1. Moving the markets 

The stock market took a break from its recent rally on Monday, as investors digested the mixed signals from the economy and the Fed. The major indexes fell, ending a four-week winning streak, as the 10-year Treasury yield dropped below 5% after briefly touching that level in late October.

The market shrugged off the warnings from some U.S. retailers that consumer spending is slowing down, even though online sales on Black Friday rose 7.5% year-over-year. Perhaps the weak spending data is a sign that the Fed’s rate hikes are finally having an impact on the economy. Some traders are betting that the Fed is done with raising rates and may even start cutting them in 2024.

The 10-year Treasury yield will be a key factor for the market, especially after this week’s Fed comments and the data on consumer confidence and inflation, which are due on Thursday.

The housing market also showed signs of weakness, as new home sales fell 5.6% month-over-month in October, worse than expected. The September figure was also revised down from 12.3% to 8.6%. Ouch! The dismal home sales, along with the contraction in Texas manufacturing, dragged down the U.S. macro data.

The bond market reacted to the gloomy news, as did the homebuilders and the banks. The dollar continued its slide, which boosted gold to its highest level since May.

As ZeroHedge pointed out in this chart, the S&P 500 is trading way above its fair value based on global liquidity. We know that such divergences don’t last forever, but which way will they resolve? Will the S&P 500 come down to earth, or will the global liquidity catch up?

History suggests that the S&P 500 may have to eat some humble pie—sooner or later.

1. Moving the markets 

The market bulls were in a festive mood today, as stocks climbed higher despite some gloomy economic data and a delay in OPEC’s decision on oil production. The bond market, however, was not so cheerful, as the 10-year Treasury yield briefly dipped to its lowest level in two months before bouncing back.

The rally was broad-based, with more than half of the stocks on both the NYSE and the Nasdaq advancing. The tech sector was especially strong, as investors shrugged off Nvidia’s disappointing guidance and focused on its solid earnings beat. The chipmaker’s shares dropped 2.5%, but still outperformed the energy sector, which fell 1% after crude oil plunged over 4.5% before recovering some of its losses.

The Fed’s latest minutes did not offer much hope for the rate-cut enthusiasts, as the central bank reiterated its hawkish stance and showed no signs of easing its monetary policy anytime soon. But the market seemed to ignore the Fed’s words and instead priced in a low probability of a rate hike in December.

The economic data was not very encouraging, as jobless claims surged, durable goods orders slumped, consumer sentiment dipped, and inflation expectations rose. These indicators suggested that the US economy was losing steam and facing the risk of a hard landing.

The dollar tried to rally on the back of the Fed’s minutes, but failed to sustain its momentum and ended the day lower. Gold also struggled to hold on to its $2k level, as investors preferred riskier assets.

The S&P 500 followed its seasonal pattern and rebounded from its October lows, catching up with its historical average. The index is now within striking distance of its all-time high, as it heads into the Thanksgiving holiday.

I will be taking a break from writing these summaries until next Monday, so I hope you enjoy your turkey and cranberry sauce.

1. Moving the markets 

The Fed dashed the hopes of traders who were looking for some hints of interest rate cuts in the latest meeting minutes. Instead, the central bank said it would keep its policy “restrictive” to tame inflation, which could rise further. The Fed kept the interest rate unchanged at 5.25% to 5.5% in its meeting on Oct. 31-Nov. 1.

“Participants continued to judge that it was critical that the stance of monetary policy be kept sufficiently restrictive to return inflation to the Committee’s 2 percent objective over time,” the minutes said.

That sounds pretty hawkish, but the market is still betting on rate cuts starting from May next year. Is that wishful thinking or realistic expectation? History suggests that the Fed usually waits for about 11 months after the last rate hike before cutting rates again. And the last rate hike was in December 2022.

Meanwhile, the economy is showing signs of slowing down, as some major retailers lowered their sales outlooks and missed revenue expectations. Lowe’s stock price fell more than 2%, Best Buy dropped 2.7%, and American Eagle plunged 17.3%. Ouch.

The housing market is also cooling off, as existing home sales hit their lowest level since 2010 and reached a record low in the West. This dragged down the US Economic Surprise index and the Financial Conditions index, which measure how the economy is performing relative to expectations and how easy it is to borrow money.

The stock market retreated, as the short squeeze that lifted the market yesterday ran out of steam and the big tech stocks gave up some of their recent gains. The bond market was mixed, the dollar bounced back, but gold shone brightly and reclaimed its $2k level.

All eyes are now on Nvidia’s earnings report tonight, which could be a make-or-break moment for the chipmaker. Will it follow the footsteps of its rivals AMD and Intel, which reported disappointing results amid the global chip shortage? Or will it surprise the market with strong growth driven by its gaming and data center segments?