If investors in the S&P 500 (Index: SPX) were looking for direction from the newstreams for how to shape their portfolios, they didn't find much to influence them.

That's despite Friday, 15 September 2023 being a triple witching trading day for U.S. markets with the scheduled expiration of derivative contracts for stock options, stock-index options, and stock index futures that are often associated with higher-than-average volatility.

Without much news to motivate them, the index pretty much just sat around, mostly trading within 1.1% of where it closed the week before. The S&P 500 wrapped up the week at 4450.32, down 0.16% from where it closed the week before.

For the latest update to the dividend futures-based model's alternative futures chart, we find the index dipped just enough to move into the lower half of the redzone forecast range. Which is to say stock prices are behaving very predictably.

As far as dividends futures are concerned, 2023-Q3 came to an end on Friday, 15 September 2023 and we are now in 2023-Q4. We'll continue updating the 2023-Q3 alternative futures chart for another two weeks however before we roll the chart forward to show 2023-Q4.

Meanwhile, here's what passed as market-moving headline during the week that was:

Monday, 11 September 2023

• Signs and portents for the U.S. economy:
• Oil prices settle mostly flat ahead of monthly oil forecasts
• Fed minions expected to hold Federal Funds Rate steady next week and to start cutting interest rates in 2024:
• Fed to leave rates unchanged on Sept. 20; cut unlikely before Q2 2024: Reuters poll
• DoubleLine's Gundlach expects Fed rate cuts in first half of 2024
• Bigger trouble, stimulus developing in China:
• More Chinese seek bargains at Beijing market as confidence in economy wanes
• China's Aug new bank loans jump more than expected, more policy steps expected
• BOJ minions daring to think about ending never-ending stimulus:
• BOJ's hawkish tilt suggests end to super-easy policy approaching
• Ueda comments send yen higher, dollar dips ahead of US inflation data
• Explainer-What will BOJ's policy normalisation path look like?
• Bigger trouble developing in the Eurozone:
• European Commission cuts growth forecast for Germany in 2023
• Nasdaq ends sharply higher as Tesla soars on AI optimism
• Tesla leads the S&P 500 Index as AI premium plays in

Tuesday, 12 September 2023

• Signs and portents for the U.S. economy:
• US inflation eroded 2022 wages, as child poverty jumped, Census says
• Oil jumps 2% to near 10-month high as OPEC predicts tight supplies
• Panama Canal to further reduce daily transits if drought continues
• Bigger trouble developing in China:
• China 2023 GDP growth forecast cut to 5.0%, 4.5% in 2024 - Reuters poll
• Wall Street ends lower as Oracle tumbles on weak forecast
• Oracle misses on quarterly sales, cloud revenue slows sequentially; stock -5% after hours
• Nasdaq, S&P, Dow retreat a day ahead of CPI data; Apple falls after new iPhone launch

Wednesday, 13 September 2023

• Signs and portents for the U.S. economy:
• US consumer prices accelerate in August on gasoline
• Oil dips as surprise US crude stockbuild faces supply cuts
• Recession risk "coin flip" over the next year - PIMCO
• US holiday sales set for slowest year since 2018 as consumers turn frugal - report
• Expectations that Fed minions are done with rate hikes lock in for September 2023 meeting:
• Traders keep view the Fed is probably done with rate hikes
• Some big US bond investors say Fed hikes have peaked despite sticky inflation
• Fed gets an August inflation curveball to keep hikes alive
• Fed to leave rates unchanged on Sept. 20; cut unlikely before Q2 2024
• JapanGov minions want higher wages, to put political pressure on BOJ minions:
• Japan's Kishida: cabinet to ensure wage growth exceeds rate of inflation
• Japan's new cabinet priorities to keep BOJ in political spotlight
• ECB minions don't see Eurozone inflation falling below 3%, are getting results they wanted from rate hikes:
• ECB's crucial 2024 projection to put inflation above 3%, source says
• German govt sees economy shrinking up to 0.3% this year - Bloomberg News
• S&P 500 ends higher as CPI data cements bets for Fed pause

