Marketmind: Stocks clocking best week of the year
Send a link to a friend
[November 03, 2023] A
look at the day ahead in U.S. and global markets from Mike Dolan
Markets are betting central banks are done hiking interest rates,
inflation is falling and corporate earnings are robust - and they now
have just one more hurdle to clear to complete what's set to be the best
week of 2023.
The U.S. October employment report out later on Friday caps a hectic two
weeks of central bank decisions, company updates and unnerving
geopolitics. As the first major marker of U.S. economic strength in the
final quarter of the year, the payrolls report packs a punch despite
expected strike-related distortions.
Following a soft private sector jobs reading earlier in the week and a
tick higher in weekly jobless claims, employment growth is expected to
have slowed to some 180,000 new payrolls from 336,000 in September.
In the light of Thursday's surge in stocks and bonds - based largely on
an assumption the Federal Reserve, European Central Bank and Bank of
England have now ended their rate hike campaigns - signs of a cooling
labor market may be welcomed.
In advance of the release, S&P500 futures stepped back a bit from
Thursday's highs when the cash index boasted its biggest one-day gain
since April by adding almost 2%. Even the small cap Russell 2000 jumped
2.7% in its biggest gain since June.
Part of the hesitancy is down to an underwhelming third quarter update
from America's most valuable firm Apple, whose stock fell 3% in
out-of-hours trade ahead of Friday's open after its sales forecast for
the holiday quarter missed Wall Street estimates despite a third-quarter
profit beat.
And while S&P500 aggregate annual earnings growth for Q3 is tracking an
impressive 5%, LSEG data shows Wall Street has downgraded fourth-quarter
earnings growth estimates to 7.2%, down from 11% just before the
reporting season began.
The interest rate relief this week is pervasive, however, as the Fed,
ECB and BoE all paused tightening and U.S. Treasury debt sales worries
ebbed somewhat.
Ten-year U.S. Treasury yields have recoiled almost 30 basis points from
Wednesday's highs to sit at 4.66% - and are on course for their biggest
weekly drop since March.
U.S. Treasury and equity market volatility gauges have subsided to their
lowest levels since early last month.
What's more, other incoming economic numbers underlined a reason for
renewed market optimism after a torrid few months.
[to top of second column] |
Traders work on the floor at the New York Stock Exchange (NYSE) in
New York City, U.S., October 27, 2023. REUTERS/Brendan McDermid
Labor Department statistics showed worker productivity grew faster
than forecast in Q3 as labor costs declined -- recording its
quickest pace in three years. If sustained, that should help the
Fed's efforts to bring inflation back to target and may also reflect
investment in technology and artificial intelligence.
Elsewhere, Chinese stocks also caught a bid at last after a survey
showed services activity improved slightly last month, even though
new orders rose at their slowest in 10 months and employment
stagnated.
U.S. service sector readings are also due later on Friday.
The dollar held steady ahead of the payrolls release.
With U.S. Secretary of State Antony Blinken in Isreal seeking a
pause in the Gaza war as Israeli troops surround Gaza City,
investors will likely keep a wary eye on the conflict there as the
weekend nears.
And the crypto world may well take a deep breath after FTX founder
Sam Bankman-Fried was late Thursday found guilty of stealing from
customers of his now-bankrupt cryptocurrency exchange in one of the
biggest financial frauds on record.
Key developments that should provide more direction to U.S. markets
later on Friday:
* U.S. Oct employment report, ISM and S&P Global Oct U.S. service
sector surveys; Canada Oct employment report
* U.S. corporate earnings: Eversource Energy, Sempra, Cardinal
Health, Dominion Energy, Gartner, Church & Dwight, AMC, Liberty
Media, Icahn Enterprises, Silvercrest
* Federal Reserve Vice Chair for Supervision Michael Barr,
Minneapolis Fed President Neel Kashkari speak; Bank of England chief
economist Huw Pill speaks
* U.S. Secretary of State Antony Blinken visits Israel
(By Mike Dolan, editing by Emelia Sithole-Matarise; mike.dolan@thomsonreuters.com.
Twitter: @reutersMikeD)
[© 2023 Thomson Reuters. All rights
reserved.]
This material may not be published,
broadcast, rewritten or redistributed.
Thompson Reuters is solely responsible for this content.
|