471 billion on Thursday. This is intriguing, especially when you consider it’s above the 12-month average of $8.296 billion.

In Conclusion

So, what’s the bond market trying to tell us? With all these shifts and changes, it’s clear that the financial landscape is moving. I think we are heading toward a recession. There could be an opportunity for investors to make substantial returns on Treasuries if this happens next year.

COMMODITIES

Oil & Energy

September witnessed a significant surge in oil prices, marking the fourth straight month of growth. Brent crude showcased an impressive monthly gain of nearly 7%, while WTI outperformed with a 9.50% increase. Interestingly, the US benchmark is gradually aligning with its European counterpart. This trend can be attributed to WTI’s advantage from the notably low US inventory levels, which stand well beneath their 5-year average. Consequently, the gap between Brent and WTI prices is diminishing. Currently, WTI hovers around $91.20, closely trailing European Brent’s $92.60.

Shifting our focus to natural gas, prices have receded to 43 EUR/MWh in Europe. As winter approaches, Europe braces itself with a nearly full inventory, at 95%.

Gold & Precious Metals

Copper, often seen as a global economic indicator, is facing a downturn. The primary concern stems from potential dips in metal demand, especially from China. Presently, a tonne of copper is valued at approximately $8100 on the London Metal Exchange.

Gold’s Slippery Slope: Gold, historically a steadfast asset even with rising bond yields, has recently experienced notable declines. The evidence is clear: gold’s value has dipped for five successive days, now standing at around $1,860.

CRYPTOCURRENCY

Bitcoin is gaining momentum, registering a +2.90% increase since the week’s onset and is currently hovering around the $27,000 mark. Following suit, ether, the second most valuable cryptocurrency by market cap, has surged by +5.8%, nearing the $1,680 threshold. This notable rise can be attributed to the SEC’s green light for an ether futures ETF presented by Valkyrie. For many, this favorable verdict might pave the way for numerous ETFs awaiting SEC’s nod in the US.