Thursday, 14 September 2023

• Signs and portents for the U.S. economy:
• Oil rises to highest in 2023 on tight supply expectations
• US crude prices above $90/bbl ignite inflation worries
• US retail sales beat expectations as Americans pay more for gasoline
• A third of would-be buyers cannot find affordable US homes -NAR
• Former Fed minion thinks inflation may force more rate hikes:
• Data may bias Fed to more rate hikes, ex-St. Louis Fed chief says
• Bigger stimulus developing in China:
• China's central bank set to boost liquidity but keep policy rate steady
• China cuts banks' reserve ratio for second time in 2023 to aid recovery
• China to avoid 'Lehman moment' despite property woes, Goldman says
• BOJ minions get flimsy reason to keep never-ending stimulus alive:
• Japan's weak machinery orders, other batch of soft data raise BOJ challenge
• ECB raises rate to record high and signals end of hikes
• Lagarde comments at ECB press conference
• ECB cuts growth outlook but raises key 2024 inflation projection
• Dow jumps ~1%, Nasdaq, S&P rise as Arm's big debut resurrects IPO market hopes
• Arm Holdings jumps 25% in market debut for a valuation of $68B

Friday, 15 September 2023

• Signs and portents for the U.S. economy:
• Exclusive-US retailer holiday hiring to drop to levels last seen in 2008
• US manufacturing production barely rises in August
• Fed minions losing money because of their rate hikes, change in inflation expectations have investors expecting them to deliver one more hike:
• Fed losses breach $100 billion as interest costs rise
• Forecast for Fed's new forecasts - still one more rate hike to go
• Signs stimulus getting traction in China, but bigger trouble still developing:
• China's economy shows signs of stabilising but property slump threatens outlook
• China's property slump worsens, clouding recovery prospects
• ECB minions to start getting help from Eurozone governments in fighting inflation, don't want to cut rates:
• Euro zone ministers agree fiscal policy must aid ECB inflation fight
• ECB policymakers push back on rate cut expectations
• ECB has no target date for cutting interest rates, De Guindos says
• Nasdaq, S&P, Dow slump on triple witching day, put in mixed performance for the week

The CME Group's FedWatch Tool showed little change in the past week. It continues to show no rate hike when the Fed next meets on 19-20 September (2023-Q3). After which, the tool projects the Fed will hold rates steady until 12 June (2024-Q2), which is expected to mark the first of a series of quarter point rate cuts continuing at six-to-twelve-week intervals through the end of 2024.

The Atlanta Fed's GDPNow tool's forecast of annualized real growth rate during 2023-Q3 is +4.9%, falling from last week's prediction of +5.6% growth.

Image credit: Restful bear photo by Mark Basarab on Unsplash.

The silver lining investors found in the S&P 500 (Index: SPX) in the previous trading week lost some of its luster. The index declined by 1.3% during the trading week ending on Friday, 8 September 2023, closing out the Labor Day-holiday shortened week at 4457.49.

Most of that decline took place during the first two trading days of the week, as oil prices rose and signs of bigger trouble developed in both China and the Eurozone. But the biggest trouble for the S&P 500 came on Wednesday, 6 September, when news came China's leaders would order Chinese government agencies to stop using iPhones. Apple (NASDAQ: AAPL) is the biggest single component of the S&P 500 index, so a bad day for Apple's stock automatically weights the index down. Apple's stock price dropped by 6% by the end of the week, accounting for about a third of the index' overall decline by itself.

For the entire index, the week's decline puts its trajectory close to the middle of the latest redzone forecast range on the latest update to the alternative futures chart.

Other stuff also happened during the past week, which probably accounts for the rest of the S&P 500's downward movement. Here's our summary of the week's market moving headlines.

