NYSE MAC Desk
Market Update

DOW 43,179 (-90), S&P 500 5,883 (-34), Russell 2000 2,317 (-8), NYSE FANG+ 12,290 (-145), ICE Brent Crude $72.86/barrel (-$0.45), Gold $2,655/oz (+$24), Bitcoin ~94.2k (+1882)

• Equities pullback
• Geopolitical headlines continue to swirl
• Mixed retail earnings
• Big tech earnings on deck
• 8 of 11 S&P 500 sectors lower: Healthcare bounces, Tech underperforms
• Check out some of the recent ICE Data/Content:
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  • Inside the ICE House 447: AB InBev CFO Fernando Tennenbaum Brews the Future of Beer
  • Inside the ICE House: Market Storylines  
  • ICE October Mortgage Monitor - Average Payment Hits All-Time High

MAC Desk Commentary:
Yesterday geopolitical concerns sent US equity markets lower at the open. After trading down ~1%, S&P 500 held around last Friday’s lows and rallied into the close, ending the day up up 0.4% led by mega-cap tech stocks with the NYSE FANG+ up nearly 2%. Cyclical sectors ended the day lower while healthcare remained under pressure.  

Overnight Asian markets were mixed but European indices were bouncing ahead of the US open recouping some of yesterday’s losses. US futures also traded modestly higher overnight but came off the best levels just ahead of the bell following another missile strike in Russia. Equities came under additional pressure after the open retesting yesterday’s lows again (~5,850) which have held thus far. As we head to print, the S&P 500 is down 27pts to 5,890 (-0.5%), the Dow is down 58pts to 43,211 (-0.1%), while the Russell 2k is down 11pts to 2,314 (-0.5%). One other thing to note about the volatility over the last two days, this morning was the expiration of the November VIX future contract, which was heavily used to protect election risk, this is likely adding to the choppiness.
 
The economic calendar in the US remains sparse with mortgage apps ticking up last week. Overnight in Japan import and exports came in ahead of expectations. PPI in Germany was in line with expectations however, negotiated wages jumped to 5.4% from 3.5% in the prior quarter. Inflation data in the UK also came in hot. These two data points have pushed yields across Europe higher particularly at the long end of the curve however, as the Ukraine headlines hit yields pulled back. Yesterday the geopolitical concerns had put a bid in Treasury markets but that bid faded throughout the session leaving yields only modestly lower. Given the push and pull of these headlines there has been some volatility in Treasury markets today. Yields have started to move higher again this afternoon after comments from Fed Bowman. She said she saw greater risk to the price stability mandate and suggested that the Fed Funds rate may be closer to neutral than policymakers think, similar to what Lorie Logan said last week. Fed officials are clearly preparing markets for the pace of future cuts to slow. After pulling back for a couple of days the USD index is getting a safe haven bid up 0.5% to $106.60 strengthening against most crosses.
 
For the second consecutive day retail earnings were in focus and the results have been mixed. After a strong report from Walmart yesterday, Target missed estimates and cut guidance.  The company highlighted weakness in discretionary spending and a selective/opportunistic consumer, though sounded cautiously optimistic related to holiday sales. Management highlighted that elevated inventory levels and costs impacted results, which were at least partially related to preparation ahead of potential port strikes. However, the rest of the reports have been reasonably positive. TJX continues to put up solid results given its unique positioning in this environment and highlighted a pickup in international sales. There were with a couple of standouts in the home furnishing segment including Williams-Sonoma and La-Z Boy, and Home Goods segment within TJX as well. Consumer discretionary (-1.2%) and staples (-0.6%) are trading lower.
 
Within the S&P 500 8 of 11 sectors are trading lower. Healthcare is the best performing sector after its recent weakness bouncing 0.75%. President Trump nominated Dr. Mehmet Oz to head the CMS which is helping some of the insurers bounce. Materials are moving higher with packaging companies leading to the upside. Energy is also modestly higher driven by natural gas and oil services companies. Natural gas futures are surging ~6% breaking above $3 and its 50d ma helped by colder weather forecasts and LNG feedgas flows. The Ukraine/Russia headlines continue to surge adding to volatility in oil markets. Yesterday was an outside reversal day for ICE Brent which tested its recent lows overnight (~$70.70) before closing just over $73. After trading higher this morning prices have pulled back following inventory data which showed bigger than expected builds. ICE Brent is down ~0.5% to $73.
 
After outperforming yesterday info tech is underperforming today but will move into the spotlight tomorrow with a couple of key earnings after the bell including Nvidia, Palo Alto and Snowflake. Tomorrow the economic data in the US picks up with claims, the Philly Fed, leading indicators and existing home sales on the calendar.
 
Sectors/Other Asset Classes:


 
Government Yields

• US 2yr +1bps to 4.30%, 5yr +1bps to 4.28%, 10yr +1bps to 4.41%, 30yr +1bps to 4.60%
• USD index: +$0.50 to $106.64
• VIX: +1.46 to 17.81

Other:

• Putin signals he is open to a ceasefire but rules out territorial concessions and Ukraine joining NATO - Reuters

Economic Data:

• US:
  • Mortgage Apps: 1.7% w.w prior 0.5%: 30yr rate 6.9% prior 6.86%
• Global
  • Japan Exports: 3.1% vs. 2.2% cons,. prior -1.7%
  • Japan Imports: 0.4% vs. -0.3% cons., prior 1.8%
  • Germany PPI: 0.2%/-1.1% m.m/y.y vs. 0.2%/-1.1% cons., prior -0.5%/-1.4%
  • EU Negotiated Wages: 5.42% up from 3.54% in Q2
  • UK Inflation: 0.6%/2.3% m.m/y.y vs. 0.5%/2.2% cons,. prior 0%/1.7%
  • UK Core Inflation:  0.4%/3.3% m.m/y.y vs. 0.3%/3.1% cons,. prior 0.1%/3.2%