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Major market averages started Tuesday’s trading session off lower following a solid rally to start the week.
Early on and the Nasdaq Composite (COMP.IND) was -1.4%, the S&P 500 (SP500) was -0.7%, and the Dow (DJI) was -0.1%.
“Markets seems to be taking the geopolitical risk session by session at the moment, rather than having any strategic sense of where things are heading,” Deutsche Bank’s Jim Reid said. “It feels like we’re in a very dangerous and delicate holding pattern for now, but with no major developments since the Israeli evacuation notice to Gaza residents on Friday, markets have taken off their weekend hedges over the last 24 hours or so.”
Rates continued to move up. The 10-year Treasury yield (US10Y) rose 14 basis points to 4.84%. The 2-year yield (US2Y) rose 8 basis point to 5.18%.
Monday’s “bond sell-off was matched by growing anticipation that the Fed might deliver another rate hike in 2023 after all, with pricing for a hike by December up from 32% at the close last week, to 37% yesterday,” Reid said. “The long-end sell off was shared across real yields and breakevens, with the 10yr real yield up +4.5bps to 2.32%, and the 30yr real yield was up +5.3bps to 2.42%.”
September retail sales arrived showing a strong consumer. Monthly retail sales figures arrived at +0.7% M/M versus the +0.3% expected level. Core retail sales data came in in-line with the consensus reading of +0.2% M/M.
September industrial production figures came in at +0.3% compared to the forecasted 0.1% rise.
“U.S. consumers cannot really afford Beyoncé concert tickets and new televisions at the same time, and obviously Beyoncé is prioritized,” UBS’ Paul Donovan said. “That mediocre demand for goods helps explain why durable goods prices slipped so quickly into deflation last year. Of course, a lot of the goods purchased in the US are made in Mexico, but US production data is relevant.”
“New York Federal Reserve President Williams will be speaking at the Economic Club of New York – because economists are social. Demented and sad, but social.”