Tuesday, 5 September 2023

• Signs and portents for the U.S. economy:
• Oil prices settle at 10-month high as Saudi, Russia extend supply cuts
• Fed minions excited to sit on hands rather than raise rates again, claim increasing use of emergency lending facility isn't because of emergency:
• Waller says recent data gives Fed space to decide next interest rate move
• Rising demand for Fed bank lending program not a sign of stress
• Bigger trouble developing in China:
• China's exports, imports likely contracted more slowly in August: Reuters poll
• China's August services activity slows amid sluggish demand - Caixin PMI
• Analysis: Part of China's economic miracle was a mirage. Reality check is next
• Bigger bailout developing in China:
• China's state planner to set up special bureau to support private economy
• BOJ minions getting mixed economic signals, won't give up never-ending stimulus just yet:
• Japan household spending suffers biggest drop in 2-1/2 years; outlook not as gloomy
• Japan Aug service activity growth fastest in 3 months - PMI
• Reaching 2% inflation goal necessary for BOJ easy policy exit, says ex-board member Kataoka
• ECB minions getting results they wanted from rate hikes, thinking about more:
• Euro zone August downturn deeper than was thought -PMIs
• German service sector activity shrinks in Aug for first time in 2023 -PMI
• French services sector shrinks more than first thought in Aug -PMI
• Italy's service sector contracts in August for first time in 2023 -PMI
• Rising debt cost to weigh on euro zone GDP - HSBC
• ECB chief economist says easing inflation welcome but must continue -report
• Nasdaq, S&P, Dow end slightly lower to kick off first full week of September

Wednesday, 6 September 2023

• Signs and portents for the U.S. economy:
• Oil settles up on expectations of U.S. crude draws and tight supply
• Panama Canal water levels at historic lows, restrictions to remain
• US services sector picked up in August, along with prices
• Fed minions claim they will remain calm, analysts see risk of policy error:
• Fed's Collins says now is time to be patient, deliberate with policy
• Possible Fed overtightening makes recession more likely than not, Deutsche Bank says
• Bigger trouble developing in China:
• China July-Aug economic losses from disasters double from first six months
• China's exports, imports likely contracted more slowly in August: Reuters poll
• ECB minions say they don't know what they're doing, but are thinking about it:
• ECB policymakers say Sept rate decision still up in the air
• ECB should raise rates next week, then pause, Kazimir says
• Wall St slides as economic data stokes inflation and interest rate worries
• Apple slips as China reportedly orders government agencies to stop using iPhones

Thursday, 7 September 2023

• Signs and portents for the U.S. economy:
• Oil falls on concerns about China, winter demand
• Brent falls below $90/bbl, pausing rally, on weaker demand outlook
• U.S. mortgage rates fall for a second week but hold above 7%
• Fed minions suggest they might be done with rate hikes:
• Fed's Williams: An 'open question' whether Fed will need to hike again
• Bigger stimulus developing in China:
• China's major banks to lower rates on existing first-home mortgages
• Bigger trouble developing in China as trade data shows economy still slowing, but more slowly:
• China's trade slump narrows as stabilisation signs emerge
• BOJ minions want to keep never-ending stimulus alive:
• BOJ policymaker calls for keeping ultra-easy policy, sets high bar on exit
• Central banks starting to go into reverse on rate hikes:
• Polish central bank stuns with 75 bps rate cut, zloty plunges
• Bigger trouble developing in the Eurozone:
• German industrial output falls more than expected in July
• Nasdaq, S&P end in the red, with Apple falling more than 6% in two days; Dow bucks trend
• Apple slips again on China worries; issue is 'way overblown,' analysts say

Friday, 8 September 2023

• Signs and portents for the U.S. economy:
• Oil prices rise to 9-month high on worries about tight supply
• Fed minions excited to sit on hands rather than hike rates, thinking about digital currency instead:
• Fed policymakers to sit tight on rates, debate if more is needed
• Fed's Barr says central bank 'a long way' from any decision on issuing digital currency
• Bigger stimulus developing in China:
• Nanjing scraps home-buying curbs in China's latest property boost
• BOJ minions get reasons to keep never-ending stimulus alive
• Japan cuts Q2 GDP on weak spending, wages slide
• Japan real wages fall for 16th straight month in July
• ECB minions getting results they wanted from rate hikes:
• Citigroup cuts 2023 euro area real GDP growth forecast to 0.4%
• German economy expected to contract by 0.4% in 2023 - DIW
• German economy faces meagre growth in medium term - IfW
• Nasdaq, S&P, and Dow finished slightly higher to end the holiday-shortened week

The CME Group's FedWatch Tool was comparatively unchanged in the past week. It continues to show no rate hike when the Fed next meets on 19-20 September (2023-Q3). After which, the tool projects the Fed will hold rates steady until 1 May (2024-Q2), which is expected to mark the first of a series of quarter point rate cuts continuing at six-to-twelve-week intervals through the end of 2024.

