Daily Markets: Fed Pause Optimism Persists

Today’s Big Picture

Asia-Pacific equity markets finished the day higher as speculation on the current U.S. central bank’s rate hike pause buoyed those markets: Australia’s ASX All Ordinaries advanced 0.24%, Taiwan’s TAIEX 0.86%, both China’s Shanghai Composite and India’s SENSEX just over 0.90%, Hong Kong’s Hang Seng 1.71%, and Japan’s Nikkei 2.37%. In the first trading session after Korean regulators instituted a ban on short selling, it seems like the entire market underwent a short squeeze as traders scrambled to cover those positions, pushing South Korea’s KOSPI up 5.66%. European markets are mostly lower in midday trading, and U.S. equity futures point to a higher open.

The positive start to the week reflects the carryover from last week’s move higher as investors contemplate what’s next for the Fed and potential progress on averting a government shutdown later this month. While September quarter earnings continue this week, we have a rather light but that will be offset by the return of Fed officials, including Fed Chair Jerome Powell. While many ruminate on the Fed’s next move, Barclay’s came out early this morning and announced it sees the Fed holding through December and moving to raise rates in January of 2024. That pushout flows through to its forecast for the Fed’s first rate cut, which it now sees coming in September 2024. Interesting timing given the proximity to the 2024 presidential election.

Two other items investors will be watching closely are continued short covering and the market’s technical setup. Part of the market's move last week was fueled by short covering, something that could persist into this week. That will lead investors to carefully watch the technicals for the S&P 500 and the Nasdaq Composite. Both ended last week above their respective 50-day moving averages but have another layer of resistance ahead with their 100-day moving averages that are about 1% higher than Friday's close. If those market indices pierce upcoming resistance levels, it would argue in favor of the traditional November and December market seasonality many have been hoping for.

Data Download

International Economy

The HCOB Eurozone Services PMI was unrevised at 47.8 in October, pointing to a third consecutive month of falling services sector activity and the deepest contraction since February 2021. Demand conditions worsened, as new business volumes fell at the quickest pace since January 2021, including new export business falling at the fastest pace in the last two-and-a-half years.

Domestic Economy

House Speaker Mike Johnson shared that House lawmakers worked over the weekend on a stopgap measure needed to fund the U.S. government beyond a Nov. 17 deadline. Last week, Johnson discussed a possible stopgap measure running through Jan. 15.

Campbell Harvey, Duke University professor of finance, sees the collapse of Silicon Valley Bank earlier this year was likely not an isolated incident and expects other banks may fail.

Markets

Equities closed out last week by extending gains from the post-Fed meeting euphoria and also got a boost from both weaker the weaker than expected October Employment Report and ISM Services data. Energy was the lone decliner, falling 1.01% as oil traders read the potential for lower demand in the ISM and Employment figures’ tea leaves for the US and China. Continuing the current trend, Real Estate added another 2.36% gain to bring the week’s gains to just over 8.5%.

Other leading sectors on Friday included Communication Services (1.53%), Consumer Discretionary (1.41%), and Financials (1.32%). Broad index returns indicated that Friday’s rally had a good deal of breadth as not just the Dow (0.66%), The S&P 500 (0.94%), and Nasdaq Composite (1.38%) posted gains but the Russell 2000 led, closing 2.71% higher.

Not everyone was riding high as shares of Fortinet (FTNT) were bid down 12.35% after the company pre-announced that it expects current quarter sales to fall from the $1.5 billion estimate to between $1.38 and $1.44 billion.

Here’s how the major market indicators stack up year-to-date:

• Dow Jones Industrial Average: 2.76%
• S&P 500: 13.51%
• Nasdaq Composite: 28.78%
• Russell 2000: -0.03%
• Bitcoin (BTC-USD): 109.18%
• Ether (ETH-USD): 52.80%

Stocks to Watch

Before U.S. equity markets begin trading today, Freshpet (FRPT) and TreeHouse Foods (THS) will report their latest quarterly results.

Pre-market breadth looks healthy as 268 of the S&P 500’s 503 names are seeing action ahead of the open with 205 gainers and 63 decliners. Warner Brother Discovery (WBD) and Paramount Global (PARA) are both coming under some pressure this morning as the actor’s strike heads into its 114th day with little solution in sight.

Apple partner Foxconn Technology (FXCOF) reported October revenue that declined 4.65% YoY but rose 12.2% MoM. Foxconn reiterated its outlook for the current quarter that calls for “significant” growth.

Lucid Group (LCID) cut prices of its Air range of luxury sedans earlier this week for a limited time ahead of the holiday season.

IBM (IBM) will work with NatWest Bank (NWG) to improve Cora, the bank's virtual assistant, which will use generative AI to provide access to a wider range of information through conversational interactions.

Ant Group, an affiliate of Alibaba (BABA), received approval from the Chinese government to release products to the public powered by its artificial intelligence large language model called Bailing.

LVMH Moët Hennessy Louis Vuitton (LVMUY) agreed to buy Los Angeles-based eyewear maker Barton Perreira. LVMH plans to expand the brand outside the U.S. by selling its glasses in high-end stores it already works with throughout Europe and Asia. It also plans to open a number of stand-alone Barton Perreira stores, initially in Europe.

Palo Alto Networks (PANW) is reportedly close to acquiring Israeli startup Talon Cyber Security in a deal that could value it at $600 million to $700 million.

Burger King, owned by Restaurant Brands International (QSR), shared it will not expand its plant-based offerings in the U.S. in the near term.

IPOs

Readers who want to dig deeper into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.

After Today’s Market Close

Air Lease (AL). Coherent (COHR), Hims & Hers Health (HIMS), Medifast (MED), Mueller Water (MWA), NXP Semiconductor (NXPI), Realty Income (O), Tanger Factory Outlets (SKT), and TripAdvisor (TRIP) will report their quarterly results after equities stop trading. Those looking for more on upcoming quarterly earnings reports should head on over to Nasdaq’s Earnings Calendar.

On the Horizon

Tuesday, November 7

• China: Exports and Imports – October
• Eurozone: Producer Price Index - September
• US: Consumer Credit – September

Wednesday, November 8

• Japan: Leading Indicators – September
• Germany: Inflation Rate – October
• Eurozone: Retail Sales – September
• US: Weekly MBA Mortgage Applications
• US: Weekly EIA Crude Oil Inventories

Thursday, November 9

• Japan: Eco Watchers Survey - October
• China: Inflation Rate, Producer Price Index – October
• China: Retail Sales - September
• US: Weekly Initial & Continuing Jobless Claims
• US: Wholesale Inventories – September
• US: Weekly EIA Natural Gas Inventories

Friday, November 10

• UK: GDP Growth – 3Q 2023
• UK: GDP, Manufacturing and Industrial Production – September
• China: Vehicle Sales - October
• US: The University of Michigan Consumer Sentiment Index (Preliminary) – November (10:00 AM ET)

Thought for the Day

“The weather just went from 90 to 55 like it saw a state trooper.” ~ Unknown

Disclosures

• Palo Alto Networks (PANW), Fortinet (FTNT) are constituents of the Foxberry Tematica Research Cybersecurity & Data Privacy Index
• Tanger Factory Outlets (SKT), LVMH Moët Hennessy Louis Vuitton (LVMUY) are constituents of the Tematica BITA Big Spenders & Savers Index
• Apple (AAPL) is a constituent of the Tematica Research Thematic Dividend All-Stars Index

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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