Market 10/14: S&P500 Hits New High, Liquidity Collapses, Bonds Close

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China promises but does not roll out additional stimulus

• In the 2nd meeting, Ministry of Finance outlines plan to deploy approved 2000 billion CNY stimulus to local governments and consumers

• Government promises to roll out additional stimulus packages if necessary but "lacks details"

• Chinese market has no reaction

China's economic data still indicates recession in September

• CPI +0.4% YoY lower than +0.6% forecast

• CPI +0.0% MoM lower than +0.2% expected

• PPI -2.8% (forecast -2.6% and previous -1.8%) and -0.6% MoM (forecast -0.7%)

• Trade surplus $81.71 billion, lower than $89.8 forecast

• Credit frenzy still hasn't occurred, borrowing not expanded

→ September data still shows deflation and recession, somewhat disappointing but the impact of stimulus packages not being immediate is understandable.

OPEC cuts oil demand growth forecast

• OPEC cuts forecast for 3rd consecutive month

• Demand forecast cut (million barrels/day)

  • 2024: -0.11 down to 1.93

  • 2025: -0.10 down to 1.64

→ Confidence within OPEC bloc is gradually disappearing, OPEC may have to increase production soon to not lose more market share to US and Canada

Boeing cuts 17,000 jobs, government intervenes

• These 17,000 employees are 10% of total staff

• Strike enters 5th week

• US government has begun intervening in negotiations with both sides

• Boeing continues to be threatened with credit rating downgrade

• Boeing incurring $108 million loss per day as strike continues

→ Real crisis for Boeing, until the strike ends

Most business bankruptcies in 12 years

• Number of businesses restructuring bankruptcies in September reaches 2462, highest since early 2012

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Hezbollah attacks Israel, US troops join the battle

• Yesterday morning Hezbollah attacked an Israeli military base with drones causing many casualties

• Initial information 67 casualties including Army Chief of Staff

• However later the information was refuted by Israel with only 6 casualties and no senior officers killed

• US sent the most advanced high-altitude air defense system THAAD with 200 US troops to operate it to Israel

Market continues to hit new highs amid collapsing liquidity

US stock market remains open on Columbus Day holiday. Mega cap tech leads the market, pulling SPX past the old high and setting a new all-time high.

• NVDA pushes right up to the old high pulling the entire market

However, from a macro perspective, the market has extremely low liquidity making all movements lack certainty. Bond market also closed today, pulling a large amount of liquidity out of the market.

With low liquidity all market movements are hard to predict accurately. However, what to note this morning is that the market has entered the extremely greedy zone again.

Call/put ratio also hits 0.44 lowest level since 07/2023

With weak organic volume, today's morning move is almost entirely from rolling call wall 5800 to 5850 with gamma peak at ~5865.

→ With weak liquidity, all changes today lack certainty. Plus bond market closed, can't accurately gauge market sentiment on interest rates. Risk didn't increase today but market entering “extremely greedy” zone is also a factor to watch.

Read more: Should investors fear bond yields?