The Atlanta Fed's GDPNow tool held steady in forecasting an annualized real growth rate of +5.6% during 2023-Q3. That's well above the so-called "Blue Chip Consensus" that anticipates real GDP growth during 2023-Q3 somewhere in a range between +1.1% and +3.4%, with a midrange estimate of about +2.4%.

Image credit: Photo by Fili Santillán on Unsplash.

The S&P 500 (Index: SPX) had one of its best weeks of 2023. The index closed the trading week ending on 1 September 2023 at 4515.77, which was up 2.5% from the previous week's close.

The reason why stock prices rose however is because of negative changes in the outlook for jobs in the U.S. The biggest driver was a large reduction in the number of job openings, which dropped to their lowest level since March 2021.

That assessment of a softening job market was reinforced with 1 September 2023's employment situation report, which showed an increase in the unemployment rate.

For the stock market however, these negative developments produced a positive result, as investors bet on the bad jobs news taking any additional interest rate hikes in 2023 off the table. Prior to the week's jobs-related news, investors were giving a greater than 50% probability of at least one more quarter point rate hike in 2023. The elimination of that probability is positive for stocks, especially for those firms that rely heavily on debt financing, who investors believe will benefit from having higher profits from lower-than-previously-expected interest costs. It's the proverbial silver lining on a dark cloud.

The S&P 500 moved up into the upper portion of the newly added redzone forecast range in the latest update of the dividend futures-based model's alternative futures chart.

Overall, stock prices are behaving as expected with investors continuing to focus their attention on the final quarter of 2023 in setting current day stock prices.

Here's our summary of the week's market moving headlines:

Monday, 28 August 2023

• Signs and portents for the U.S. economy:
• Oil steady as possible rate hikes stoke demand worry, storm could hit supply
• Bigger trouble developing in Canada?
• Canadian economy set to show marked slowdown in Q2, giving BoC cause to pause
• Bigger trouble, stimulus developing in China:
• China new home prices growth likely flat in 2023, dragging on economy - Reuters poll
• China's industrial profits extend slump into seventh month
• Factbox-How China is trying to boost its stock market
• China halves stamp duty on stock trades to boost flagging market
• China approves 37 retail funds to help revive market
• Marketmind: Beijing tries new ways to lift moribund markets
• Case builds for China's banks to cut deposit rates
• BOJ minions wonder if they can blame China, want reasons to keep never-ending stimulus alive:
• BOJ Ueda says China's slowdown adds to economic uncertainty
• BOJ's Ueda: Underlying inflation still a bit below target
• ECB minions getting the results they wanted, think pausing rate hikes might be mistake:
• Euro zone lending growth slows further as rate hikes bite
• ECB rate pause now may be too early: policymaker
• Nasdaq, S&P 500, Dow kick off final week of August with gains, helped by 3M
• 3M jumps on reported settlement

Tuesday, 29 August 2023

• Signs and portents for the U.S. economy:
• Oil rises 1% on softer dollar, US braces for hurricane hit
• US labor market loses steam as job openings, resignations decline
• Former Fed minions say current Fed minions want to jerk investors around:
• Fed to keep markets guessing on rate pauses and cuts -former policymakers
• Bigger trouble developing in China:
• China's factory activity likely extended declines in August - Reuters poll
• China companies' fundraising options narrow after IPO restrictions
• Analysis-Chinese investors rush to offshore funds to offset domestic risks
• BOJ minions get data that suggests it’s time to end never-ending stimulus:
• Japan at 'inflection point' in 25-year battle with deflation - govt
• ECB minions getting results they wanted:
• Sweden's economy shrinks in Q2, but less than feared
• S&P 500 ends sharply higher, jobs data fuels interest rate optimism

Wednesday, 30 August 2023

• Signs and portents for the U.S. economy:
• US second-quarter economic growth revised lower as inventories drop
• Oil prices rise after U.S. data shows tighter crude supply
• Short U.S. housing correction likely over; tight supply to keep prices high: Reuters poll
• Fed minions worried about potential risk from more regional bank failures, hint they can stop hiking rates:
• US Fed ramps up demands for corrective actions by regional banks - Bloomberg News
• Fed can stop hiking rates if economy slows at current pace, Rosengren says
• Bigger trouble developing in China:
• South Korea exports to extend downturn amid worsening China outlook: Reuters poll
• Chinese banks post sluggish profit growth, warn of regional debt risks
• Factbox-What are global companies saying about China's economy?
• Bigger stimulus developing in China:
• Chinese cities ease mortgage rules in bid to revive property sector
• BOJ minions says changes to never-ending stimulus may happen next year:
• BOJ policymaker signals chance of policy tweak early next year
• Wall Street ends higher as economic data fuels rate-pause bets

