November 1 – Amazon and Intel’s strong earnings are providing a boost to the stock market today, though weaker than expected results from Apple provide somewhat of a drag. Regardless, the major stock indexes are all comfortably in the green at mid-day, rebounding from yesterday’s scary Halloween losses as we head into the end of the week. The VIX is off slightly from the morning, hovering around the 21.7 level at the time of writing. The dollar is rallying through the morning, pushing back above the 104 level after briefly pushing below 103.5 earlier in the session. Treasuries are rallying as well, with 10-year yields trading below 4.35% and 2-year yields pushing near 4.19%. Crude oil continues to build risk premium back in following reports of a potential Iranian attack on Israel via Iraqi territory which could derail this week’s diplomatic push and see the broadening conflict continue to escalate. The ags have lost much of the morning’s steam, with grains falling hard from the session highs as the wheat complex now dips back into the red while corn and soybeans are nearing the same.
Manufacturing data has been mixed today, with the final S&P Global Manufacturing PMI for October being revised higher to 48.5 from its preliminary 47.8 reading, climbing to its highest level since July. However, ISM’s Manufacturing PMI for October saw an opposite move, falling to the lowest reading seen since July 2023 at 46.5, down from 47.2 in September and defying analyst expectations of a climb to 47.6. New orders did improve month-on-month in the index, though worsening production, inventories, and backlogs provided drag to the headline reading. Contrasting with this morning’s 46K job losses in manufacturing, the Employment portion of the ISM index did show month-on-month improvement from 43.9 to 44.4, though that remains in contractionary territory. One of the biggest highlights from ISM’s data release was an unexpectedly sharp jump in input prices, with the Prices Paid subindex climbing to 54.8 in October, way above market expectations of a contractionary 48.5 reading and marking the hottest input price pressure seen since May. This keeps some amount of fear of reinflationary pressures in the back of traders’ minds, potentially providing more hawkish ammo to the FOMC ahead of next week’s meeting, though this morning’s ugly jobs report likely offsets some of that concern.
U.S. construction spending increased 0.1% month-on-month to a seasonally adjusted annual rate of $2.149T in September, matching the 0.1% growth seen in August and beating market expectations of a dip back to no growth. The increase was driven by the public sector, with public spending up 0.5% month-on-month while private sector spending was flat compared to August. The residential segment outperformed non-residential in both, with private residential spending up 0.5% month-on-month and public residential spending up 2.3% month-on-month.
The U.S. has reportedly asked Lebanon to declare a unilateral ceasefire with Israel following their recent ramp-up in fighting with Iran-backed Hezbollah that has seen the IDF push deeper into the country. Lebanon’s military is not involved in the conflict but can help facilitate diplomatic discussion between Israel and Hezbollah. Previous talks have failed to prove fruitful thus far, limiting the amount of optimism seen from this week’s push, but the killings of both Hezbollah and Hamas leadership in recent months have raised some level of optimism that at least a short-term pause to the broadening conflict could be in sight. However, the reports of another potential retaliatory attack on Israel by Iran via their assets in Iraq have brought some risk premium back into the market, especially with the potential for seeing the conflict broaden even further. Israel’s strikes on Iran to start this week were limited enough that crude oil markets sold off a sizable amount of the built-in risk premium, but another round of escalation could bring that right back, especially with the market heading into a weekend that could bring unexpected headlines.
