The United States economy grew at a faster-than-expected annual rate of 2.9% in the third quarter of 2022, according to the second estimate published by the Bureau of Economic Analysis on Wednesday. Today’s reading came in slightly higher compared to the initial estimate of 2.6%. The latest data “reflected upward revisions to consumer spending and nonresidential fixed investment that were partly offset by a downward revision to private inventory investment. Imports… decreased more than previously estimated,” the report explained. Consumer spending expanded by 1.7% in the same period, surpassing expectations, with the GDP deflator expanding by 4.3%. Core PCE prices rose 4.6%, with sales climbing 4%. On the other hand, corporate profits fell by 0.2%. Markets projected the data as positive overall, however, today’s trade balance figures confirmed downside risks for the final trimester of this year. NN: This is not what the FED has in mind.
Medvedev: NATO could become legitimate target over Ukraine aid
(Reuters) – Former Russian President Dmitry Medvedev warned NATO on Tuesday against providing Ukraine with Patriot missile defence systems, denouncing the alliance as a “criminal entity” for delivering arms to what he called “extremist regimes”. Medvedev, who once cast himself as a liberal moderniser as president from 2008 to 2012, has increasingly emerged as one of the most hawkish proponents of Russia’s war in Ukraine, posting scathing denunciations of the West on his social media channels.
“If, as (NATO Secretary-General Jens) Stoltenberg hinted, NATO were to supply the Ukrainian fanatics with Patriot systems along with NATO personnel, they would immediately become a legitimate target of our armed forces,” Medvedev wrote on the Telegram messaging app. It was not clear from his message whether he was referring to Patriot systems, Ukrainian forces or NATO personnel becoming a target. “The civilised world does not need this organisation. It must repent to humanity and be dissolved as a criminal entity,” he wrote in an earlier post. Ukraine has asked its Western partners for air defences, including U.S.-made Patriot systems, to protect it from Russian attacks on its energy infrastructure. NATO ministers have condemned what they call Russia’s “persistent and unconscionable attacks on Ukrainian civilian and energy infrastructure”, and pledged to step up their support for Kyiv. NN: This is called escalation… War spreads like a bottle of ink spilled on a white linen table clot. This war will spread to all of Europe. Look the world is already polarized with world powers choosing a side and arming the combatants. Its like a school yard fight with the onlookers yelling fight, fight, fight and pushing the fighters towards each other while giving them knives.
China COVID shutdowns to disrupt supply further…… Oil prices could plunge in the short term
Bank of America Corporation CEO Brian Moynihan said on Tuesday, during an interview with CNN, that China’s most recent shutdowns of areas hit with the COVID-19 virus will cause further obstruction of supply chains. “We’re all concerned about it,” Moynihan stated, adding that from an economic perspective these shutdowns are likely to cause world disruptions. Meanwhile, commenting on the current situation in the United States, Moynihan asserted that the country’s economy is “holding better than the rest of the world.” NN: I am adamant… In the SHORT term oil prices will plunge as covid shuts down the Chinese economy till spring!
IMF says ‘too early’ for Fed to back off rate hikes
International Monetary Fund (IMF) Managing Director Kristalina Georgieva underlined on Tuesday it is “too early” for the Federal Reserve to “back off” interest rate increases, after several policymakers’ voiced support for slowing down the pace of the rate hikes starting from its December meeting. The IMF head also expressed optimism that the energy crisis brought on by the conflict in Ukraine would “speed” the drive towards “renewables” in Europe in an interview with Associated Press. However, policymakers remain divided in the opinion of whether the Federal Reserve should move with interest rate hikes, with some stressing it is crucial to halt the monetary tightening and observe how the policy “transmits through the economy” before deciding on the future steps, while others are certain that more increases of interest rates are needed to reach to target. NN: It is amazing to me. What part of the FED is going to raise rates and keep raising them at varying amounts until inflation get to 2%… a very very lonely number!
Oil Up as OPEC meets and China spins COVID infections
TOKYO/SINGAPORE (Reuters) -Oil jumped on Tuesday, buoyed by hopes that China would relax its COVID-19 controls after rare protests against the country’s zero-COVID strategy over the weekend in big Chinese cities. Brent crude futures advanced $1.4, or 1.7%, and traded at $84.57 a barrel at 0645 GMT. U.S. West Texas Intermediate (WTI) crude futures rose $1.17, or 1.5%, to $78.39 a barrel. Both benchmarks gained more than $2 earlier in the day. China held a news conference on COVID prevention and control measures at 3 p.m. (0700 GMT) on Tuesday amid record COVID infections and protests in Shanghai and Beijing.
