SDVY - The S&P 500 Rises With Fall Of Long-Term Treasury Yields

2023-11-14 04:20:00 ET

Summary

• The S&P 500 gained nearly 1.2% over its previous week's close, ending the first full trading week of November 2023 at 4409.95.
• The most interesting headlines of the week came on Thursday, 9 November 2023, and are related to a disappointing auction of 30-year U.S. Treasuries that was apparently handicapped by the hacking of a Chinese bank, whose absence from participation briefly caused long-term interest rates to rise that day.
• The CME Group's FedWatch Tool's projections now anticipate the Fed will hold the Federal Funds Rate steady in a target range of 5.25-5.50% into mid-June (2024-Q2).

The S&P 500 ( SPX ) gained nearly 1.2% over its previous week's close, ending the first full trading week of November 2023 at 4409.95 .

In doing so, it continued reverting toward its mean and is now about a half percent below it .

In terms of the bigger picture, the move was accompanied by the reversal of the October 2023 spike in long-term U.S. Treasury yields. Since they peaked on 27 October 2023, there has only been one day where they've increased, which came on Thursday, 9 November 2023, coinciding with the only decrease in stock prices over the period.

Here's the latest update for the dividend futures-based model's alternative future chart. Compared to last week's edition, we've extended the red zone forecast range through 15 November 2023 to compensate for the effect of more recent volatility in stock prices.

The most interesting headlines of the week came on Thursday, 9 November 2023, and are related to a disappointing auction of 30-year U.S. Treasuries that was apparently handicapped by the hacking of a Chinese bank, whose absence from participation briefly caused long-term interest rates to rise that day. Follow the links below to find out more, although that's just one of several themes recorded in the week's market-moving headlines.

Monday, 6 November 2023

• Signs and portents for the U.S. economy:
  • Oil up 1.5% as Saudi Arabia and Russia stick to supply cuts
• Fed officials claim they're not responsible for October surge in long-term interest rates, think they might hike rates more, see tighter credit:
  • Fed's Cook says rising yields not tied to monetary policy outlook
    • Fed's Cook says hopes current policy setting is adequate to settle inflation
  • Fed's Neel Kashkari not convinced rate hikes are over -WSJ
    • Kashkari: Fed has more work to do to control inflation
  • Fed report shows US loan officers see tighter credit, weaker demand
• Mixed economic signs in China:
  • China's trade slump likely eased further in October - Reuters poll
  • Exclusive-China's clashing priorities behind rare money market distress
• Chinese government claims made without supporting data:
  • China's youth employment generally stable, continues to improve - state media
• Other signs of bigger trouble developing in Asia:
  • Japan service activity posts slowest growth this year - PMI
  • Indonesia's Q3 GDP growth weakest in 2 years, exports slump further
• BOJ officials say they are making progress in fighting inflation, will keep never-ending stimulus alive:
  • BOJ chief sees progress towards hitting price goal, warns of uncertainty
  • BOJ members saw no need for new yield control tweaks -Sept minutes
• Bigger trouble developing in the Eurozone:
  • Euro zone recession fears harden as surveys show grim start to Q4
    • German service sector activity contracts in October - PMI
    • Wave of cancellations in German housing construction at new high -Ifo
• ECB officials thinking about hiking rates again after getting results they wanted:
  • ECB must remain vigilant, be ready to hike rates again, Holzmann says
• Nasdaq, S&P, Dow end marginally higher after posting their best week of 2023

Tuesday, 7 November 2023

• Fed officials say they're putting inflation where they want it, think GDP growth may be too hot, starting to get excited about the chance for more rate hikes:
  • Fed is making progress on inflation, Goolsbee says
  • Fed's Waller: Q3 GDP a "blowout" number that warrants watching
    • Fed's Waller calls Q3 US GDP growth a 'blowout,' but newer data suggest slowdown
  • Fed's Bowman says she expects further policy tightening will be needed
  • Fed's Logan: watching if financial conditions tight enough
• Signs of stimulus finally getting traction in China:
  • China's imports unexpectedly grow as demand makes cautious comeback
• Bigger trouble developing in the Eurozone, even ECB officials notice, ready to stand by:
  • German industrial output falls further than forecast in September
  • Eurozone economy to contract or stagnate in Q4, ECB's De Guindos says
    • ECB's De Guindos warns higher deposit costs will hit banks' lending income
  • ECB must be 'vigilant' as inflation may surprise, Nagel says
• S&P 500, Nasdaq score longest win streak in 2 years on rates view