Thursday, 31 August 2023

• Signs and portents for the U.S. economy:
• US consumer spending accelerates; declining savings a red flag
• Fed minions expected to hold interest rates steady at September meeting:
• Fed expected to hold interest rates steady next month
• Bigger trouble developing in China:
• China's factory activity shrinks for 5th month, maintains pressure for policy support
• BOJ minions get reason to continue never-ending stimulus:
• Japan's July factory output slumps, raises pressure on manufacturers
• ECB minions getting results they wanted, still worried about inflation:
• German unemployment rises more than expected in August
• Stubborn euro zone inflation fails to settle ECB rate debate
• French August inflation higher than expected, fuelled by energy
• ECB's Holzmann leaning towards September rate hike
• Nasdaq, S&P, Dow end mixed a day ahead of jobs report; stocks close out August in the red

Friday, 1 September 2023

• Signs and portents for the U.S. economy:
• Oil rises to highest in over seven months on supply worries
• US unemployment rate rises, wage growth cools as labor market slows
• Things Fed minions say:
• Fed doves, Fed hawks: US central bankers in their words
• Fed's Mester says job market remains strong despite some signs of cooling
• Full impact of Fed hikes still to be seen in real economy, ex-vice chair Blinder says
• Bigger stimulus developing in China:
• China to cut banks' FX reserve ratio to rein in yuan weakness
• Major Chinese banks cut deposit rates as efforts to prop the economy grow
• China's Beijing, Shanghai ease mortgage rules for first-time home buyers
• Bigger trouble spreading out from China:
• Asia's factory activity weakens, China's rebound offers some hope
• Bigger trouble still developing in China:
• 'Too afraid to buy': China's slowing economy overshadows property easing moves
• China new home prices fall for fourth month, sales slump - survey
• Explainer-Why is China's economy slowing down and could it get worse?
• BOJ minions getting mixed signals on whether to keep never-ending stimulus alive:
• Japan capex growth weakens with companies wary about China slowdown
• Japan's factory activity shrinks, squeezed by costs - PMI
• Japan's economic output runs above capacity for first time in nearly 4 years
• Eurozone economy sees some signs of life, ECB minions play coy about their plans for future rate hikes:
• Euro zone August factory activity showed signs of recovery -PMI
• ECB's Villeroy: options open at upcoming rate meetings
• Stocks start September mixed; S&P posts best week since June, Dow, Nasdaq also up
• https://www.reuters.com/article/usa-stocks/sp-500-ends-higher-as-jobs-data-fuels-rate-hike-optimism-idUSKBN3072WD

The CME Group's FedWatch Tool continues to show no rate hike in September (2023-Q3). The big change from last week came as investors stopped betting one last quarter point rate hike later in 2023 following the past week's jobs report and downward revisions in previous months' employment numbers. Now investors expect the Fed will hold rates steady until 1 May 2024, when they anticipated the Fed will start a series of quarter point rate cuts that will continue at six-to-twelve-week intervals through the end of 2024.

The Atlanta Fed's GDPNow tool predicts an annualized real growth rate of +5.6% during 2023-Q3, down from the previous week's estimate of +5.9% growth.

Image credit: Every Cloud Has a Silver Lining photo by Colin Smith via Geograph Britain and Ireland. Creative Commons. Attribution-ShareAlike 2.0 Generic (CC BY-SA 2.0).

For the S&P 500 (Index: SPX), there may as well have been only one event taking place during the past week.

That event was the Federal Reserve's annual getaway meeting at Jackson Hole, Wyoming, at which Fed Chair Jerome Powell addressed inflation and the Fed's path ahead in charting a course to deal with it on Friday, 25 August 2023. Compared to the speech Powell gave last year, this year's speech was more positive for investors. The S&P 500 (Index: SPX) rose after Powell's speech, ultimately ending the week at 4405.71, a 0.8% increase over the prior week's close.