Asian shares also rallied as unsubstantiated rumours swirled that the unrest might prompt a loosening of the COVID restrictions. Similar rumours have caused markets to zig-zag in recent weeks.
The rare street protests in cities across China over the weekend were a vote against President Xi Jinping’s zero-COVID policy and the strongest public defiance during his political career, China analysts said. Beijing has stuck with the zero-COVID policy even as much of the world has lifted most restrictions. Oil prices are also supported by the expectation that major oil producers would adjust their production plans at the upcoming meeting. The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, known as OPEC+, are set to hold a meeting on Dec. 4. Analysts at Eurasia Group suggested in a note on Monday that weakened demand out of China could spur OPEC+ to cut output. “Although this is merely a guess … not the official statement from the OPEC, it still reflects the near-term market sentiment and is likely to be the turning point of the oil prices,” analysts from Haitong Futures said in a note. OPEC+ started to lower its output target by 2 million barrels per day (bpd) in November, aiming to shore up oil prices. Markets are also assessing the impact of an upcoming Western price cap on Russian oil. Group of Seven (G7) and European Union diplomats have been discussing a cap of between $65 and $70 a barrel, with the aim of limiting revenue to fund Moscow’s military offensive in Ukraine without disrupting global oil markets. Russia calls its actions in Ukraine “a special operation”. But EU governments failed to agree on Monday on the cap, with Poland insisting the cap should be set lower than proposed by the G7, diplomats said. The price cap is due to come into effect on Dec. 5, when an EU ban on Russian crude also takes effect.
NN: BlackMask Blog:
Looking pretty stupid right now
Dow plunges 500 pts amid China protests, Fed’s remarks
- Stocks sank on Monday as protestors in China and hawkish comments from Fed officials weighed on the market.
- Unrest over China’s zero-COVID policy could exacerbate supply-chain issues, which are partly responsible for rising inflation.
- St. Louis Fed President James Bullard added the US had “a ways to go” on rate hikes before claiming victory on the inflation front.
US stocks sank on Monday as protests in China and hawkish comments from Fed officials weighed on the market. Anger over China’s zero-COVID policy has sparked turmoil across the nation, with protests threatening to exacerbate supply-chain issues in the global economy. Experts say the protests could fuel US inflation, as supply-chain issues have been a major driver of high prices so far. Apple stock slipped nearly 3% as unrest broke out in a iPhone factory in Zhengzhou, and the tech giant will have to navigate the possibility of “brutal” shortages into the holiday season, Wedbush warned. St. Louis Fed President James Bullard expressed more hawkishness on the Fed’s inflation fight, noting the central bank still had “a ways to go” before policy was restrictive enough to tame inflation. He estimated the Fed would raise rates to 5%-5.25%.
- S&P 500: 3,963.95, down 1.54%
- Dow Jones Industrial Average: 33,849.46, down 1.45% (497.57 points)
- Nasdaq Composite: 11,049.50, down 1.58%
Here’s what else is happening:
- Apple has seen $96 billion erased from its market value as investors grow anxious over iPhone shortages, according to Wedbush.
- Chinese stocks are set to struggle against economic headwinds, and any recovery will be sluggish despite policy support from the government, UBS warned.
- BlockFi filed for bankruptcy, the latest crypto lender to succumb to the contagion of FTX’s collapse.
- Bitcoin could plunge to $10,000, and investing in crypto is “dangerous,” according to billionaire Mark Mobius.
- The Fed’s rate hikes could soon bleed into other areas of the economy and weigh on sectors like manufacturing, according to one Solus strategist.
- Oil prices traded mixed, with West Texas Intermediate up 0.93% to $76.99 a barrel. Brent crude, the international benchmark, dropped 1.02% to $83.73 a barrel.
- Gold slipped 0.84% to $1,739.85 per ounce.
- The 10-year yield inched 1 basis point higher to 3.7%.
- Bitcoin dropped 1.93% to $16,234.42.
Fed’s Bullard: Fed to keep hiking rates in 2023…… Fed’s Williams: Inflation to drop to 5-5.5% this year….. Mester thinks Fed not near a pause in rate rises.
