market

Earnings took the central stage, and stocks rose.

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For recent years, stocks have traded largely inversely with the bond yields. As bond yields rose, stocks felt the pressure and dropped. This becomes less apparent as we arrive at the earning seasons. While the 10-year Treasury yield rose 8 basis points, Nasdaq led major indices to rise higher.

Positive performance from banks

The sector, badly beaten for the year, received another good news. Charles Schwab reported an earning of 77 cents per share for the third quarter, which is well ahead of the 74-cent consensus. This boosted bank stocks sentiment and gave the S&P 500 the needed momentum to stay in the green and propel higher.

Things weren’t always that rosy for Charles Schwab. Consumers have generally pulled some cash out of the low-yielding cash accounts. However, at the very least, things are stabilising, and the CEO noted that they are well positioned “for long-term growth”. That is music to the ears of investors.

Geopolitical tensions are still simmering.

Investors are still digesting and remain agile to the wars in Ukraine and Israel as global politics become a major headwind for equity markets. Just last week, JP Morgan CEO, Jamie Dimon had described the current era as “the most dangerous time the world has seen in decades”, reflecting the possibility of heightened volatility in international economies that have to grapple with a less cohesive world order.

Still, we are seeing VIX falling down as diplomatic efforts by the US and several states in the Middle East to cool down the tension, which could also help cap oil gains, which have risen considerably, at an uncomfortable level against the backdrop of sticky inflation in the US. After all, this could have implications for the Fed’s next monetary decision in the November FOMC meeting.

What’s on the menu today?

8.30 pm : We will have the Core Retail sales. This is critical for us to understand the health of consumer spending. JPM CEO, Jamie had said that consumers are relatively in good economic health but cautioned that they are also drawing down on their savings. Hence, the data will show whether we could have a soft landing.
9.20pm: FOMC member Bowman speaks
10.45 pm : FOMC member Barkin speaks

It is 8.50 am in Singapore and 8.50 pm in New York. We are now baking in a sound optimism around earnings, which is expected to bottom out this quarter. Let us hope for a better second half of October.