For us, because of intense interest investors have for the direction for the Federal Reserve's monetary policies, Powell's speech serves as a calibration point for setting the value of the multiplier in the dividend futures-based model. The event allowed us to confirm our current estimate of the multiplier's current value of +1.5 is still valid, with investors closely focused on the upcoming fourth quarter of 2023, which coincides with the expected timing of the Fed's next actions to change interest rates.

Here's what that looks like on the latest update for the alternative futures chart:

Speaking of charting courses, that brings us to our next challenge. The chart indicates the accuracy of the dividend futures-based model's projections of the future for the S&P 500 will soon be impacted by the echo effect. This is a consequence of using historic stock prices as the base reference points from which the model's projections of the future are made, where the past volatility of stock prices affects the model's projections of the future.

To compensate for that effect, we've added a new redzone forecast range to the chart, which we've anchored at the level of the S&P 500 on Friday, 25 August 2023. The opposite end of the forecast range is anchored to the projections associated with investors focusing on 2023-Q4 on 7 November 2023, after the echoes of past stock price volatility have dissipated.

Here's that version of the chart, which we'll be updating and presenting in the weeks ahead.

Since we discussed how we generate redzone forecast ranges in previous editions of the S&P 500 chaos series, we won't repeat that description here. Let's get to the handful of market-moving headlines that appeared in the newstreams of the past week.

Monday, 21 August 2023

• Signs and portents for the U.S. economy:
• Crude oil settles lower as hope fades for Chinese demand
• Majority of small businesses believe US is in recession
• Fed minions think future economic growth will be weak:
• Fed's long-term GDP outlook is dismal; the economy hasn't got the message yet
• Bigger trouble and stimulus developing in China, government-run banks "mopping up" weak yuan:
• China's fiscal revenue slows as economy struggles
• China surprises with modest rate cut amid growing yuan risks
• China state banks seen mopping up offshore yuan to stem currency weakness
• Bigger trouble developing in the Eurozone; ECB minions getting results they wanted:
• Downturn in German housing construction worsens in July - Ifo
• German producer prices post first fall since late 2020
• Nasdaq rallies with Nvidia, tech shares; investors look toward Jackson Hole
• Nvidia pops as Wall Street hikes price targets for 'Godfather of AI'

Tuesday, 22 August 2023

• Signs and portents for the U.S. economy:
• Oil prices settle lower on nagging worries about Chinese demand
• US existing home sales slide again, but prices up from a year earlier
• Fed minions claim they're worried about return of higher inflation, among other things:
• Strong US data makes 'reacceleration scenario' possible, Fed's Barkin says
• Fed doves, Fed hawks: US central bankers in their words
• BOJ minions claim they're not talking about propping up yen, ex-BOJ minion describes when they will:
• BOJ's Ueda meets premier, says didn't discuss recent yen volatility
• Ex-BOJ official predicts no yen intervention until breach of 150 threshold
• Dow, S&P 500 end down as US interest-rate worries mount, bank shares slip
• S&P downgrades multiple US banks citing 'tough' operating conditions

Wednesday, 23 August 2023

• Signs and portents for the U.S. economy:
• US bond yields surge despite muted inflation as investors look beyond Fed
• US 30-year mortgage rate soars to highest since 2000
• US new home sales rise in July, prices fall on annual basis
• Oil slides on grim manufacturing data
• US job growth in year through March was less than estimated
• US economy near stalling point as consumer demand weakens, survey says
• Bigger trouble developing in China:
• China should stick to 'houses are for living, not for speculation' - state media
• Japanese economy shrinks more slowly:
• Japan's factory activity shrinks at slower pace in Aug - PMI
• Much bigger trouble developing in the Eurozone, ECB minions expected to pause rate hikes:
• German business activity suffers steepest decline since May 2020-flash PMI
• Close to half of German companies face a shortage of trainees -survey
• Investors expect ECB rate-hike pause in September after dismal PMIs
• Slide in euro zone service sector sharpens ECB's rates dilemma
• Indexes end sharply higher; AI chip maker Nvidia jumps again after the bell
• Nvidia soars as Q2 earnings, guidance smash estimates; unveils $25B buyback