St. Louis Fed President James Bullard confirmed on Monday the Federal Open Market Committee (FOMC) would have to continue hiking rates next year until it reaches the 5-7% rate range. This means the Fed will have to increase its key rates by at least one more percentage point. Bullard agreed with his colleague from the Fed, John Williams, that the recession in the United States isn’t seen as the baseline scenario, however noting the economy would see slow growth during the next year. However, he argued the Fed might have to keep rates higher through 2023 and into 2024. Growth estimates for the final quarter of this year are trending positive, he concluded.
Fed’s Williams: Inflation to drop to 5-5.5% this year
New York Fed President John Williams argued on Monday that the annual inflation rate in the United States would decline to between 5% and 5.5% by the end of 2022, while further sliding to around 3% by the end of next year. The inflation fight could extend into 2024, he added. In a speech set to be presented on Monday, Williams acknowledged the Federal Reserve still has work to do to lower soaring consumer prices, noting it would take time to release the upward pressures. He warned that the US unemployment rate would rise to between 4.5% and 5% near the end of 2023. The November inflation data comes out on December 13, a day before the Fed’s rate decision. The October data showed US inflation rate continued to decline for the fifth month in a row, landing at 7.7%.
Mester thinks Fed not near a pause in rate rises
Cleveland Fed President Loretta Mester stated Monday that she doesn’t think the United States Federal Reserve is near a change or a pause in rate hikes. In an interview with Financial Times, Mester supported “several” hikes after the “good” CPI report in October. “I would need to see several more of those and more moderation and perhaps even a reduction in core services prices. And we also have to see better balance in the labor market,” she added. Despite signs that the situation is easing, she also noted that it is “imperative” to avoid any mistake while adding that she considers inflation will decline “next year.” NN: I have never seen so much Fed speak. They are making it clear they are NOT done till its DONE. And it done when the published inflation rate hits 2%.
U.S. stock futures fall as Chinese protests rattle markets, oil hits 2022 low
U.S. stock-index futures sank Sunday night, indicating possible losses on Wall Street on Monday, as Asian markets fell following widespread public demonstrations in China and as oil prices hit a 2022 low. Dow Jones Industrial Average futures YM00, -0.36% were down more than 150 points, or 0.5%, as of 11:30 p.m. Eastern, above their session lows, while S&P 500 futures ES00, -0.60% and Nasdaq-100 futures NQ00, -0.80% dropped closer to 1%. Wall Street finished mixed on Friday with the Dow notching its highest close since April 21. The S&P 500 SPX, -0.03% finished down 1.1 points, or less than 0.1%, at 4,026.12; the Dow Jones Industrial Average DJIA, +0.23% closed 152.97 points, or 0.5%, higher at 34,347.03; and the Nasdaq Composite COMP, +1.42% shed 58.96 points, or 0.5%, to 11,226.36. Stocks in Asia declined Monday, led by a 2% fall by Hong Kong’s Hang Seng Index HSI, -1.44%. The Shanghai Composite SHCOMP, -0.75% slid as well, as thousands of protesters in major Chinese cities, including Beijing and Shanghai, called for President Xi Jinping to resign. The unprecedented protests were spurred by frustration with China’s strict lockdowns as part of its “zero-COVID” policy. “Unsurprisingly, there is more significant uncertainty in China’s reopening trajectory, which is getting priced into markets on reports of protests over the weekend,” Stephen Innes, managing partner at SPI Asset Management, said in a note Sunday night. “We knew we would be hit with China COVID jitters this morning, but the protests have caught the market by surprise,” he added. “Still, this morning’s price action could reverse quickly if it becomes clear that reports of protests will not lead to tighter COVID restrictions.” Oil prices fell sharply Sunday as well, as investors worried about slipping demand in China. West Texas Intermediate crude futures CL.1, -2.53% were last down nearly 3%, at $74.17 a barrel, its lowest price year to date. Prices for Brent crude BRNF23, -2.67%, the international standandard sunk as well.
NN: The World Changed Again.. This China COVID otbreak has got my attention. I believe the market especially oil is not pricing in what could be another China lock down.
Bear markets come in three stages; and we’ve only just started the second, says veteran analyst.
Stocks will start the Black Friday Monday session near 10-week highs, having rebounded partly on hopes the Federal Reserve will be slowing the pace of interest rate rises as it waits to see how much previous tightening has impacted the economy. Investors are thus looking ahead to when the Fed eventually pivots and borrowing costs can start coming down again. For now, they are displaying few concerns about how much damage any economic slowdown may do to corporate earnings.
