More Fed officials turn dovish ahead of key inflation releases

A sharp pullback in Treasury yields helped propel US equities broadly higher Tuesday, boosting the S&P 500 Index and the Nasdaq Composite to three-week highs, as investors monitored the Middle East conflict and readied for monthly inflation updates starting today. Treasuries were playing catch-up after bond markets were closed Monday for the Columbus Day holiday, reflecting a flight-to-safety amid the outbreak of the Israel-Hamas conflict.  The Dow rose 0.4%, the S&P 500 climbed 0.5%, and the Nasdaq Composite added 0.6%, with ten out of the 11 S&P sectors ending higher led to the upside by utilities, consumer discretionary, and materials. European equity markets also ended higher yesterday, with the German Dax and the Euro Stoxx 50 up 2% and 2.2%, respectively as investors welcomed dovish remarks made by Federal Reserve officials. Travel and leisure shares surged almost 4%, mining equities soared 3% and autos gained about 2.5% supported by reports that China is looking to increase its budget deficit for 2023. 

Summary for 11.10.2023 

• Asian equity markets rose on Wednesday, tracking Wall Street higher as dovish messaging from Fed officials bolstered bets that the central bank is done hiking rates. A weaker dollar and Treasury yields also aided sentiment. South Korean shares led the charge as Samsung jumped 4% on a stronger-than-expected Q3 profit forecast. Shares in Australia, Japan, Hong Kong and mainland China also gained. 
• European shares are poised to fall at the open while US equity futures were flat overnight as instead await key inflation reports. 
• Oil edged higher this morning as fears of possible supply disruptions in the Middle East started to fade. Saudi Arabia also reiterated its support for efforts by OPEC+ to balance oil markets and measures that could bolster global growth. Moreover, Iran denied involvement in Hamas’ aggression toward Israel and the White House said it has no evidence that the country planned or directed the assault. 
• Federal Reserve Bank of Atlanta President Bostic reiterated yesterday that he doesn’t think the Fed needs to raise interest rates any further while Fed Vice Chair Jefferson and Dallas Fed President Logan noted that the recent run-up in yields might reduce the need for further interest rate hikes.  
• The IMF left its global growth forecast steady at 3% for 2023 but cut its forecast for 2024 to 2.9% compared to 3% seen in July. Also, the expectations for global inflation were revised higher to 6.9% in 2023 from 6.8% and to 5.8% from 5.2% in 2024. Meanwhile, the IMF raised its growth forecast for the US to 2.1% in 2023 from 1.8% and to 1.5% next year from 1%. On the other hand, the Chinese economy will probably grow at a slower 5% in 2023 (vs 5.2% seen early) and 4.2% next year (4.5%). The Euro Area is also seen growing at a slower 0.7% in 2023 (vs 0.9%) and 1.2% in 2024 (vs 1.5%). 
• China is considering raising its budget deficit for 2023 as the government prepares to unleash a new round of stimulus to help the economy meet the official growth target. This could mark a shift in Beijing’s stance as the government has so far avoided broader fiscal stimulus despite a deepening property crisis and rising deflationary pressure that have put the growth goal of around 5% for the year at risk. 
• US President Joe Biden vowed to provide Israel with full support that includes shipments of munitions and intelligence assistance, while calling the Hamas attack on the country “an act of sheer evil.” The combined death toll from the war approached 2,000 and Israel’s military said it’s building a base for thousands of soldiers in preparation for the next phase of its retaliation. 
• Samsung Electronics reported a more modest slide in quarterly profit after staunching losses at its chip division, suggesting the global semiconductor market may have rounded a corner. Samsung’s shares rose as much as 4.5%, the most in more than a month, with some investors saying a 78% decline in operating income was better than they had feared. 
• LVMH reported a 9% rise in third quarter revenue after the market close yesterday, marking slower growth as inflation and economic turbulence dented shoppers’ appetites for high end fashion.  
• Pepsi rose 1.8% on Tuesday after the beverage company late Monday reported third-quarter earnings and revenue that surpassed expectations. 
• Block Inc. rose 5.2% yesterday after Bank of America reiterated its “buy” rating on the payment service company’s shares, citing a cheap valuation and strong fundamentals. 
• Palantir Technologies rose 1.1% Tuesday after the data analytics and software company won a $250 million contract from the US Army to develop artificial intelligence and machine-learning capabilities through 2026. 
• Rivian rose 4.6% yesterday after UBS upgraded the electric vehicle manufacturer’s shares to “buy” from “neutral”, saying a recent selloff presents a buying opportunity.