Thursday, 24 August 2023

• Signs and portents for the U.S. economy:
• Oil settles up, rebounds from lows after European storage report
• US economic activity picked up in July - Chicago Fed
• US department stores see higher credit delinquencies amid strained spending
• Fed minions like interest rates rising without them having to hike them, don't like "spend-happy" Americans:
• Two Fed officials tentatively embrace bond yield jump
• Fed's Collins: May be at a place where Fed can hold steady - Yahoo Finance
• Fed's Harker expects no more rate hikes needed this year, in CNBC interview
• Fed struggles to gain traction in battle with spend-happy consumers
• Wall St ends down sharply, focus shifts to upcoming Powell speech
• Nasdaq, S&P, Dow slide more than 1% each on fading AI-euphoria, fall in Boeing
• S&P 500 flashing a correction signal not seen since early 2000s

Friday, 25 August 2023

• Signs and portents for the U.S. economy:
• Oil futures up 1% to one-week high on soaring US diesel prices
• Large US homebuilders raise prices as existing home supply remains tight
• Expectations before Fed minion's Jackson Hole speech:
• US Treasury yield curve shifts could be set-up for Jackson Hole unwind
• Powell Talks At Jackson Hole, Says Nothing
• Fed's Powell: higher rates may be needed, will move 'carefully'
• Factbox-Highlights of Fed Chair Powell's Jackson Hole speech
• Rate hike chances rise after remarks by Fed's Powell
• Fed's Mester keeps door open for more rate hikes in CNBC interview
• Bigger trouble developing in China, currency bailout taking shape:
• Analysis-China has no pain-free solutions for its slowing economy
• Exclusive-China steps up yuan defence with bond limit guidance - sources
• BOJ minions expected to keep never-ending stimulus alive for another year despite inflation:
• BOJ will keep current policy until at least July 2024, most economists say: Reuters poll
• Inflation in Japan's capital slows in August, stays above BOJ target
• Bigger trouble developing in the Eurozone, expectations grow ECB minions will pause rate hikes:
• Gloomy Ifo fuels fears of second German recession in a year
• Euro zone inflation to remain "too high for too long" - Bank of Spain deputy chief
• Momentum growing for ECB rate hike pause as growth falters -sources
• Nasdaq, S&P 500 snap three-week losing streak, Dow ends slightly lower

The CME Group's FedWatch Tool continues to show no rate hike in September (2023-Q3), though it gives a greater than 50% probability the Fed will hike rates by a quarter point when it meets on 1 November (2023-Q4), which is now expected to stick nearly all the way through January 2024. However, on 31 January (2024-Q1), investors now expect the Fed to start a series of quarter point rate cuts that will continue at six-to-twelve-week intervals through the end of 2024.

The Atlanta Fed's GDPNow tool now predicts an annualized real growth rate of +5.9% during 2023-Q3 which is up a tick from the previous week's estimate of +5.8%.

Image credit: Photo by orbtal media on Unsplash.

There were two sets of news headlines that combined to impact the U.S. stock market during the trading week ending Friday, 18 August 2023.

Domestically, Fitch Rating's threatened downgrade of a dozen banks in the U.S., including JP Morgan Chase (NYSE: JPM) underscored the growing risks on their balance sheets from the Federal Reserve's series of rate hikes. The rate hikes have resulted in the rapid accumulation of unrealized losses for banks with large holdings of U.S. Treasuries, putting them at risk of failing like Silicon Valley Bank and other smaller banks did earlier in the year.

Internationally, the biggest economic story in the world continues to be China's sputtering economy. The Chinese government's action to terminate the reporting of its youth employment statistics revealing its developing troubles indicates those building problems are bigger than it wants to admit. At the same time, the government's official economic statistics agency is attempting to minimize the perceived risk to China's economy from the heavy debts of its real estate sector and the country's local governments.

For the S&P 500 (Index: SPX), the looming potential downgrades of U.S. banks carried more weight, leading the index to fall to 4369.71, a 2.1% decline from the previous week’s close. Here's the latest update to the alternative futures chart for the third quarter of 2023:

We've refrained from adding a redzone forecast chart to account for the deviation from the dividend futures-based model's projections over the last couple weeks for two reasons. First, the current deviation from the model's echo effect will be short-lived, as we expect the trajectory of the index to rejoin the model's projections on Friday, 25 August 2023. That will coincide with Jerome Powell's address at the Federal Reserve's Jackson Hole annual summer get-a-way.

