MARKETS TODAY Nov 3 (Vica Partners) – The S&P 500 down 0.65% as of 12.40 p.m. Eastern. The Dow Jones Industrial Average down 74 points, or -0.23%, to 32,073. The tech based Nasdaq down 1.09%.
The three major stock market indexes all declining Thursday morning, the 10-year Treasury up at yield at 4.157%, the 2 year Treasury yield up at 4.70, and the U.S. Dollar Index (DXY) up at $112.93. Oil prices down with Brent crude $95.43, -0.76%, and US West Texas Intermediate down at $88.96, -1.16%.
What to expect from the US interest rate obsessed equity markets
Data that shows the U.S. economy isn’t slowing as the central bank tightens policy will test lower stock prices.
Jobless Claims fell last week in a tight labor market
U.S. weekly jobless claims come in below forecast; initial claims for state unemployment benefits slipped 1,000 to a seasonally adjusted 217,000 for the week ended Oct. 29, the Labor Department said on Thursday. Economists had forecast 220,000 claims for the latest week.
U.S. service sector slows in October which accounts for more than two-thirds of U.S. economic activity
The Institute for Supply Management (ISM) said on Thursday its non-manufacturing PMI fell to 54.4 last month, the lowest reading since May 2020, from 56.7 in September. Vica analysts had forecast the non-manufacturing PMI at 54.9, +50 metric indicates expansion in the services sector.
EPS challenges ahead as the equity markets have yet to price in the true earnings impact
Vica models MSCI World index is pricing in a 6-8% earnings contraction, that would also suggest a roughly 18-20% decline in earnings.
The MSCI World Index is a broad global equity index that represents large and mid-cap equity performance across all 23 developed markets countries. It covers approximately 85% of the free float-adjusted market capitalization in each country.
Momentum earnings note
Peabody Energy (NYSE:BTU) +13.8% market Thursday @11:18 am EST after posting a Q3 profit and doubling revenues from a year ago while beating most analyst’s expectations for adjusted EBITDA.
Q3 net income at a profit of $375.1M, or $2.33/share, compared to a net loss of $44.2M, or a $0.38/share loss in the prior-year quarter. Q3 adjusted EBITDA rose to $438.9M, above $421M analyst consensus estimate as well as $289.1M in the year-earlier quarter, and Q3 operating cash flow soared to $494.7M from $4.4M in the same quarter last year. Peabody Energy’s (BTU) stock price return shows a 117% YTD gain.
IMPORTANT TO READ as low interest rates will return
The Federal Reserve will slow the pace and begin to cut interest rates in 2023 to avoid an extended recession. The cure for inflation is not just raising rates. Vica analysts see a significant policy change coming by late spring of 2023 with Powell reversing direction… just look at 12 month declining lower commodity pricing and new reports on rising retail inventories.
Yearly commodity prices will rise “as there are still production shortages” which include: iron, copper and crude oil. Upside will continue!
Solid strategy for these type of market days ….
We suggest investing in companies that have solid balance sheets and offer dividends.
Best to continue to cost average buy value stocks and resist most all tech and growth stocks where companies have negative margins. Our Teams forecast a negative 5-7% valuation correction for speculative stocks. DON’T try to time market lows!
*** Watch for our emerging 30/ 60/ 90 day Sector and leading company watchlist’s
*** Look to Index ETF’s like SPY to outperform stocks and most managed funds
*** Energy is the Top Performing Sector in S&P 500 Year to Date and is already regaining strength
*** Banks will profit from higher interest rates on new loans and other products which will offset defaults
