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Is the party over? Pre-market futures are down for the first time in recent memory; it’s been a terrific week-long demonstration of exuberance, as market participants did the math on what three (or perhaps more) interest rate cuts next year will do for earnings — and others followed along for fear of missing out. We may be seeing some profits being booked — the Dow is -59 points at this hour, the S&P 500 -9 and the Nasdaq -49 points. Or maybe it’s a sign of something else…
Aside from valuation considerations on this run-up — which is not a week old, but more like eight weeks — we do have the next leg in the Middle Eastern war to concern ourselves with. The October 7th attack on Israeli citizens morphed into an Israeli army strafing of the Gaza Strip, which has now morphed into maritime attacks from Yemen-based Houthi rebels to restrict Israel’s war effort by hitting their supply chains.
But it may not be only the war effort supply chains being affected: 100 attacks on 12 separate vessels in the Red Sea — which stretches from the Sinai Peninsula to the narrow pass to the Arabian Sea between Yemen and Somalia — have occurred so far. It’s now taking a coalition of mostly Western trade nations to secure the passage of key goods like oil and gas. Add to this the issues in Ukraine with grain shipments as its war with Russia approaches a winter stalemate, and we’ll start to add up the possibility that supply chain disruptions may lead to spikes in commodity prices.
These may be small wrinkles easily ironed out over the grand scheme of things, but they may not be. Everyone can remember the global supply chain issues during and just after the Covid pandemic, and what they meant for inflation in this country. This directly elbows its way into our current conversation regarding when the Fed will start easing interest rates; if the monetary policy body sees inflation dangers rearing their ugly head once again, you can bet they’ll delay their rate-cut dot-plot. And that will be felt in the stock market.
This morning, Q3 U.S. Current Account deficits are out — lower quarter over quarter, as expected, to -$200.3 billion, but still higher than the -$197.5 billion expected. There is also a residual pandemic effect here: before Covid, we were seeing Current Account deficits roughly half of where they are now. The good news is that we are indeed coming down, even if slightly less than originally anticipated.
And American staple General Mills (GIS - Free Report) reported mixed results in its fiscal Q2 earnings report this morning, beating expectations on its bottom line by a solid dime to $1.25 per share (and even better than the $1.10 per share reported in the year-ago quarter), marking its eighth-straight earnings beat. But revenues in the quarter, at $5.14 billion, missed the Zacks consensus by -3.7%. As a result, shares are selling off -4% in today’s pre-market, adding to the pain of -20% returns year to date, basically a mirror image of the S&P’s +24%. For more of GIS’ earnings, click here.
After the opening bell, we’ll get a look at Existing Home Sales for November — expected to tick down month over month — and Consumer Confidence for December is expected to bump up from prior levels. Bond yields are still wallowing at 7-month lows — 4.378% on 2’s, 3.881% on 10’s — which should benefit the stock market. Right now, it’s likely some profit-booking going on in the sell-off, but it’s always worth it to pay attention to what’s going on.
Image: Bigstock
Could Supply Chain Disruptions End the Party?
Is the party over? Pre-market futures are down for the first time in recent memory; it’s been a terrific week-long demonstration of exuberance, as market participants did the math on what three (or perhaps more) interest rate cuts next year will do for earnings — and others followed along for fear of missing out. We may be seeing some profits being booked — the Dow is -59 points at this hour, the S&P 500 -9 and the Nasdaq -49 points. Or maybe it’s a sign of something else…
Aside from valuation considerations on this run-up — which is not a week old, but more like eight weeks — we do have the next leg in the Middle Eastern war to concern ourselves with. The October 7th attack on Israeli citizens morphed into an Israeli army strafing of the Gaza Strip, which has now morphed into maritime attacks from Yemen-based Houthi rebels to restrict Israel’s war effort by hitting their supply chains.
But it may not be only the war effort supply chains being affected: 100 attacks on 12 separate vessels in the Red Sea — which stretches from the Sinai Peninsula to the narrow pass to the Arabian Sea between Yemen and Somalia — have occurred so far. It’s now taking a coalition of mostly Western trade nations to secure the passage of key goods like oil and gas. Add to this the issues in Ukraine with grain shipments as its war with Russia approaches a winter stalemate, and we’ll start to add up the possibility that supply chain disruptions may lead to spikes in commodity prices.
These may be small wrinkles easily ironed out over the grand scheme of things, but they may not be. Everyone can remember the global supply chain issues during and just after the Covid pandemic, and what they meant for inflation in this country. This directly elbows its way into our current conversation regarding when the Fed will start easing interest rates; if the monetary policy body sees inflation dangers rearing their ugly head once again, you can bet they’ll delay their rate-cut dot-plot. And that will be felt in the stock market.
This morning, Q3 U.S. Current Account deficits are out — lower quarter over quarter, as expected, to -$200.3 billion, but still higher than the -$197.5 billion expected. There is also a residual pandemic effect here: before Covid, we were seeing Current Account deficits roughly half of where they are now. The good news is that we are indeed coming down, even if slightly less than originally anticipated.
And American staple General Mills (GIS - Free Report) reported mixed results in its fiscal Q2 earnings report this morning, beating expectations on its bottom line by a solid dime to $1.25 per share (and even better than the $1.10 per share reported in the year-ago quarter), marking its eighth-straight earnings beat. But revenues in the quarter, at $5.14 billion, missed the Zacks consensus by -3.7%. As a result, shares are selling off -4% in today’s pre-market, adding to the pain of -20% returns year to date, basically a mirror image of the S&P’s +24%. For more of GIS’ earnings, click here.
After the opening bell, we’ll get a look at Existing Home Sales for November — expected to tick down month over month — and Consumer Confidence for December is expected to bump up from prior levels. Bond yields are still wallowing at 7-month lows — 4.378% on 2’s, 3.881% on 10’s — which should benefit the stock market. Right now, it’s likely some profit-booking going on in the sell-off, but it’s always worth it to pay attention to what’s going on.
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