Wednesday, 8 November 2023

• Signs and portents for the U.S. economy:
  • US 30-year mortgage rate plunges by most in nearly 16 months - MBA
• Fed officials not happy with geopolitics, claim they are more strategic than ever before:
  • Fed's Cook says geopolitical tensions could change US economic outlook
  • Fed's Williams says US central bank's policymaking now more strategic
• BOJ officials thinking about ending never-ending stimulus sooner:
  • BOJ Ueda signals chance of exit from easy policy before real wages rise
• ECB officials told what they need to do, see Eurozone consumers as a new problem:
  • ECB must keep rates at or near 4% through 2024 to get inflation down -IMF
  • Euro zone consumers raise inflation expectations in headache for ECB
    • Euro zone retail sales fall in Sept, exposing weak consumer demand
  • ECB's Makhlouf says new risks emerging as others fade
  • ECB policymakers keen to cool euphoria over inflation drop
• Nasdaq, S&P, Dow end mixed as November rally takes a beat; Disney results in focus
  • S&P 500, Nasdaq barely extend win streaks as investors eye yields, Fed comments

Thursday, 9 November 2023

• Signs and portents for the U.S. economy:
  • Brent oil finishes over $80 after this week's sell-off
• Fed officials say they would exploit uncertainty, see repos drop below $1 trillion for the first time since 2021:
  • Fed's Jefferson: high uncertainty could justify aggressive policy
  • Fed reverse repos fall under $1 trillion for first time since August 2021
• Chief Fed official doubles down on higher for longer short-term interest rates:
  • Fed's Powell: biggest mistake would be to fail to control inflation
  • Fed's Powell: "Not confident" policy is tight enough, supply-side help may be finished
    • Analysis-Some investors see Powell's hawkish lean as response to looser financial conditions
    • Marketmind: Powell pushback puts cloud 9 beyond reach
• Bigger trouble developing in China:
  • China's consumer prices dip back into decline amid limp demand
    • Price wars during Chinese shopping fest expose consumer woes
• BOJ officials thinking about ending never-ending stimulus as early as January 2024:
  • BOJ may end negative rates in January, ex-central bank executive says
    • BOJ's Ueda says will tread carefully in exiting easy policy
    • BOJ debated groundwork for future easy-policy exit at Oct meeting
  • BOJ, Japan Inc need to prepare for 'life with interest rates', lobby head says
• ECB officials say they want smaller balance sheet, but not too much smaller; also say too soon to talk rate cuts:
  • ECB balance sheet must shrink but not too much: Lane
  • ECB still sees inflation risks so rate cut talk too early - vice president
• Nasdaq, S&P, Dow slip as hawkish Powell, disappointing 30-year auction stops market rally
  • Traders now see Fed starting rate cuts later in 2024
  • Stocks Tumble, Yield Surge After Catastrophic 30Y Auction Stops With Biggest Tail On Record As Foreign Demand Craters
    • Ransomware attack on China’s biggest bank disrupts US Treasury market

Friday, 10 November 2023

• Signs and portents for the U.S. economy:
  • US drillers cut oil rigs to lowest since Jan 2022 for second week -Baker Hughes
    • Oil prices up 2% but headed for third weekly decline
• Fed officials try to keep threat of more rate hikes alive:
  • Fed's Daly: Still too soon to say rate hike cycle is over -CNBC
• Bigger stimulus developing in China, Japan:
  • China can raise 2024 budget deficit ratio to spur growth - central bank adviser
  • Japan to top up fiscal loans, investments to boost supply chain -draft
• Nasdaq, S&P, Dow rise as yields stabilize; Wall Street set for back-to-back weekly gains
  • Microsoft hits all-time high

The CME Group's FedWatch Tool 's projections now anticipate the Fed will hold the Federal Funds Rate steady in a target range of 5.25-5.50% into mid-June (2024-Q2). Starting from 12 June (2024-Q2), investors expect deteriorating economic conditions will force the Fed to start a series of quarter-point rate cuts at six-to twelve-week intervals through the end of 2024, which is six weeks later than expected a week ago.

The Atlanta Fed's GDPNow tool 's estimate of real GDP growth for the current quarter of 2023-Q4 bounced up to +2.1% from the +1.2% annualized growth it projected a week ago and back in the ballpark of where it was two weeks ago.

For further details see: