U.S. Equity Markets finished lower Wednesday led by the 2.37% fall in the NASDAQ 100. Markets ended lower following several factors in yesterday’s trading session. Some weakness in equities is attributable to the underperformance from Republicans in the U.S. midterm elections. Additionally, disappointing earnings continue to roll in, with Disney (DIS) missing expectations. Meta Platforms (META) confirmed it will cut about 13% of its workforce – the first major layoffs in its 18-year history. And continued volatility and uncertainty in the crypto market also proved to be a tailwind for equities as Binance backed out of its FTX acquisition deal, leading to a 12% fall in Bitcoin. Consumers’ shrinking discretionary income is showing up on banks’ balance sheets. Since late 2021, the Fed has told us it is worried about inflation growth. After all, the U.S. Bureau of Labour Statistics’ Consumer Price Index has risen from a low of 0.1% growth in May 2020 to 8.2% growth this past September. So, the Fed is trying to stabilise prices by strengthening the Dollar. But, in the process, it is driving up the cost of loans. The change is a windfall for lenders who have been starving for years to make more net interest income (“NII”). In basic terms, NII refers to the difference between what banks take in for loans and what they then pay out in liabilities. Over the past year, the Federal-Funds rate target has jumped from a range of 0% to 0.25% to a new range of 3.75% to 4%. It has been much faster than previous rate-hike cycles. This change is putting money back onto banks’ balance sheets in a hurry. We need to look no further than JPMorgan Chase’s (JPM) third-quarter results. The company reported a record NII of $17.6 billion. It also guided total NII for the year to $61.5 billion, up from last quarter’s expectation of $58 billion. It was the same story for Bank of America (BAC). Management reported third-quarter NII of $13.8 billion – the highest level in over a decade. But that is not all. The Fed said that it is going to raise rates another 1% by next March. That means banks are going to make even more money on loans. You see, the central bank’s rate-hike plans should function as a continued tailwind for credit card companies and the banking sector. Over the past couple of years, most Americans have been buoyed by the financial security of government handouts, like stimulus payments, loan forbearance, and tax credits, among others. This led to a high pandemic-era savings rate. But all that financial security is quickly drying up. We have been hearing plenty of “resilient consumer” remarks and that “consumer balance sheets are strong” for a few months now. While this was true coming out of the pandemic, the trillions of dollars saved by Americans while they were stuck at home are fading fast. American households have weathered high inflation for much of the year. But signs are starting to emerge that consumers are losing ground to the rising cost of living. And the result? Credit-card debt is surging to pre-pandemic highs. Total card balances in the U.S. hit $916 billion in September. Outstanding balances are up 9% year to date and are 23% higher than the pandemic low in April 2021. According to the U.S. Bureau of Economic Analysis, the personal savings rate as a share of disposable personal income fell to 3.3% in the third quarter. This is one of the lowest readings on record dating back to the 1940s. This is also a far cry from the 26.4% savings rate at the height of the pandemic in 2020. Servicing credit cards typically come at a high cost due to interest rates. According to credit-card comparison service CreditCards.com, the national average interest rate on a credit card is now 18.9%. That is compared to Federal Reserve data that show late 2021’s average interest rate stood at 14.5%., while more spending and account openings create the near-term optics of a healthy consumer. longer term, the dynamic will destroy disposable income at an even faster rate. In the meantime, households are likely to increase consumption via credit cards to keep up. That means they will be spending even more on interest payments and putting margin into banks’ balance sheets. Within the S&P 500 Index, all the 11 sectors finished lower. European Markets also closed in the red. Markets ended lower as investors await Thursday’s inflation news from the U.S. There was no other major economic news out of Europe as the European Central Bank’s (“ECB”) Consumer Expectations Survey showed little change in the inflation outlook. The German Council of Economic Experts warned the government that energy relief measures must remain curtailed to only those necessary as the risk of higher inflation persists. And the ECB’s Andrea Enria, said that eurozone banks could handle higher interest-rates spikes, furthering the hawkish tone that a pivot isn’t close. In Asia, Markets ended lower as economic sentiment and COVID-19 worries overshadowed any optimism following China’s first drop in producer inflation in 22 months. China’s number of new COVID-19 cases remains above 8,000 per day. Japan manufacturer sentiment fell to a 22-month low as the weak Yen drove up import costs. However, the country’s services-sector sentiment firmed. And India said it will continue to buy Russian oil citing its domestic benefits. Elsewhere, Oil fell 3.78% while Gold closed 0.43% lower after a late rally in the Dollar.
