NYSE MAC Desk
Market Update
STRAIGHT FROM THE TRADING FLOOR
September 12, 2024 at 9:15 a.m. EDT
by Michael P. Reinking, CFA - Sr. Market Strategist
DOW 41,076 (+214), S&P 500 5,599 (+45), Russell 2000 2,129 (+25), NYSE FANG+ 11,178 (+180), ICE Brent Crude $72.17/barrel (+$1.56), Gold $2,582/oz (+$40), Bitcoin ~58.4k (+1018)
Yesterday was a wildly volatile session as investors digested the debate and a CPI report that was a touch hot, driven by the oft maligned shelter component. The S&P 500 came for sale right at the open falling a little more than 1.5% as the VIX moved up to ~21.5 but the index held Friday’s lows ~5,400. The market turned mid-morning helped by positive comments from Nvidia’s CEO Jensen Huang and a flurry of derivatives activity which caused the VIX to turn sharply breaking below the lows for the last week and closing under 18 (see Chart below to see the negative correlation). The S&P 500 cleared resistance around 5,500 and its 50d ma, closing up 1% with tech stocks doing all of the heavy lifting while the equal weight version of the index ended a touch higher.
Global markets played some catchup with the US overnight with particular strength in tech heavy indices. Overnight US futures traded modestly higher holding yesterday’s gains. This morning’s economic data didn’t drive too much volatility either with PPI and claims both about in line with expectations. Equities traded with a slightly positive tone for most of the day with tech continuing to show relative strength. However, this afternoon markets have pushed to fresh highs after the Fed Whisperer, the WSJ’s Nick Timiraos, released an article including quotes from multiple former Fed officials weighing in on the 25/50bps debate. This included a quote from Jon Faust, the former special adviser to the Chair, up until earlier this year, that he would lean 50bps. Equities are now at session highs with yields and the USD pulling back. As we head to print, the S&P 500 is up 45pts to 5,599 (+0.8%), the Dow is up 215pts to 41,077 (+0.5%), while the Russell 2k is up 25pts to 2,129 (+1.2%).
As mentioned above global markets traded well overnight. The Nikkei was up >3% with PPI coming in a bit below expectations offsetting some hawkish comments from a BOJ official. In Europe, the ECB cut its deposit rate by 25bps as expected. The central bank’s core inflation projections moved higher while GDP estimates were cut (details below) highlighting the difficult backdrop for the central bank. There wasn’t much in the way of forward guidance with the statement and President Lagarde pointing to a data dependent meeting-by-meeting approach maintaining some optionality for its October meeting which seemed to come as a modest disappointment. Local 2yr yields moved up ~5bps while the Euro is up ~0.4% verse the USD index.
In the US, today’s PPI report was similar to yesterday’s CPI with headline in line with expectations pointing to disinflation, but core came in a touch hot again. Claims were in line with initial claims up 230k for the week and continuing claims ticking up to ~1.85ml. Yields were moving modestly higher throughout the session with the mix of data, a slightly hawkish ECB decision and a 30yr auction which wasn’t quite as strong as the other auctions this week. However, yields especially at the front end have pulled back following the WSJ article. The 2yr yield is up 2bps to 3.67% (HOD 3.705%). The officials quoted in that article full well understand the potential impact on markets. One of the reasons why I’ve felt that a 25bps cut was more likely was the fact that if the central bank surprised markets that would weaken the USD, potentially triggering another round of carry trade related volatility, though to be fair that should be much less impactful with recent position unwinds. Floating this does potentially dampen that volatility. I do feel less confident in that call.
With the late afternoon leg higher 10 of 11 S&P sectors are trading higher with the tech stocks continuing to lead. Defensives, yield oriented and financials are underperforming.
A quick look ahead after the close Adobe earnings will get some attention. Overnight there is a data dump out of China. The US calendar tomorrow is reasonably quiet with import/export prices ahead of the open and U of Mich. Sentiment after the open.
Sectors/Other Asset Classes:
- Equities extend rally after the Whisperer floats 50bps
- ECB cuts but holds cards close to the vest
- PPI a touch hot
- Yields modestly higher but pulling back
- 10 of 11 S&P 500 sectors higher: Tech leads, Defensive/yield oriented underperform
- Check out some of the recent ICE Data/Content:
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- Inside the ICE House: Market Storylines
- ICE August Mortgage Monitor - As tappable equity hits record high of $11.5T, 3 of 5 mortgage holders have at least $100K to borrow against
Yesterday was a wildly volatile session as investors digested the debate and a CPI report that was a touch hot, driven by the oft maligned shelter component. The S&P 500 came for sale right at the open falling a little more than 1.5% as the VIX moved up to ~21.5 but the index held Friday’s lows ~5,400. The market turned mid-morning helped by positive comments from Nvidia’s CEO Jensen Huang and a flurry of derivatives activity which caused the VIX to turn sharply breaking below the lows for the last week and closing under 18 (see Chart below to see the negative correlation). The S&P 500 cleared resistance around 5,500 and its 50d ma, closing up 1% with tech stocks doing all of the heavy lifting while the equal weight version of the index ended a touch higher.