It’s all too rosy, reckons Peter Boockvar, chief investment officer of Bleakley Financial Group. In an interview with Magnifi+, an AI investing and trading platform, the veteran analyst warns that stocks will grind lower next year, and we have not seen the bottom of a bear market still in its middle phase.
“Bear markets usually come in three stages. The first one is we take a lot of the frothy excesses and euphoria out of the market in terms of the sexy names that we saw in 2021 and we take a PE ratio down. We’ve done that, we went from 22 times earnings, call it 16 to 17,” says Boockvar. In the second phase, he adds, investors start calculating the economic and company earnings consequences of the ongoing rises in interest rates…”and then the third phase is everyone throws in the towel. No one wants to own a stock again, and that’s your bottom and that’s when you need to be buying stocks hand over fist.” “I feel like we’re really just only beginning to start that second phase,” he said.
Still, there will be opportunities. It all depends on your time scale, according to Boockvar. “If you have a big purchase that you have to make within the next year or two, whether it’s a kid going college or it’s a wedding, a bar mitzvah or some other expense like a home that you have put aside money for, it should not be in the stock market. It should be in the bank it should be in short-term T-bills. It should be in cash equivalents because the next couple of years are going to be challenging for those with shorter-term time horizons,” he said. So, what assets is he interested in? Bonds are attractive, but it’s important to stick to quality. “You have investment-grade bonds that are yielding 6% and you can do that without taking much duration risk by buying shorter-term durations…. And you can buy a short-term, two-year treasury and get a yield of four and a half percent and get some attractive Munis too. So fixed-income land, with shorter durations, I believe, is more attractive. Longer-term trade durations, I’m still more suspect on,” says Boockvar. Here’s an interesting observation on stock volatility from Benedek Vörös, director of Index Investment Strategy at S&P Dow Jones Indices. “It has been a turbulent year, but a degree of relative calm has returned to U.S. equity markets in the past few weeks, and participants in the options market look even more relaxed than their cash counterparts,” Vörös writes in his latest bulletin. “VIX, having averaged 3 points above the 21-day realized S&P 500 volatility over the past year, has slipped 6 percentage points below it as of yesterday’s close. Historically, that has had some predictive power for lower volatility to come.”
NN: I am not happy. I am worried about seasonality. Its the time of good cheer. I am not worried as much as i was. China COVID infections are big. And i am watching to see if it infects the rest of the world. Most people vaccines are wearing off. AND FEW PEOPLE HAVE GOTTEN THE LATEST MODIFIED SHOT. I know the stock market will soon tank.
Saudi Arabia And Iraq Reiterate Their Support For A Production Cut
Goldman cuts oil forecast by $10 to $100 a barrel…… I’ll Take it!
Following a bilateral meeting on Thursday, the energy ministers of Saudi Arabia and Iraq reiterated their support for the oil production cut agreed upon last month.At the same meeting, they emphasized the importance of sticking to the agreement until the end of 2023, Saudi Arabia’s Abdulaziz bin Salman said in a statement earlier today. Bin Salman and his Iraqi colleague, Hayan Abdel-Ghani, also agreed that they would ensure OPEC has “the ability to take further measures, if required, to achieve balance and stability in the market.” Iraq has ambitious oil production growth plans, eyeing a production capacity of 7 million bpd by 2027, up from the current 5 million barrels daily. Yet it remains a loyal OPEC member: when the head of SOMO, Iraq’s oil-exporting company, announced the capacity plans, he added that “The increase in these production rates will take place in coordination with OPEC and according to the decisions taken in line with oil market requirements.” OPEC+ agreed last month to reduce its combined production of crude oil by a nominal 2 million barrels daily, which would translate into an actual reduction of around 1 million barrels daily. This stabilized oil prices for a while before Covid updates from China began taking their toll. Earlier this week, the Wall Street Journal reported that the cartel was considering an increase in oil production ahead of the EU oil embargo on Russian oil. According to the WSJ report, which quoted unnamed OPEC delegates, the output hike “could help heal a rift between Saudi Arabia and the Biden administration and keep energy flowing amid new attempts to blunt Russia’s oil industry over the Ukraine war. The report prompted an immediate reaction from Saudi Arabia, which denied the information and suggested that it was, in fact, even open to further production cuts. “It is well-known that OPEC+ does not discuss any decisions ahead of the meeting,” Abdulaziz bin Salman told the Saudi state news agency.