Making Sense

We had string of fresh highs on S&P 500, Gold and Bitcoin. U.S Yields had a wide move lower post the benign NFP numbers. USD Index dropped right into the 0.618% Fibo support level of 102.28 of the move from 100.62 to 104.96 and closed the week at 102.80.  On the NFP data, NFP employment rose 275K for the month of Feb. The prior month numbers were revised significantly lower to 229K for Jan and 290K for Dec, a cumulative downward revision of 167K. The Labor Force Participation rate stayed at 62.5% and the U/R inched higher to 3.90% from prior 3.70%. The Unemployment level increased by 334K as Labor Force rose by 150K and Employment reduced by 184K. The Average Hourly Earnings (AHE) rose 0.14% mom and the Average Weekly Hours rose rose by 0.10 hrs to 34.30 hrs.  After bottoming at 165K in Oct, NFP employment has steadily increased and averages at 231K over the 6 month period. Over a 3 month horizon, AHE have risen at an average 0.33% mom and over a 12 month horizon have rise...

Risk Sentiment up in the sky as U.S. Equities made all time fresh highs  as did the Stoxx 50 & 600 index, Nikkei 225 and our loved Domestic Equities. Gold came within a whisker of ATH of 2145 and similarly for Bitcoin within a whisker of ATH of 69000. However, USD continues to languish around the 103.60 level which makes sense if one theorizes about it from a standpoint of USD Smile Theory. The USD smile theory says that “ US dollar tends to rally when the US economy is ripping and the Fed is hiking. And the dollar also rallies during US recessions. On the other hand, the dollar tends to sell off in periods of moderate US growth as long as global growth is decent.” NYCB fell sharply lower but the Markets shrugged off the decline possibly because they see no contagion risks at the moment. The Fed Fund pricing shifted from 92 bps in 2024 to 84 bps and US2s10s bear flattened. Yields High Low Close DoD ▲ US 2Y ...

"Success Comes down to rare moments of opportunity. Be open, alert, and ready to seize them" Equity Markets took a beating last night and US yields rose. Market pared the bets on Fed Fund Cuts as the implied pricing for Fed Fund Rates shifted higher from lows of 166 bps to currently 155 bps. Despite the disruption in the Red Sea, crude continues to chop around. British Oil Giant Shell halted shipments via the Red Sea. Christopher Waller in his speech titled “As good as it gets… But will it last” spoke about progress in inflation, improved supply demand in labor markets and tighter financial conditions and restrictive monetary policy. Towards the end of the comments, he said “This cycle, however, with economic activity and labor markets in good shape and inflation coming down gradually to 2 percent, I see no reason to move as quickly or cut as rapidly as in the past. The healthy state of the economy provides the flexibility to lower the (nominal) policy rate to keep the real...

 Asia markets are seeing a rebound on risk sentiment after US equities fell with Dow leading losses of 1.89%. ECB kept the rates unchanged and stayed away from calling a peak in rates and focused on a data dependent approach.  Initial Jobless claims (IJC) rose 10K rom the prior week for the w/e 20 Oct to 210K while Continuing Jobless Claims (CJC) rose 63K to 1790K. CJC are seen rising since start of September and are at levels last seen in April end. Strong beat on U.S Durable goods orders, for the month of Sep, orders rose 4.70% yoy following a revised reading of -0.10% in the previous month. Pending home sales rose 1.10% mom following a 7.1% contraction in the previous month. US GDP beat expectations with Q3 growth seen at 4.9% following a 2.1% expansion in the previous quarter. The street took comfort from the core PCE deflator which came in below street estimates of 2.40% and the narrative that Q3 marks a peak in growth. A Research house reported that the PCE deflator impl...

Recapping the last week's price action,  Risk sentiment deteriorated in the immediate aftermath of the Israel-Hamas Conflict at the start of the week but improved on Fed Speak. Higher UST yields and as a consequence tighter financial conditions were seen by Fed Members as having done the job for Federal Reserve and the suggestion that the narrative should shift from how high to how long supported the risk sentiment before the strong US CPI data and resumption in crude oil price rally dented the sentiment again. The extremely fluid geo-political situation and how the war escalates and embroils other nations will continue to weigh on the market sentiment.  The week ahead is light on data. India only releases the WPI data today while US releases Retail Sales / Industrial production / Building Permits / Jobless Claims / Home Sales data coupled with Fed Speak. Keep a close watch on the Fed Chair Jerome Powell's Speech on Thursday before the start of the blackout period ahead of the...