Markets don’t like prosperity before the Fed

So today’s uptrend in early trade evaporated as it neared the Fed’s decision to raise interest rates another 75 basis points (bps) to a range of 3.75 to 4.00% tomorrow afternoon. Even though that number seems to have been baked into the cake about three weeks ago, since then there has been another creeping hope that the Fed is ready to slow its pace after the November meeting.

after today Job Vacancies and Labor Turnover Survey (JOLTS) for September, this hope has soured. Instead of dipping below 10 million job postings for the first time since June 2021 as expected, the stock went the other way: 10.7 million, versus an upward-revised 10.3 million for august. These stubbornly robust “labour market” numbers are not going to help convince the Fed to ease off on interest rate gas.

Hirings were below expectations at 6.1 million, while layoffs were flat at 4.1 million, or 2.7% month-over-month. Construction and healthcare still have many openings, especially in the South, +6.9%, and the Midwest, +6.5%. The good news here is that these jobs are generally not at the high end of the salary scale, nor in the more expensive regions. Unemployment per job offer reached +0.5%; in comparison, this is down from +4.9% in April 2020 and +6.5% in July 2009.

S&P PMI Manufacturing for October climbed back above the 50 level, indicating growth from contraction: 50.4, from 49.9 the previous month. ISM manufacturing also performed slightly better than expected, 50.2% from the 50.0% expected, although down from September’s 50.9%. In normal times, this would be seen as a healthy, albeit lukewarm, gathering of equilibrium in the domestic production of goods; nowadays, we’re inclined to think that’s yet another heel to dig into a hawkish Fed.

And Building expenses for September also turned positive: +0.2% against -0.6% expected and -0.6% revised slightly upwards for August. Again, we’re looking at some pleasantly healthy numbers, and we’re also looking at the end of the summer, but there’s no evidence the Fed is making any progress on these inflation measures.

The fear is, of course, that the Fed will overreach and not recognize that something is broken until it is too late. Take all of this data from earlier today: if each of these stocks is experiencing a significant slowdown over the past few months that has yet to be recorded, causing the economy to slow drastically in key areas such as production of goods and the labor market, it could push the Fed up 75 bps. hike tomorrow a bridge too far. So, we are probably not only still in bear market conditions, but also “good news is (again) bad news”.

AMD Advanced Micro Devices hit earnings expectations of 67 cents a share today, trailing the company’s lower guide last month. Revenue of $5.57 billion was only marginally below expectations, although the revenue forecast for the next quarter also fell. Weaker PC demand in the quarter was a headwind for the company, which hit its No. 5 Zacks rank (strong sale) in its pre-announcement. Equities are up +3% on earnings release; perhaps the report is better than feared.

Rated Zacks Rank #1 (Strong Buy) in its third quarter earnings report, Airbnb ABNB outperformed both in terms of revenue and profit: earnings of $1.79 per share on sales of $2.88 billion exceeded $1.43 per share and $2.85 billion. dollars (itself a triple-digit year-over-year revenue gain), respectively. Its average daily rate was slightly higher than expected, $156 from $153.50, but the downgraded Q4 revenue forecast leads to a -4% sell-off in aftermarket trading.

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