Market Update

Good morning and Happy Friday,
 
S&P futures are bouncing a little to end the week after a rough day yesterday and an options expiration today. Initial gains following Nvidia’s robust earnings were quickly sold and buyers were absent to halt the sell-off at key levels. The index failed to hold a move back above the 50-day average as trading began. The S&P 500 finished below the 100-day moving average for the first time since early May, down for the fifth day in six. The size of the reversal was historic. According the Bespoke, it was just the 4th time in the SPY ETF’s history that it opened up more than 1.5% and then closed down more than 1.5%. The other days: in 2008 during the financial crisis (2x) and the April 8 Tariff shock. Treasuries fell 3-5bp across the curve as the market digested very retrospective payroll data and the latest weekly initial claims. The reports provided both affirmations and counterarguments no matter what side of the Hawk / Dove line you’re on. Price action showed the overall takeaway was Dovish, keying on downward revisions and uptick in unemployment rate.
 

 
Futures moved higher this morning as NY Fed President Williams spoke about room for a near-term rate cut. That gave markets some respite from what has been hawkish-leaning Fed Speak and comes from one of the most influential voices at the Fed. Odds of a rate cut jumped from 40% yesterday to ~70%. Boston President Collins was more hawkish in her comments as she talked up holding rates steady. Governor Miran took to the airwaves to push his view that yesterday’s data “was obviously dovish”. Meanwhile Dallas Fed President Logan pressed her hawkish stance, saying she would find it difficult to cut in December.  Overall, markets are taking rates lower. The CBO lowered its estimates for tariff revenue and deficit reductions, to lower effective tariff rates. The CBO now estimates tariffs will cut the deficit by $3 trillion over the next 10 years, $1 trillion less than the previous estimate. 

• US 2yr -4bps to 3.50%, 5yr -3bps to 3.62%, 10yr -3bps to 4.06%, 30yr -3bps to 4.70%
• USD index: +$0.02 to $100.12
• VIX: -1.06 to 25.36

European equites are modestly lower but major indexes are around their best levels currently. The Eurozone Manufacturing PMI was lower than expected and declined from last month while Services beat expectations and was essentially flat with last reading. Both German readings fell, with Manufacturing moving further into contraction. The Nikkei closed down over 2%. Tech names were weak as expected given the US price action yesterday: SoftBank, Advantest, Sumitomo Electric all down ~10%. A $135B stimulus program was approved, putting further pressure on JGBs. Officials continued with verbal intervention to counter yen weakness. Service flash PMI was flat and Manufacturing improved but remains <50. China and South Korea were also sharply lower
 

 
 
Crypto continues to come under heavy selling pressure. Bitcoin and ETH are down another 5% today, with Bitcoin below $85k and coming close to testing $80k earlier today. Crude is lower, just off its worst levels after reports that Ukraine and EU countries have rejected key areas of the US peace proposal. Precious metals are moving back to positive after being in the red earlier.
 

 
Earnings/Corporate Updates:

• After-Market (Thrs): AUNA, BULL, ESE, ESTC, GAP, INTU, NGVC, POST, PXED, ROST, UGI, VEEV
• Pre-Market: BJ, BKE, MOG 

Economic Data:
US:

• Fed Speakers:
  • Williams, Jefferson, Collins, Logan
• 9:45am Flash PMIs
• 10:00am Univ Michigan Sentiment survey, Final
• 1:00pm Rig Count

Global:

• Flash PMIs, Manufacturing / Services:
  • Australia: 51.6 / 52.7 vs. prior 49.7 / 52.5
  • Japan: 48.8 / 53.1 vs. prior 48.2 / 53.1
  • India: 57.4 / 59.5 vs. 59.0 / 59.7 cons., prior 59.2 / 58.9
  • Germany: 48.4 / 52.7 vs. 49.8 / 54.0 cons., prior 49.6 / 54.6
  • UK: 50.2 / 50.5 vs. 49.2 / 52.0 cons., prior 49.7 / 52.3
  • France: 47.8 / 50.8 vs. 49.0 / 48.3 cons., prior 48.8 / 48.0
  • Europe: 49.7 / 53.1 vs. 50.2 / 52.8 cons., prior 50.0 / 53.0
• Japan CPI core: 3.0 vs. 3.0% cons., prior 2.9%
• Japan Trade Balance: -¥231.8B vs. -¥280.0B cons., prior -¥234.6B
• Japan Exports y.y (Oct): 3.6% vs. 1.1% cons., prior 4.2%
• China Foreign Direct Investment YTD y.y: -10.3% vs. prior -10.4%