Global markets played some catchup with the US overnight with particular strength in tech heavy indices. Overnight US futures traded modestly higher holding yesterday’s gains. This morning’s economic data didn’t drive too much volatility either with PPI and claims both about in line with expectations. Equities traded with a slightly positive tone for most of the day with tech continuing to show relative strength. However, this afternoon markets have pushed to fresh highs after the Fed Whisperer, the WSJ’s Nick Timiraos, released an article including quotes from multiple former Fed officials weighing in on the 25/50bps debate. This included a quote from Jon Faust, the former special adviser to the Chair, up until earlier this year, that he would lean 50bps. Equities are now at session highs with yields and the USD pulling back. As we head to print, the S&P 500 is up 45pts to 5,599 (+0.8%), the Dow is up 215pts to 41,077 (+0.5%), while the Russell 2k is up 25pts to 2,129 (+1.2%).
As mentioned above global markets traded well overnight. The Nikkei was up >3% with PPI coming in a bit below expectations offsetting some hawkish comments from a BOJ official. In Europe, the ECB cut its deposit rate by 25bps as expected. The central bank’s core inflation projections moved higher while GDP estimates were cut (details below) highlighting the difficult backdrop for the central bank. There wasn’t much in the way of forward guidance with the statement and President Lagarde pointing to a data dependent meeting-by-meeting approach maintaining some optionality for its October meeting which seemed to come as a modest disappointment. Local 2yr yields moved up ~5bps while the Euro is up ~0.4% verse the USD index.
In the US, today’s PPI report was similar to yesterday’s CPI with headline in line with expectations pointing to disinflation, but core came in a touch hot again. Claims were in line with initial claims up 230k for the week and continuing claims ticking up to ~1.85ml. Yields were moving modestly higher throughout the session with the mix of data, a slightly hawkish ECB decision and a 30yr auction which wasn’t quite as strong as the other auctions this week. However, yields especially at the front end have pulled back following the WSJ article. The 2yr yield is up 2bps to 3.67% (HOD 3.705%). The officials quoted in that article full well understand the potential impact on markets. One of the reasons why I’ve felt that a 25bps cut was more likely was the fact that if the central bank surprised markets that would weaken the USD, potentially triggering another round of carry trade related volatility, though to be fair that should be much less impactful with recent position unwinds. Floating this does potentially dampen that volatility. I do feel less confident in that call.
With the late afternoon leg higher 10 of 11 S&P sectors are trading higher with the tech stocks continuing to lead. Defensives, yield oriented and financials are underperforming.
A quick look ahead after the close Adobe earnings will get some attention. Overnight there is a data dump out of China. The US calendar tomorrow is reasonably quiet with import/export prices ahead of the open and U of Mich. Sentiment after the open.
Sectors/Other Asset Classes:
- US 2yr +2bps to 3.67%, 5yr +3bps to 3.48%, 10yr +4bps to 3.70%, 30yr +5bps to 4.02%
- USD index: -$0.23 to $101.43
- VIX: -0.65 to 17.04
- BOJ hawk Tamura said that rate hike expectations are too low saying he sees the neutral rate around 1.00%.- Reuters
- The ECB cuts deposit facility rate by 25bps to 3.5%. Headline inflation expectations were left unchanged at 2.5%, 2.2% and 1.9% 2024 - 2026 but core was revised higher to 2.9%, 2.8% and 2%, respectively. Growth forecasts were cut by 0.1% across all timeframes to 0.8% in 2024, 1.3% in 2025 and 1.5% 2026. . The council will continue to follow a data-dependent and meeting-by-meeting approach
- IEA lowers 2024 global oil demand growth to ~900k b/d from 970k b/d in 2024 driven by weak China demand. 2025 oil demand estimated at 950k b/d
- Deloitte projects 2024 holiday sales to be up 2.3% -3.3% the smallest increase in six years and down from 4.3% last year - Reuters
- US:
- Initial claims: 230k vs. 230k cons,. Prior 227k
- Continuing claims: 1.85ml vs. 1.845ml cons,. Prior revised to 1.845ml from 1.838ml
- PPI: m.m/y. 0.2%/1.7% vs. 0.2%/1.8% cons,. Prior 0.1%/2.2%
- PPI ex-food & energy: 0.3%/2.4% m.m/y.y vs. 0.2%/2.4% cons., prior revised to -0.2% from 0%/2.4%
- Global
- Japan PPI: -0.2%/2.5% m.m/y.y vs. 0%/2.8% cons,. Prior 0.5%/3%
- Australia inflation expectations: 4.4% prior 4.5%
- Sweden CPI: -0.6%/1.9% m.m/y.y vs. 0.5%/2.0% cons,. Prior 0.1%/2.6%
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