Market 11/29: Q3 GDP revised up but consumption impact down

Q3 GDP higher than estimated thanks to government spending

Q3 GDP revised higher than previous survey, from +4.9% QoQ to +5.2% QoQ - fastest growth in nearly 2 years.

Personal consumption +2.4% QoQ - down compared to +2.7% previously.
Inventories +1.4% QoQ - up compared to +1.3% previously.
Net exports -0.04% QoQ - up from -0.08% previously.

→ Only adjusted consumption growth down shows weaker-than-expected household consumption.

Q3 GDP growth (and over the past year) also partly influenced by increased government spending, contributing 0.94% to GDP, equivalent to +5.5% QoQ Q3.

Overall pre-tax corporate profits up +3.3% QoQ - highest in 1 year, mainly from domestic financial companies:

Financial companies: +4.2% QoQ (compared to -10.9% previous quarter).
Non-financial companies: +3.4% QoQ.

Q3 PCE price index after adjustment at 2.8%, core PCE (excluding food and energy) at 2.3% — core index quite favorable.

Global Bond Index rises fastest since 2008 financial crisis

Statements from Fed officials yesterday indicate: “Fed internally not unified on interest rate target”.

Viet Hustler

Market 11/28: Fed internally not unified on interest rate target

Bond auction not as expected: Amount sold: $39 billion Yield 4.399% vs 4.378% previous session Bids 68.99% of auction amount Highest spread since 11/2022 Consumer confidence index improves in November Overall confidence index for November is 102.0 (up from actual 99.1 in October…

2 years ago · 11 likes · Nhật Thanh Lê

However, investors are betting on stopping rate hikes and starting cuts by both the Fed and central banks worldwide.

→ Global bond index up 4.9% in November.

US 10Y bond yield has fallen below 4.3% for the first time since September:

Bond yield declines also recorded in UK, Australia, and European markets.

Market expects Fed rates to cut -25bsp in May, total cut -110 to -125bsp until Jan 2025.

US goods trade deficit rose 3.4% in October

Exports: -1.7% MoM (170.8 billion USD).
Imports: 0% (260.7 billion USD)
Trade deficit at -89.8 billion USD (higher than expected).

→ The increase in trade deficit after 2 months could negatively impact Q4 GDP.

Oil prices fall due to inventory build and record-high crude production

According to DOE report:

Crude: +1.61 million barrels (-700,000 vs expectations)
Cushing +1.85 million
Gas: +1.76 million (+200,000 vs expectations)
Distillates: +5.22 million (-100,000 vs expectations) - highest since Dec 2022.

First time in 7 weeks, government added 313,000 barrels of oil to Strategic Petroleum Reserve (SPR).

According to Bloomberg, prior SPR oil additions were interrupted due to “companies delaying return of borrowed barrels”.

Oil prices currently hovering around 76 USD/barrel.

Some other news:

Apple to stop partnering with Goldman Sachs on its Apple Card credit card program.
- Last year, Goldman Sachs reported losses over 1 billion USD on this partnership.
- According to Bloomberg, Apple will continue the credit card program, but just not partner with Goldman Sachs.
Deutsche Bank predicts Fed could cut base rate to 3.5-3.75% by end of next year.

GM plans to buy back 10 billion USD in shares and increase QoQ dividend to 12 cents/share (~33%) to soothe investor reaction to rising labor costs.
- GM says union labor agreements could add 9.3 billion USD in costs.

Japanese Yen rises to highest level vs USD since early September.

Charlie Munger, Warren Buffett's right-hand man, has passed away at age 99.
META prepares for 2024 election: AI-generated political ads must be used transparently, avoiding influence on important social and political issues.
Update on Fed official Thomas Barkin's remarks: “Fed should consider hiking rates if inflation remains persistent.”