Dow Jones lower after Fed Speak – Daily Market Brief, October 7, 2022

Key US indices retraced Thursday as investors weighed job market data ahead of today’s NonFarm Payrolls. DJIA lost 1.15%, whereas the S&P500 lost 1.02%. Nasdaq was the least affected, at 0.68% lower. Meanwhile, Fed speakers contended recent speculation of a “pivot”.

Key factors for today

-Fed speakers turn more hawkish in light of latest optimism

-Job cuts spike affirms Fed policy spillover into the jobs market

-ECB minutes show inflation is here to stay for longer

-WTI remains supported by ‘cut’, but the US might step in to alleviate prices

-Samsung and AMD cut guidance amid macroeconomic challenges

US indices slide

Initial optimism in the stock market quickly faded, with bond yields increasing 0.20% as traders focused on jobs data. Challenger Job cuts rose to 46% as the survey showed intention to hire at the lowest level since September of last year. That follows a sharp job opening drop the day before. Another round of Fed speakers trying to quash rumors that a pivot was coming exacerbated recession fears.

ECB and “long inflation”

The ECB published minutes of the last meeting, showing that some officials preferred a 50bps hike, though the vote, in the end, was unanimous. Inflation was too high and would stay high for an “extended period”, the minutes showed. Press reports on an as-yet-unreleased German Economy Ministry report said that inflation would be at 7.9% this year and 8.0% next year. The European currency showed a more than 1% loss at yesterday’s close.

OPEC+ fallout continues

Oil prices remain elevated following OPEC+’s announcement regarding cuts to production targets, peaking 1% higher at $89bbl. There is speculation that the US will look to lift some of the sanctions on Venezuela to allow oil exports. White House Energy Advisor Hochstein said that easing sanctions wasn’t being considered, but the White House later said no options were off the table with the potential for more releases from the SPR.

Samsung joins ‘Guidance Cuts’ cohort

Samsung was another major company (along with AMD) yesterday to cut forecasts in the third quarter, forecasting operating income of KRW10.8T, -32% from the prior year. The Bloomberg estimate was KRW12.1T. Preliminary sales data, however, increased to KRW76.0T from KRW74.0T last year.

Market Movers

-AMD fell 4.5% after cutting Q3 guidance and now expects Sales of $5.6B instead of the previously guided $6.5-6.9B. The firm cited macroeconomic conditions weighing on demand and inventory correction.

-Tesla lost 1.1% despite a vote of confidence from S&P, which raised investment grade two notches, but not enough to overcome the noise around Twitter’s buyout.

-Chevron rose 1.9% on rumors that the White House was looking to ease sanctions on Venezuela.

-Costco advanced 0.5% after publishing Sept SSS +8.6%, above consensus estimates

-Amazon slid 0.5% after saying it would hire 150K for the holiday season, the same as last year.

On the docket

-The Canadian unemployment rate is expected to remain unchanged at 5.4%

-US Nonfarm Payrolls for September forecast at 250k; unemployment steady

Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances, or needs.

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