See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium.  CLICK HERE to learn more and start your trial.

“For civilization to survive, the human race has to remain civilized” – Rod Serling

Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.  

Click on the image below to view yesterday’s CNBC interview discussing the market backdrop heading into October.

ADP Payrolls came in stronger than expected this morning putting to rest some fo the concerns markets have had in the last few weeks. Mideast tensions continue to boil, and oil prices are trading up over 2% in reaction, but US Treasury yields have been on the rise at the long end of the curve.  Equity futures are modestly lower, and Nike (NKE) is partly to blame as the stock is down over 5% in reaction to earnings after the close yesterday.  If these losses hold, it will be NKE’s fourth straight quarter of declining at least 5% in reaction to earnings.  Before this current streak, the longest streak of 5%+ declines on earnings reaction days dating back to 2001 was just two.

Throughout the entire conflict in the Middle East, the price of crude oil has been remarkably sullen. While prices have rallied 6% from Monday’s close, since the attacks on Israel last October, crude oil has declined over 16%, and since the end of Q2, prices have dropped over 10%.  On the other hand, natural gas prices have been trying to break out of a long funk. Natural gas tends to be much more volatile than crude oil, but since its low in late August, the former is up over 55% which is impressive no matter how volatile a commodity we’re talking about.

In looking at the chart below, two things stand out. First, even after a 55% rally, natural gas remains more than 20% from a 52-week high. Second, looking at the moving averages of natural gas, the 50-day moving average is about to cross up through the 200-day moving average. With both moving averages on the rise, that would make it the first golden cross for the commodity in two and a half years (3/8/22).

Natural gas has now gone 530 trading days without hitting a 52-week high. That ranks as the fifth-longest streak on record, and the longest since 2016. If the current streak lasts another three weeks, it will move into fourth place overall while it would take another three months without a 52-week high to overtake the 590-day streak that ended in 2016.

See what’s driving market performance around the world in today’s Morning Lineup. Bespoke’s Morning Lineup is the best way to start your trading day. Read it now by starting a two-week trial to Bespoke Premium.  CLICK HERE to learn more and start your trial.

“Doctors tell me I have the body of a thirty-year-old. I know I have the brain of a fifteen-year-old. If you’ve got both, you can play baseball.” – Pete Rose

Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.  

With Chinese markets closed through October 7th, they didn’t rally last night, but Japan managed to erase some of Monday’s losses with a rally of nearly 2%. However, the country’s manufacturing sector remained in contraction as September PMI fell to 49.7 from 49.8 but still slightly beat expectations.

In Europe this morning, equities are also higher with the STOXX 600 up 0.4%. Like Japan, the manufacturing PMI for September further contracted falling to 45.0 from 45.8, but that was also slightly better than expected.  The bigger news, though, was a tame inflation report where headline CPI rose just 1.8% y/y and pushed interest rates in the region sharply lower.

On the economic calendar in the US this morning, we’ll get manufacturing PMIs from S&P and ISM at 9:45 and 10, respectively. Also at 10, we’ll get Construction Spending and JOLTS. Following in the wake of Europe, US interest rates are also falling with the 10-year yield down over 5 bps to 3.74%. Lastly, the East Coast port strike is less than nine hours old, so it isn’t a major concern at this point, but the longer it lasts, the more we’ll have to start factoring in negative impacts on the economy.

A breeze of relief blew through Wall Street after the closing bell as the S&P 500 finished the month with a gain of just over 2%. Based on the calendar, October has been a much friendlier month to bulls from start to finish, but in between it hasn’t been a walk in the park. As shown in the chart below, the S&P 500’s average Intra month peak to trough decline (on a closing basis) has been the largest of any month at 4.6%.

The chart below shows October peak-to-trough declines for every October since 1945. For the last two years, the S&P 500 has experienced an intra-month decline of at least 5%, and there have been four in the last six years.  While the average decline has been 4.6%, that magnitude has been heavily skewed by 25%+ declines in 1987 and 2008.  On a median basis, October’s intra-month decline has been a relatively more modest 3.4%.  Overall, though, there have still been 26 intra-month drawdowns of at least 5% in the last 79 years.

With those 26 intra-month declines of over 5%, October is tied with September for the highest frequency at 33%. From here, though, intra-month volatility tends to abate into year-end. Historically, only 24% of Novembers have experienced 5% intra-month drawdowns while December has had the lowest frequency of drawdowns of that size.