Daily Chartbook #77

Welcome back to Daily Chartbook: macro market charts, data, and insights pulled from various sources around the Internet by a solo retail investor.

1. Balance of trade. The US trade deficit widened to $73.3 billion (a 3-month high) as imports increased by 1.5% and exports fell by 1.1%.

2. Challenger cuts. October "job cut announcements +48% y/y vs. +68% in prior month … fifth consecutive month of increases; Tech saw most announced cuts at 5.3k, followed by warehousing (2.5k) and services (1.8k)".

3. Jobless claims. Initial jobless claims came in slightly below expectations, but continuing claims reached the highest since March.

4. Inflation, then unemployment. "Inflation peaks at the start of a recession, not before," while "unemployment peaks either at the end of a recession or after economic growth has resumed".

5. Productivity & labor costs (I). Productivity increased 0.3% in Q3, below market expectations of +0.6%. Unit labor costs rose 3.5% in Q3, less than the 4.1% expected.

6. Productivity & labor costs (II).  "The last 2 times productivity declined this badly yoy was during inflationary periods and recessions".

7. Productivity & labor costs (III). For unit labor costs, "on a YoY basis, that is the fastest growth since Q3 1982".

8. ISM Services PMI (I). Services PMI dropped to 54.4 in October (vs. 55.5 expected), pointing to the slowest growth since May 2020.

9. ISM Services PMI (II). Prices paid increased while business activity, new orders, and employment all moved down.

10. S&P Global US Sector PMI. "Four out of seven US sectors monitored by S&P Global PMI data recorded lower business activity during October".

11. Terminal rate. "The terminal Fed funds rate is now being convincingly priced above 5%".

12. Higher for longer. "Market is now pricing in smaller rate hikes (50 basis points in December) but a higher peak rate for fed funds".

13. Global terms-of-trade shock. From TS Lombard: "If the Fed is not prepared to provide [a more gradual approach to monetary tightening], other central banks will have no choice but to let their currencies slide. After all, crashing your economy is not the best way to prop up your exchange rate".

14. Q4 GDP. The updated Atlanta Fed "GDPNow model nowcast of real GDP growth in Q4 2022 is 3.6%," up from 2.6% on Tuesday.

15. Big equity fund flows. "Investors added $9.6 billion to equity funds in the week leading up to the Fed's interest rate hike,  highest weekly total since March".

16. FOMC reaction (I). Yesterday "was the worst-received FOMC day on the stock market since the beginning of 2021".

17. FOMC reaction (II). "It was the worst last 90 minutes of a Fed Day for the S&P (-3.2%) since 1994".

18. FOMC reaction (III). "Yesterday's equity put/call ratio 1.14, highest since March 2020".

19. FOMC reaction (IV). "Pro tip: it's ALWAYS about the presser".

20. Record short-term bond outflows. "Investors pulled a record $2.5 billion out of , the $21 billion iShares Short Treasury Bond ETF, just yesterday alone".

21. Dividend-paying outperformance. "S&P 500 Dividend Aristocrats have 10% outperformance YTD".

22. Resilient dividend payouts. "Over the past week, 53 S&P 500 members announced new dividends in line with their previous payouts, 17 companies announced hikes, and there were no new cuts or suspensions".

23. 2023 earnings. Revisions for 2023 earnings likely have further declining to do.

24. Forward earnings. "Blended earnings estimates for the S&P 500 Ex-Energy Index have been slashed so much since June that they are now back to January levels".

25. Key performance driver. "Companies with strong earnings revisions (sector-neutral) have been outperforming very consistently since July...+Revisions is currently 1 of the factors in our long model".

26. Low multiples. "The median price to sales ratio in the Nasdaq 100 has moved down to 4.2x, its lowest level since February 2016".

27. AAII bulls & bears. "AAII bears have dropped from 61% to 33% over the past month and are now at their second lowest level of the year. But it’s still bears > bulls for 31 weeks in a row (and 48 out of past 50)".

28. Deep inversion. "It looks like the bond market heard what the Fed said yesterday; the 2s/10s Treasury yield is now its most inverted in 40 years".

29. SPX vs. Hike cycles. And finally, "SPX returns around rate hike cycles over the past 70 years. We are rather low in this chart, below the lowest 5th percentile of projected returns".

Thanks for reading!