The 10-yr note yield has made a good move overnight, reclaiming a good chunk of what it lost yesterday after digesting the September Consumer Price Index and the weak 30-yr bond auction. Currently, the 10-yr note yield is down 12 basis points to 4.59%. Despite the improvement there and some better-than-expected earnings results from JPMorgan Chase (JPM), Wells Fargo (WFC), Citigroup (C), and UnitedHealth (UNH), the equity futures market is moving in a somewhat guarded fashion.
The S&P 500 futures are up 13 points and are trading 0.3% below fair value, the Nasdaq 100 futures are up 13 points and are trading 0.1% above fair value, and the Dow Jones Industrial Average futures are up 111 points and are trading 0.6% above fair value.
Why the guarded trade when the thing the stock market seems to love most — lower rates — is on the board? Because the overnight improvement in the Treasury market hasn’t been for the best of reasons.
China stirred concerns about the strength of its economy when it reported some soft inflation data and a year-over-year decline in both exports (-6.2%) and imports (-6.2%) for September; and Israel stirred concerns about an escalation in its fight against Hamas with a warning to 1.1 million residents in northern Gaza that they should evacuate in the next 24 hours.
An observation from Iran’s foreign minister that Israel’s continued siege of Gaza “will face reactions in other areas,” according to CNBC, has added to the angst over the situation that is fueling some safe-haven trades.
Oil prices are reacting accordingly, too. WTI crude futures are up 4.8% to $86.87/bbl and Brent crude futures are up 4.5% to $89.90/bbl.
This saber-rattling ahead of the weekend, when the equity market is closed, has mitigated some of the enthusiasm for the good earnings reports noted above.
Another drag on sentiment is the news that Steve Scalise (R-LA) has withdrawn from the Speaker race, recognizing he didn’t have enough support to get the 217 votes necessary to be elected Speaker of the House. This news has cast more uncertainty about who the next Speaker will be and whether Congress will be able to reach an agreement to avoid a government shutdown after November 17.
Following this week’s September Producer Price Index (PPI) and Consumer Price Index (CPI) reports, market participants got a little better inflation news this morning with the September Export-Import Price Index.
Briefly, export prices were up 0.7% month-over-month following a 1.1% increase in August, but were down 4.1% year-over-year. Import prices were up 0.1% month-over-month following a 0.6% increase in August, but were down 1.7% year-over-year. Excluding fuel, import prices were down 0.8% year-over-year.
It is hard for this report to trump the PPI and CPI inflation reports as a market mover, but the headlines succeeded in keeping the Treasury market on a lower track.
The open for the stock market is setting up to be a modestly higher one. It should be better based on the earnings news, but it isn’t all about earnings at the moment.
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Originally Posted October 13, 2023 – Earnings news good, geopolitical news bad
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