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“There’s no such thing as simple. Simple is hard.” – Martin Scorsese

Morning stock market summary

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After tons of economic data, at least twenty different Federal Reserve speeches, and the finale of earnings seasons, stocks finished the week with healthy gains.  Easy a pie, right?  Well, if you asked anyone at the beginning of the week how the week was going to go, we’d put good money that no one would have expected the Russell 2000 to rally over 5%…in a single day!  Everything is easy in retrospect.

This morning, futures are modestly higher on the day, and the only economic data on the calendar is Building Permits and Housing Starts at 8:30. There are several Fed speakers scheduled to speak between now and noon, and the earnings calendar is very light.

Stocks in Asia were mixed overnight.  Hong Kong stocks declined over 2% after Alibaba (BABA) fell over 10% on news that the company was canceling the IPO of its cloud business.  Foreign Direct Investment in China also declined 9.4% on a YTD versus a decline of 8.4% in September. Over in Europe, though, it’s a much more positive tone as major benchmark indices are up across the board.  CPI in the Eurozone decelerated for the seventh straight month falling from 0.3% down to 0.1% which was in line with expectations while UK Retail Sales unexpectedly fell 0.3% versus forecasts for an increase of 0.3%. That weaker report has bonds rallying on hopes that the UK’s rate hiking cycle is over.

There are still almost two weeks left in the month, but along with the equity rally, Treasuries have also surged.  Based on where the iShares 20+ Year Treasury ETF (TLT) is trading this morning, its month-to-date gain currently stands at 7.8% which, if it holds through the end of the month, would be the largest monthly gain since August 2019.

The chart below shows the monthly prices of TLT since the start of 2003, and gains of 5%+ have been nothing out of the ordinary with 23 occurrences, or about one every ten months. Since TLT’s monthly peak in July 2020, this month’s gain would be just the third occurrence (if it holds). The last two occurrences came in a three-month span in which TLT rallied over 11% before rolling over again.

The chart below shows the monthly change of TLT going back to 2003, and what stands out about the current period is the fact that this month’s gain follows a loss of similar magnitude in October.  That would make it just the second time in TLT’s history that it fell 5%+ in one month and then rallied 5%+ the next.  Ironically, the only other occurrence was in October and November of last year.  With more and more indicators lately, it seems as though the last time we saw similar extremes was exactly a year ago.

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