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For anyone following my Platinum Service it made 260 points yesterday and is now ahead by 1984 points for November, after finishing October with a record gain of 9619 points, making 6660 points in September, after closing August with a gain of 2228 points, having made 2660 points in July, following a gain of 3371 points in June. The Service made 3651 points in May, after making 762 points in April, following a gain of 5883 points in March. The Platinum Service made an impressive 5324 points in February, after ending January with a gain of 3878 points, more than making up for December’s 932 points loss. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1600 points. I have a YouTube Channel which contains recent interviews I have given This can be viewed by clicking HERE Please subscribe to this for new interview notification
Equities
The S&P 500 closed 2.08% lower at a price of 3748.
The Dow Jones Industrial Average closed 646 points lower for a 1.95% loss at a price of 32,514.
The NASDAQ 100 closed 2.37% lower at a price of 10,797.
The Stoxx Europe 600 Index closed 0.30% lower.
Yesterday, the MSCI Asia Pacific Index rose 0.2%.
Yesterday, the Nikkei closed 0.56% lower at a price of 27,716.
Currencies
The Bloomberg Dollar Spot Index closed 0.5% higher.
The Euro closed 0.6% lower at $1.0010.
The British Pound closed 1.4% lower at 1.1355.
The Japanese Yen fell 0.7% closing at $146.51.
Bonds
Germany’s 10-year yield closed 11 basis points lower at 2.17%.
Britain’s 10-year yield closed 10 basis points lower at 3.45%.
U.S.10 Year Treasury closed 8 basis points lower at 4.04%.
Commodities
West Texas Intermediate crude closed 3.08% lower at $88.40 a barrel.
Gold closed 2.10% higher at $1708.10 an ounce.
This morning on the Economic Front we have U.K. CPI and PPI at 7.00 am, followed by Euro-Zone Economic Bulletin at 9.00 am. Next, we have U.S. Weekly Jobless Claims and CPI at 1.30 pm. Finally, we have a Thirty-Year Treasury Auction at 6.00 pm and the Monthly Budget Statement at 7.00 pm.
Cash S&P 500
Yesterday saw across the board selling as suddenly contagion risk is the word from the fall-out of the FTX related crypto crash where Bitcoin fell a further 12%, hitting a two-year low at $15,700. Why do we have contagion risk? Because, in addition to the usual suspects there is concern that some institutions are locked up in the FTX disaster, cannot get their funds out and have to sell stocks to deleverage. In the process we saw systematic selling all day bringing new lows to some of the key tech stocks like Amazon, Tesla and Apple. This playback is not what I wanted ahead of this afternoon’s CPI as a strong number will see the S&P again accelerate to the downside like we saw in both September and October. I read last night that the crypto pain is real. Apparently in the last 24 hours, 350,994 crypto traders were liquidated with total liquidations coming to $700.73 million. Internals were dreadful yesterday with the McClellan Oscillator closing at +78 from +199 on Tuesday. Yesterday after the S&P hit my 3785 buy level we rallied to my revised 3799 T/P level again emphasising how important my Platinum Service is. I did not do another trade just watched the S&P drift lower into the close. The S&P has strong support from 3695/3715 where I will be a strong buyer with a 3679 ‘’Closing Stop’’. I still do not want to be short the S&P at this time.
EUR/USD
No Change. I am still a buyer on any further dip lower to .9890/.9960 with the same .9835 ‘’Closing Stop’’.
March Dollar Index
Just before the New York close, the Dollar rallied to my 110.40 sell level. I will add to this position at 111.10 while leaving my 111.75 stop unchanged. I will now raise my T/P level on this position to 109.80.
Cash DAX
The DAX again traded in a narrow range and I am still flat. Today, I will continue to be a small buyer on any dip lower to 13320/13400 with the same 13245 ‘’Closing Stop’’.
Cash FTSE
No Change. I am still a buyer from support from 7150/7210 with the same 7095 ‘’Closing Stop’’.
Dow Rolling Contract
I was lucky with my Dow call yesterday. After the market sold off to my 32800 buy level we rallied to my 32920 revised T/P level before subsequently falling over 400 points into the close. This move lower saw the Dow close right at its 200-Day Moving Average. Today, I will be a small buyer from 32100/32350 with a 31985 ‘’Closing Stop’’.
Cash NASDAQ 100
The carnage in tech stocks saw the NDX trade lower to my 10890 buy level. I will add to this position at 10740 while leaving my 10625 ‘’Closing Stop’’ unchanged. I will now lower my T/P level on this initial position to 10995.
December BUND
The Bund soared yesterday, never coming close to my buy range and I am still flat. The Bund has support from 136.60/137.40. I will move my buy level to this area with a higher 135.95 ‘’Closing Stop’’.
Gold Rolling Contract
I am still flat. Gold has support from 1670/1685 where I will be a small buyer with a 1659 ‘’Closing Stop’’.
Silver Rolling Contract
No Change. Silver has support from 20.20/20.90 where I will again be a buyer with no stop.
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