Market Morning: Buyers Gorge On Stocks, Tariffs Failing, Rate Decision, Pot Stocks Rally
Buyers Gorge On Stocks On Election Outcome That Surprised No One, Bonds Not So Much
Excepting those who expected to be surprised, nobody was surprised by the lack of surprise in the midterm elections. The midterms went exactly as predicted by most mainstream polls and the Dow shot up 545 points, the Nasdaq (NASDAQ:QQQ) nearly 200 points, celebration that sometimes things go as expected. Oil continued to fall, the dollar was off slightly, gold was steady, and the 10Y-2Y yield spread dropped to 26 basis points for the first time since October 3. 10Y yields are within 2 basis points of their highs at 3.248% and 2Y rates are skirting 2.97%. The last resistance zone on 2Y yields is at 3.122%, after which there is no resistance until 5.15%, a long way from here. The extreme volatility in equity markets along with persistently rising rates across the yield spectrum should probably be a worrying sign, notwithstanding that sometimes politics isn’t so surprising. Futures are mostly unchanged as of the early morning.
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Tariffs Failing as Chinese Exports up 16% In October
The Trump Administration’s attempts to curb Chinese exports into the United States aren’t working so well. Stats on China’s exports for October were up 16% compared with October 2017, which surprised those who tend to believe that tariffs solve problems because October was the first month in which the full $200 billion of Chinese products were subject to the Trump tariffs. One reason is that the tariffs are set to rise to 25% by the end of the year, so companies are important what they can now, which means supply will continue to rise until the end of the year, deadening price inflationary spikes until January 2019. By that time, retail stocks (NYSEARCA:XRT) could start to encounter some real trouble.
Federal Reserve Interest Rate Decision Today
Since there is no press conference associated with the Federal Open Market Committee Meeting that has taken place over the last two days, nobody is expecting the Federal Reserve to hike interest rates. So if they do, markets will crash. What markets will be looking for though are any awkward pauses, nose scratches, unexpected pupilary dilations, sweating, or other signs of nerves out of the Fed’s statement on the matter and its reflections on the economy to be released at 2:00pm EST. It is however widely expected that the Fed will raise interest rates at its upcoming December meeting, which means that if they don’t, it would tank the dollar (NYSEARCA:UUP). Which means, essentially, that the Fed is pulled by market expectations, knowing that it can’t defy those expectations without creating severe dislocation in equities markets.
Walmart Kicks Off Black Friday Early
Walmart (NYSE:WMT) has kicked off holiday deals as of today at 12:01am in an attempt to get a leg up on Amazon (NASDAQ:AMZN) and other competitors. Black Friday will be officially ushered in Thanksgiving night at 10pm, which means shoppers will start to head over to their local Walmart still gnawing on turkey carcasses with slices of pumpkin pie on the insides of their Thanksgiving trench coats. Good luck to shoppers, and may there not be any stampedes this year resulting in injury or ill will.
Marijuana Gets OKed in 3 Out of 4 States With Cannabis On the Ballot
North Dakota said no to recreational marijuana legalization, but Utah, Michigan, and Missouri all said yes. Michigan has become the first Midwestern state to fully legalize pot, allowing residents to grow up to 12 plants and sell up to 2.5 ounces without a license. An advisory referendum also passed in Wisconsin, which should encourage state legislatures there to follow through and actually put it into law. Pot stocks had a good day yesterday too, the Horizons Marijuana ETF (HMMJ.TO) up over 8% on the day.
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