Big Movers In October 2023
Dollar General (DG): The discount retailer rebounded from its biggest drop ever in September after Todd Vasos returned as CEO.
SolarEdge Technologies (SEDG): The clean-energy stock warned revenue would miss forecasts because of "substantial unexpected cancellations" in Europe.
Allstate (ALL): Reuters reported that activist investor Trian Fund Management had taken a stake in the insurance stock.
Align Technology (ALGN): The supplier of clear orthodontic braces issued weaker-than-expected profit, sales and guidance. "Deteriorating trends" were cited.
Deckers Outdoors (DECK): The footwear and apparel company hit a new all-time high after earnings, revenue and guidance beat forecasts.
Onsemi (ON): The chipmaker forecast revenue below consensus amid weak automotive demand.
Key Economic Events Last Month
Mortgage Rates Hit 23-Year High Above 8%
The average rate on 30-year mortgages hit 8% for the first time since mid-2000. The increase followed a surge in Treasury yields as the government borrows more and the Federal Reserve keeps interest rates high (18/10)
Retail Sales Beat for 3rd Straight Month
Retail sales rose 0.7% in September, more than twice the forecast amount. The increases were broad across categories. It was the third straight month that the number beat estimates. (17/10)
GDP Beats Estimates as Prices Cool
Gross domestic product increased by 4.9% in the third quarter. It was half a percentage point more than expected. Consumer spending and private investment powered the beat. The core price index also rose less than forecast. (26/10)
Treasury Cuts Planned Borrowing
The U.S. Treasury Department plans to borrow $776 billion in the fourth quarter. That’s $225 million less than the third quarter and slightly below Wall Street’s estimates. It could be viewed as a positive for bond prices, with the potential to lower borrowing costs. (30/10)
Key Futures Contracts
| Product Name | Current Month | Expiration | Next Month | 1-Mon% |
|---|---|---|---|---|
| S&P 500 E-Mini (@ES) | ESZ23 (Dec) | 15 Dec 23 | ESH23 (Mar) | -2.8% |
| *S&P 500 E-Mini Micro (@MES) | MESZ23 (Dec) | 15 Dec 23 | MESH24 (Mar) | -2.8% |
| Nasdaq-100 E-Mini (@NQ) | NQZ23 (Dec) | 15 Dec 23 | NQH24 (Mar) | -2.8% |
| *Nasdaq-100 E-Mini Micro (@MNQ) | MNQZ23 (Dec) | 15 Dec 23 | MNQH24 (Mar) | -2.8% |
| Dow Jones E-Mini (@YM) | YMZ23 (Dec) | 15 Dec 23 | YMH24 (Mar) | -1.9% |
| *Dow Jones E-Mini Micro (@MYM) | MYMZ23 (Dec) | 15 Dec 23 | MYMH24 (Mar) | -1.9% |
* Micro contracts are one-tenth the size of standard e-minis.
Events to Watch This Month
| Date | Event | What to Watch |
|---|---|---|
| Wed, 1-Nov | Federal Reserve meeting, press conference | Interest rates, comments on inflation, labor market and restrictiveness of current policy. |
| Fri, 3-Nov | Employment report | Job-market conditions: unemployment, wages, hours worked. |
| Tue, 14-Nov | Consumer price index (CPI) | Inflation trends |
| Wed, 15-Nov | Retail sales | Will sales beat estimates for a fourth straight month? |
| Tue, 21-Nov | Fed minutes | Further details on the preceding meeting. |
Sector Watch
Utility stocks rebounded following sharp declines the two previous months.
Technology stocks were little changed as software makers like Microsoft and Adobe advanced.
Energy followed crude-oil prices lower. Increasing U.S. production and weak results at Chevron contributed to the decline.
Consumer discretionary lagged as automakers including Tesla (TSLA), General Motors (GM) and Ford Motor (F) fell.
Noteworthy Calls & Predictions
The International Monetary Fund raised its 2023 growth forecast for the U.S. economy from 1.8% to 2.1%. Its estimate for next year also increased from 1% to 1.5%. The IMF cited business investment, consumption and government spending.
U.S. economyBill Ackman said “there is too much risk in the world to remain short bonds.” His Pershing Square hedge fund covered bearish positions on U.S. Treasuries first reported in August.
Bond pricesCNN observed a drop-off in demand for ESG investing. The report noted weaker fund flows and sharp declines in solar-energy stocks. Separately, automakers reduced plans for electric-vehicle production.
ESG investingChris Williamson, chief business economist at S&P Global Market Intelligence sees increased odds of a soft landing for the economy. He noted expected production growth and lower inflationary pressures.
U.S. economyTom Lee of Fundstrat said the stock market could break its “doom loop” by the first Friday of November. He said the release of key economic data could ease worries about higher interest rates.
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