NYSE MAC Desk
Market Update

DOW 36,133 (-72), S&P 500 4,567 (-3), Russell 2000 1,861 (-21), NYSE FANG+ 8,136 (+33), ICE Brent Crude $77.30/barrel (-$0.73), Gold $2,035/oz (-$7), Bitcoin ~44.4k (+2155)

• Replaying the oldies
• Sharp drop in job openings
• 10yr yield hitting new lows
• Commodities lower - Bitcoin keeps ripping
• 9 of 11 S&P 500 sectors lower: Cyclicals underperform, Mega-cap tech higher
• Check out some of the recent ICE Data/Content:
  • Data Insights - Trends in Options Trading
  • Inside the ICE House 390: Berkshire Bank CEO Nitin Mhatre, Not Your Usual Connecticut Yankee In Beantown

MAC Desk Commentary:
The S&P 500 surged at the start of November but has been trading in a pretty tight range since. However, while it feels like we’ve been running on a treadmill, the music has started to change recently. The rally began to broaden out and there were more signs of speculative behavior. That broadening out has led to a rotation with prior leadership beginning to underperform and vice versa. In terms of speculative behavior, it’s like the greatest hits of 2020 are playing with a surge in crypto currencies, non-profitable tech stocks, sharp rallies in stocks with a heavier short base and the re-emergence of some of the old school meme stocks. The reversal in yields is fueling this increase in risk appetite. Sitting in the middle of those cross currents have been the mega-cap tech stocks which have started to level off after their meteoric rise this year.
 
After a rally on Friday and five consecutive weeks of gains the S&P 500 pulled back modestly yesterday with weakness in those mega-cap names. However, that didn’t derail the rally in the Russell 2k which was up another 1% after its 3% rally on Friday. Yields did move higher, reversing much of Friday’s move, ahead of this week’s labor market data. The S&P 500 opened modestly lower this morning but has recouped those losses as the mega-cap tech stocks bounced. As we head to print the S&P 500 is down ~0.2% but that doesn’t tell the story with about 5 stocks trading lower for everyone in the green. The equal weight version of the index is down ~1% as is the Russell 2k. This comes following a sharp drop in the JOLTS job openings this morning which caused yields to move lower. This is once again raising the question as to whether there is any staying power to the recent rotation or whether it is just another ephemeral bounce within a downtrend that has been in place for the last couple years. See 5yr weekly IWM/SPY chart below.
 

 
So let’s discuss the data. The JOLTS job openings fell sharply to ~8.7ml from ~9.3ml last month which was revised down from closer to 9.6ml. This is the lowest level since March of 2021 and is off from a peak of ~12ml. Quit rates have held steady at 2.3% since July suggesting that finding new jobs is getting harder, confirming the theory we discussed after the jump in continuing claims last week. The ratio of open jobs to unemployed is now ~1.3 nearly back to pre-pandemic levels (see Chart). This is yet another sign that the labor market is softening, or moving back into balance, depending on how much of an optimist you are. The ISM services came in a touch ahead of expectations driven by inventory builds. New orders were flat m/m while the backlog declined. The employment component ticked up while prices ticked down.


 
Following the data yields have pulled back sharply currently down 3-10bps across the curve with the long-end hitting new lows. The 10yr yield is down 9bps to 4.18% and is within 15bps of its 200d ma, a level we haven’t tested since the aftermath of the banking flare up earlier this year. The US dollar index is actually rallying up ~0.3% to $104, partially in response to some dovish comments from a noted ECB hawk.
 
Looking at the S&P 500 only 2 of 11 sectors are higher. Cyclical sectors are leading to the downside. Energy and materials are both off over 1% as there is weakness in commodity markets. Outside of the economic data today there are multiple sell side conferences taking place. Thus far commentary around the holiday shopping season has been reasonably positive. There have been no major changes from the bank management teams which are largely standing by previous guidance.
 
As we look ahead to tomorrow the main piece of economic data is the ADP jobs survey ahead of the open. This hasn’t been a great indicator for the BLS report so it’s unclear how much attention the market will pay to the headline number. Investors will be looking to see if the wage data continues to moderate. 
 
 
Sectors/Other Asset Classes:

• US 2yr -3bps to 4.60%, 5yr -6bps to 4.15%, 10yr -9bps to 4.18%, 30yr -11bps to 4.32%
• USD index: +$0.36 to $104.01
• VIX: -0.11 to 12.97
• Bitcoin: +4.9% to ~44.3k

Central Banks/Inflation:

• Australia RBA on hold, conditions further tightening on data and assessment of risks (Bloomberg)
• ECB hawk Schnabel softens stance, says hikes are done following downside inflation surprise (Reuters)

Energy:

• OPEC member Saudi Arabia shows willingness to extend cuts beyond 1Q24 if needed.

 
Real Estate:

• Article pointing to the challenges to convert office space into residential buildings (Fortune)

 
China:

• Moody’s slashes China credit Outlook to Negative from Stable given lower growth and property risks; A1 rating affirmed (Reuters)

 
Economic Data:  

• US:

• S&P Global Services PMI (Final): 50.8 prior 50.6
• ISM Services PMI: 52.7 vs. 52.4 cons,. prior 51.8
• JOLTS: 8.73ml vs. 9.3ml cons. prior 9.35 from 9.55ml

• Global
  • Interest rate decision: Australia RBA 4.35% vs 4.35% cons, prior 4.35%
  • South Korea Q3 GDP (Final) QoQ 0.6%, prior 0.6%
  • South Korea Inflation Nov MoM -0.6% vs -0.15% cons, prior 0.3%
  • Japan Jibun Bank Services PMI (Final) Nov 50.8, prior 51.6
  • China Caixin Services PMI Nov 51.5, prior 50.4
  • EU Services PMI (Final) Nov 48.7 vs 48.2 cons, prior 47.8EU PPI Oct MoM  0.2% vs 0.2% cons, prior 0.5%