Market 11/03: Bond yields retreat creating conditions for market rally

From yesterday's article:

Conditions for the rally to continue tomorrow and next week are similar to last week:
- SPY above 420 / SPX above 4300 market returns to positive gamma zone
- VIX < 20
- 10Y Yield < 5.00%

All conditions satisfied this morning, above 440 (call wall), SPY considered over-extended.

October NFP payrolls: Unemployment rate highest in nearly 2 years

US economy adds 150,000 jobs in October, below expectations of 180,000 and sharply down from September's 336,000. This is the 2nd lowest level in the past 3 years.

Of the 150,000 jobs created in October:

51,000 are government jobs
89,000 jobs in health care and education
7,500 serving staff and bartenders lost jobs in October.

Previous months' data continuously revised downward sharply. Raising concerns about the reliability of government reports.

August job growth revised down 62,000, from +227,000 to +165,000
September revised down 39,000, from +336,000 to +297,000

US unemployment rate rises to 3.9% in October, highest since January 2022. April's 3.4% was the lowest since 1969.

Number of unemployed in the past 27 weeks unchanged, but total unemployed this year has increased.

Household survey more accurate and less manipulated than official data shows jobs fell 348,000, largest drop since Covid lockdown.

The gap between official data and household survey has never been this large.

Average hourly earnings: +0.2% from previous month, lower than expected +0.3%.

Number of people working multiple jobs just hit a record high.

US stocks rise as weaker jobs report boosts hopes of interest rate pause

Bond yields retreat creating conditions for market stabilization

PMI survey paints a bleak picture of the US economy

Economists forecast higher PMI while ISM expected to fall, but both projected to stay above 50. However:

S&P Global Services PMI falls from preliminary 50.9 to official 50.6 (but still higher than September's 50.1) - highest since July 2023
Services PMI falls from 53.6 to 51.8 (below expected 53.0) - weakest since May 2023.

ISM survey shows prices paid significantly higher than expected and employment drops sharply.

S&P Global US Composite PMI at 50.7 in October, up from 50.2 in September, signaling a slight increase in business activity at private sector companies.

On the other hand, recent tightening of financial conditions could make the upcoming economy very difficult.

Fed balance sheet hits lowest level since May 2021

Fed balance sheet fell another 41 billion USD this week, now down 1.1 trillion USD from April 2022 peak.

This has pushed the balance sheet to the lowest since May 2021. It can be seen that 2023 is the year of the strongest balance sheet reduction in 20 years (after 2018).

Apple stock drops after company warns of bleak Christmas revenue

Apple's Q4 FY2023 results beat analyst expectations, but 'bitten apple' stock still fell in after-hours trading.

Although Q4 results beat analyst expectations for revenue and EPS, the tech giant revealed that overall revenue declined for the 4th consecutive quarter.

Net income: 22.9 billion USD, equivalent to EPS 1.46 USD/share.
Same period last year, net income 20.7 billion USD, EPS 1.29 USD/share.
Revenue 383.3 billion USD for the full fiscal year, down about 3% from previous year.
Q4 revenue down nearly 1% from Q3.

Apple's iPhone sales in line with Wall Street expectations and up more than 2% from the same period last year. This is the only hardware product line that recorded growth in Q4.
Mac sales below Wall Street estimates, down nearly 34% from the same period.
iPad revenue down 10% from the same period.
Revenue from Apple's wearables such as AirPods and Apple Watch also weakened, down more than 3% from the same period.

Other news

Fed official Barkin: It's encouraging to see pressure easing in employment data
Eurozone unemployment rate reaches 6.5% in September, versus forecast to remain at August's 6.4%. The European economy is clearly heading downwards with significant job losses.

Nasrallah - Hezbollah leader says:

Hezbollah has entered the war, intensity depends on Israel's behavior towards Lebanon and how the situation develops in Gaza.
At the same time, he called on Arab countries to cut ties with Israel, recall ambassadors and stop exporting oil to Israel.