Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets in the day ahead. Today is Friday, Oct. 13. The Bottom Line segment of today’s podcast starts at (3:30) for listeners who want to skip ahead.
State of Play
Stocks and bonds retreated yesterday after a hotter-than-anticipated CPI report. The situation wasn’t helped by a weak bond auction, though stocks closed off of the lows. As of 0630 it looks like things are rebounding however:
Stock index futures are pointing to a lower open, led by tech. The Nasdaq is down 0.6%. S&P 500 futures are down 0.3%;
Bonds are seeing some bids after yesterday’s sell-off. The 10-year yield is down 9 basis points to 4.62% (yields move inversely to prices);
Commodities are rebounding. WTI crude oil is up 4% to trade north of $86/barrel. The cause for this is US tightening of sanctions on Russian oil sales. Gold and silver are up 1% each. Copper not going along for the ride, is unchanged.
Known Events
Earnings season is upon us. A couple of companies reported yesterday. Today we get several banks.
BlackRock (BLK 0.00%↑), which is not a bank but an asset manager, just beat on EPS estimates and reported revenues in-line with estimates. UnitedHealth (UNH 0.00%↑), which isn’t a financial company at all but a health insurance provider, beat on top and bottom-line and raised outlook.
JPMorgan (JPM 0.00%↑), which is a bank, beat on top- and bottom-line estimates. We’re due to hear from Wells Fargo (WFC 0.00%↑), Citigroup (C 0.00%↑), and PNC Financial (PNC 0.00%↑), all before the open at 0930.
The University of Michigan’s consumer sentiment survey is out at 1000. The overall reading is expected to come in at 67.4 after a 68.1 print last month. There are also segments on consumer expectations, current conditions, and inflation expectations. Probably more important than the numbers are the sentiments expressed by survey respondents.
The Bottom Line©️
Inflation concerns just won’t go away. Yesterday’s CPI didn’t miss by much, but it was enough to spook bond markets. Fed fund futures showed some renewed expectations of an interest rate hike at the next meeting on Nov. 1, but the probability is still quite low at 13% (up from 9% a day ago).
At least the stock market will get a welcome distraction with earnings. Friendly reminder that bank earnings almost always beat estimates. The EPS and revenue figures are probably secondary to things like loan loss provisions and outlooks. On that last point, Jamie Dimon of JP is absolutely worth listening to today. As the CEO of the largest lender in the US he has unique insight into consumer behavior and is generally quite sanguine with his views. He hedges them somewhat of course (they all do) but by CEO standards he’s quite outspoken on the economy.
Update: Dimon’s views are available here. Memorable quote: “This may be the most dangerous time the world has seen in decades.” Also said US consumers “generally remain healthy.”
Finally, be sure to listen to the actionable highlights from yesterday’s recording with David Hunter. As always, he has some very contrarian views on things. The full podcast will be available later today (premium subscribers only):
Housekeeping
Obviously this is not investment advice (duh). Do your own research, make your own decisions.
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Bank Earnings, Michigan Consumer Sentiment