Oct 19, 2022
VOT Research Desk
Market Insights, Considerations & Analytics
After three major US benchmark indices closed higher for a second straight day as positive earnings and better-than-expected factory data boosted risk appetite, December S&P 500 futures (ESZ22) are trending higher +0.17% this morning. Gains in the Industrials, Basic Materials, and Utilities sectors were the primary drivers of three major stock indexes in the United States.
After announcing higher net interest income and a smaller-than-expected drop in quarterly profit, Goldman Sachs Group Inc. (GS) saw its share price soar by 2.33 percent. After Lockheed Martin (LMT) beat Wall Street estimates for the third quarter and increased stock buyback plans, the S&P industrials index rose by more than 8%.
People were worried about what was going to happen over the weekend, and the market was a little bit oversold heading into Monday. People started the week a little bit better.
Meanwhile, analysts anticipate S&P 500 companies’ third-quarter profits to increase by just 2.8% year-over-year, as opposed to the expected 11.1% increase at the beginning of July.
Industrial production increased by +0.4% m/m on Tuesday, indicating economic strength despite the Fed’s aggressive monetary policy. The market is now ingrained with the belief that “a recession is coming and the Fed is going to be raising interest rates, with the hope that maybe a pause is going to be coming something next year.
At the same time, U.S. rate futures have priced in a 97.4% chance of a 75-basis-point increase and a 2.6% chance of a 100-basis-point increase at the monetary policy meeting in November.
All eyes will be on the U.S. Building Permits data in a few hours today. In addition, investors are likely to focus on the data for the Canada Consumer Price Index (CPI), which was at -0.3% m/m in August. On average, economists anticipate that September Building Permits will reach 1.530 million, down from the previous value of 1.542 million. The new figure, according to economists, should be -0.1% m/m.
Today, data on housing starts in the United States will be released. This number is expected to be 1.475 million, down from the previous value of 1.575 million. Additionally, U.S. Crude Oil Inventories data will be reported today. The United States 10-Year rate is currently at 4.073%, an increase of +1.88%, according to economists, up from the previous week’s figure of +9.880M.
Even though U.K. inflation reached its highest level in decades, the Euro Stoxx 50 futures are up +0.29% this morning, indicating further aggressive monetary tightening. The UK consumer price index increased by 10.1% year-over-year in September, exceeding expectations of 10.0%, putting pressure on the Bank of England to increase interest rates more rapidly.
Additionally, the more than 6% increase in shares of Asml Holding (ASML.NA) following the chip equipment manufacturer’s report of better-than-anticipated third-quarter sales and profits serves as a support for European stocks.
The Eurozone CPI and UK Producer Price Index (PPI) Input data were also released today.
The United Kingdom’s September PPI Input exceeded expectations by 0.4% m/m.
In contrast to expectations of +1.2% m/m and +10.0% y/y, the Eurozone’s September CPI came in at +1.2% m/m and +9.9% y/y.
Today’s trading on Asian stock markets was mixed. The Nikkei 225 Stock Index (NIK) in Japan closed up +0.37%, while the Shanghai Composite Index (SHCOMP) in China closed down 1.19 percent.
As investors worried about a possible economic slowdown and additional trade restrictions from the United States, China’s Shanghai Composite closed lower today, extending losses into a third session in a row. Additionally, the Chinese government put off for an indefinite amount of time the publication of crucial economic data for the third quarter, escalating investor concerns regarding the economy of the nation.
At the same time, gains in the Power, Precision Instruments, and Electrical/Machinery sectors pushed the Nikkei 225 Stock Index of Japan to a higher close today. The implied volatility of Nikkei 225 options is taken into account by the Nikkei Volatility, which ended the day at 23.39, down 6.51 percent.
