Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets in the day ahead. Today is Friday, Nov. 10. The Bottom Line segment of today’s podcast starts at (3:40) for listeners who want to skip ahead.
State of Play
Stocks finished lower yesterday for the first time in eight trading days (nine for the Nasdaq) after Fed Chair Jerome Powell succeeded in spooking the bond market. We didn’t think he would even attempt this, but Powell said the Fed was “not confident” it had done enough to combat inflation. That was enough for bonds to sell off and stocks followed in short order. As of 0640, all is pretty quiet:
Stock index futures are pointing to a lower open with the Nasdaq down 0.3%. S&P 500 futures are down 0.1%;
Bonds are unchanged after selling off yesterday. The 2-year yield is back above 5%, at 5.03%. The 10-year yields 4.64%.
Commodities aren’t doing much. WTI crude oil is up 1% to trade around $76.50/barrel while copper is down 0.8%;
Cryptos continue their ascent. Bitcoin is up another 1% to trade north of $37,000.
Known Events
It’s a slow Friday. The only thing on the calendar worth mentioning is the University of Michigan’s consumer sentiment survey, which is out at 1000. Economists expect a reading of 64, a tick higher than the 63.8 recorded last month. It’s been awhile since the market reacted to this, but it’s potentially a pretty important survey with all kinds of details including consumer expectations and inflation expectations.
The Bottom Line
So Powell succeeded in providing a catalyst, but it wasn’t one to move higher. Instead the opposite occurred. Of course, fundamentally nothing has really changed about the Fed outlook. Powell said last week risks were balanced. This week he said the Fed might also have more work to do to combat inflation. Both of these things can be true at the same time.
Indeed Fed fund futures haven’t really moved on this, even if bonds have. Very little chance is given to another rate hike at the next FOMC meeting on Dec. 13, with just 9% probability being priced into futures markets. For the subsequent meeting on Jan. 31, we’re looking at 19% — more than twice what it was a week ago, but still quite low. We’ll get more information on this on Tuesday with the CPI.
Housekeeping
Obviously this is not investment advice (duh). Do your own research, make your own decisions.
This Substack chat tracks The Contrarian’s trades in (almost) real time. The full portfolio is available upon request.
If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.
Please take the listener survey! It’s like, five questions and should only take a few minutes of your time. You can win free merchandise. A lucky respondent will be selected each month to receive a classic crew-neck T-shirt.
Powell Spooks Markets, Again