To The Moon

It was thrilling to learn that US market continued its upwards streak on Fri, 03 Nov 2023.

The 2 catalysts (I think) that kept US market stirring another day were:

• US Non-Farm Payroll (October 2023).

• US Treasury 10 years yield.

US NON-FARM PAYROLL (OCTOBER 2023).

For October 2023, US economy added 150,000 jobs versus expected 180,000 jobs as surveyed by Bloomberg.

According to Bureau of Labour Statistics, employment in the manufacturing sector decreased by -35,000 jobs (in October) due to UAW strike across US’s 3 Big car makers.

At the same time, unemployment rate ticked higher to 3.9% versus economists’ expectation of a flat unemployment rate.

The key numbers Wall Street will zoom in, according to data from Bloomberg: (see above)

• Nonfarm payrolls: 150,000 vs. +180,000 (+297,000 previously)

• Unemployment rate: 3.9 vs. 3.8% (3.8% previously)

• Average hourly earnings, MoM: 0.2 vs. +0.3% (+0.2% previously)

• Average hourly earnings, YoY: 4.1vs. +4.0% (+4.2% previously)

• Average weekly hours worked: 34.3 vs. 34.4 (34.4 previously)

The health of the labor market is a key input for Fed policymakers, and the signs of a slowing economy should support the case for the central bank to hold off from another rate hike this December / 2023.

US 10 YEAR TREASURY YIELD.

Markets responded well to the announcement as the market broadly believes there will be no further rate hikes in 2023. Some even believe we could start to see rates come back down into the early part of 2024.

This caused bond yields to slide back, bumping prices and pumping equity markets. The Dow Jones jumped 1.7% to close out its best day since June. The S&P 500 fared even better, gaining 1.89% for its biggest one day result since way back in April.

For the first time in weeks, 10 years US Treasury yield dipped below the 4.60% (see above).

The yield on 10-year govt bonds fell on Friday as investors digested new jobs data that showed slowing growth, an indicator closely watched by the Fed and one that suggest a pause on additional rate hikes.

The last time the 10 years Treasury yield was 4.577% was approx. back in 29 Sep 2023 (4.571%).

And just like that, US stocks jumped simultaneously. (see below)

By the time market called it a day & a week:

DJIA: +0.66% (+222.24 TO 34,061.32). Dow has gained +4.68% this week.

S&P 500: +0.94% (+40.56 TO 4,358.34). S&P has gained +5.29% this week.

Nasdaq: +1.38% (+184.09 to 13,478.28). Nasdaq has “re-gained” +5.71% this week. Best performing index clocking its best week in 2023!

With Non-Farm Payroll report (October 2023) out, most of the crucial data on US economy is on the table; leaving US market squarely tuned to quarterly earnings again.

Two possible reports that may be of interest to the Fed:

• US Consumer Credit (07/11) - Investors will get a fresh look at the latest reading on consumer credit, as interest rates remain elevated and Americans head into the holiday shopping season. A fresh survey on consumer sentiment will also offer a reading into the mood of consumers as unemployment figures deteriorate slightly.

• Wholesale Inventories (08/11).

For November’s second week, attention shifts to:

Quarterly earnings reporting for week beginning 06 Nov 2023

Of the many companies that continue to report their earnings respectively, below are a handful that are of interests (to me):

• Semiconductors: $NXP Semiconductors NV(NXPI)$ (6/11). Arm Holdings (ARM) (8/11).

• Energy: $Occidental(OXY)$ (7/11).

• EVs: $Rivian Automotive, Inc.(RIVN)$ (7/11). Lucid Group Inc (LCID) (7/11). Li Auto & NIO (9/11)

• Financial: $UBS Group AG(UBS)$ (7/11), Affirm Holdings, Inc.(AFRM) (8/11).

• Pharma: $BioNTech SE(BNTX)$ (6/11). Gilead Sciences (GILD) (7/11). AstraZeneca (AZN) (9/11). Novavax (NVAX) (9/11).

The million dollar question of the week — Will US market continues with its rally streak?

After all the readings, this is my view of this week:

Broadly, a solid earnings season hadn't served as much of a market catalyst in recent weeks.

• This was because of [a] higher bond yields and [b] fears of another Fed rate hike.

• These “fears” have abated (for now), as the 10-year yield hit its lowest level in more than a month on Friday, easing off 16-year highs that Wall Street strategists believed could be a consistent headwind for stocks.

• According to Evercore ISI’s data — as of Fri, 03 Nov 2023 morning, 404 S&P 500 companies have reported earnings.

• Based on [1] earnings reported so far and [2] updated projections, Evercore ISI expects “average” report sales growth to be +2.2% and “average” earnings growth to be +3.6% for Q3 2023.

• If remaining 96 companies continue to report similar rate of sales & earnings growth, it implies that for the first time, companies have reported earnings growth since Q4 2022.

• To investors, this means “one could still make money in stocks with interest rates at these levels or higher”; it happened for a decade+ prior to the great financial crisis (GFC).

Do note - it is about “making money”; not about “making long term investments”.

This is because the medium term remains a challenge:

• In light of earnings uncertainty (especially for Q4 2023).

• Troubling geopolitics matters.

• Potential for recession.

For the months of November and December, its all about make hay while the sun shines. Agree?

• Do you think US market will continue to rise & recover lost grounds this week?

• Do you think as an individual investor, we need to learn to be nimble & flexible when it comes to investing for the now instead of unknown-future?

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