Market Hits the Snooze Button

It is the Wednesday before Thanksgiving, which means many market participants are likely not going to be participating today. That also means the trading action could be either whippy or snoozy. Right now, it looks snoozy.

The S&P 500 futures are down three points and are trading fractionally below fair value, the Nasdaq 100 futures are up three points and are trading fractionally above fair value, and the Dow Jones Industrial Average futures are down 35 points and are trading 0.1% below fair value.

Strikingly, there isn’t a shortage of tradable news.

• Several high-profile companies, including Deere (DE), Nordstrom (JWN), HP, Inc. (HPQ), and Autodesk (ADSK), have reported earnings results.
• The Reserve Bank of New Zealand raised its policy rate by 75 basis points (largest rate hike on record) to 4.25%.
• EU members are meeting to try to reach an agreement on a price cap for Russian oil in the neighborhood of $60-70, according to reports.
• China is pushing targeted, but rather extensive, controls in a bid to stop the spread of COVID.
• Workers at the Foxconn manufacturing facility (where Apple’s iPhone is produced) have waged a violent protest over unpaid wages and COVID concerns, according to Bloomberg.

There is also a slate of economic data to consider. Specifically, the flash November manufacturing PMIs for European countries were mostly better than expected but still below 50.0 (the line between expansion and contraction), weekly initial jobless claims in the U.S. were higher than expected, and October Durable Goods Orders were stronger than expected.

Initial jobless claims for the week ending November 19 increased by 17,000 to 240,000 (Briefing.com consensus 226,000) while continuing jobless claims for the week ending November 12 increased by 48,000 to 1.551 million.

The key takeaway from the report is that initial jobless claims are moving in a direction the Fed would prefer at this juncture, yet they are still not high enough to suggest that there has been some acute loosening in the labor market.

The 2-yr note yield is up three basis points to 4.55% and the 10-yr note yield is up one basis point to 3.77%.

Durable good orders, meanwhile, increased 1.0% month-over-month in October (Briefing.com consensus +0.4%) following a downwardly revised 0.3% increase (from 0.4%) in September. Excluding transportation, durable goods orders rose 0.5% month-over-month following a downwardly revised 0.9% decline (from -0.5%) in September.

The key takeaway from the report is that business spending rebounded, evidenced by a 0.7% increase in new orders for nondefense capital goods, excluding aircraft, which had declined 0.8% in September. Shipments of these orders were up 1.3% month-over-month in October, which will be a positive input for Q4 GDP forecasts.

There will be more data released this morning, including the preliminary November IHS Markit Manufacturing and Services PMIs at 9:45 a.m. ET and the October New Home Sales and final University of Michigan Index of Consumer Sentiment for November at 10:00 a.m. ET.

The marquis release today, however, will be the FOMC Minutes for the November 1-2 meeting at 2:00 p.m. ET.

These minutes should ultimately be important for the market in name only. We say that knowing that many Fed officials have spoken since that meeting and have universally driven home the point that the Fed is not done raising rates, will contemplate slowing the pace of rate increases at coming meetings, and expects to hold things at the terminal rate (whatever that ends up being) for a while.

And that’s where we will hold Page One today to wish all our readers a Happy Thanksgiving!

As a reminder, the market will be closed Thursday and will have an abbreviated session on Friday that ends at 1:00 p.m. ET.

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Originally Posted November 23, 2022 – Market hits the snooze button