Second, we'll be using that date as the starting anchor point for a much longer redzone forecast range that will last into mid-November 2023. We'll be adding that new redzone forecast range to the chart in the next edition of the S&P 500 chaos series.

But, that doesn't mean you can't sketch your own redzone forecast range on the chart for this short period! All you need to do is connect the dots for where the S&P 500 was on Monday, 7 August 2023 with where the dividend futures-based model projects it will be on Friday, 25 August 2023.

That raises the question of "which projection?", but that's easily answered. Investors are currently focused on 2023-Q4 in setting current day stock prices, so you would use the projection associated with that future quarter. It's not your imagination. It really is that easy, and the S&P 500 is already about two-thirds of the way there!

Here is our summary of the past week's market moving headlines:

Monday, 14 August 2023

• Signs and portents for the U.S. economy:
• Oil dips further as China worries counter supply cuts
• Fed minions counting on slowing rents to beat inflation down to 2% target:
• A smooth 'last mile' to 2% inflation may not be a stretch for Fed
• Not So Fast With The CPI Celebrations: Rents Are Surging Again And Back To Record Highs
• Bigger trouble developing in China:
• Contagion fears spread as China property sector cash crunch intensifies
• S&P 500, Nasdaq end up as Nvidia surge leads megacap higher

Tuesday, 15 August 2023

• Signs and portents for the U.S. economy:
• U.S. gasoline prices at year high, tight supply weighs on motorists
• Oil drops over 1% on worries about Chinese economy
• US import prices rebound in July, trend remains soft
• Fed minions claim they're not done with rate hikes yet:
• Kashkari: not ready to say Fed is done raising rates
• Strange things going on with official Chinese stats:
• China to stop releasing youth jobless rate data from Aug, says stats bureau
• China stats bureau sees no deflation risks, plays down property woes
• Bigger trouble developing in China:
• China's property investment slides for 17th month in July
• Explainer-How much worse can China's economic slowdown get?
• Suddenly much bigger stimulus developing in China:
• China central bank unexpectedly cuts rates to support sputtering economy
• China cuts key rates as weak batch of July data darken economic outlook
• Bigger fiscal stimulus developing in Eurozone:
• Germany planning to raise amount of tax relief for firms: document
• Broad Market Selloff Sends S&P 500 Below Its 50 Day Moving Average
• US bank stocks fall on prospect of tougher oversight, more downgrades
• Fitch warns it may be forced to downgrade multiple banks, including JPMorgan - CNBC

Wednesday, 16 August 2023

• Signs and portents for the U.S. economy:
• Motor vehicles lift US manufacturing output in July
• Oil settles lower as China fears, rate hikes counter tight US supply
• US weekly jobless claims fall as labor market remains tight
• Atlanta Fed model lifts US third quarter GDP view to 5.8%
• Fed minions divided in July over need for more rate hikes, minutes show
• Bigger trouble developing in China:
• China's economic woes mount as trust firm misses payments, home prices fall
• Analysis-Country Garden undone by promise to bring 5-star life to China's hinterland
• Chinese asset manager eyes restructuring to ease liquidity crunch amid contagion fears
• Bumpy road for China's ride hailing drivers as economy slows
• BOJ minions thinking about intervention to keep yen from falling:
• Japan's policymakers hold fire as yen enters intervention range
• Stocks, oil slide as Fed mulls rates and China struggles
• U.S. 10-year Treasury yield hits highest since October, drags on shares

Thursday, 17 August 2023

• Signs and portents for the U.S. economy:
• U.S. 10-year Treasury yield hits highest since October, drags on shares
• Oil edges up as China seeks to calm economic fears
• US weekly jobless claims fall as labor market remains tight
• US 30-year fixed mortgage rate jumps to near 21-1/2-year high
• U.S. Mid-Atlantic manufacturing sky-rockets to 16-month high
• Fed minions set date for their biggest event of the summer:
• Fed Chair Powell to give economic outlook at Jackson Hole Aug 25
• Bigger trouble developing in China as investors bet on bailout:
• China investors jump into municipal bonds, hopes of state support outweigh debt woes
• Analysis-China's crackdowns rewrite investors' private sector playbook
• Chinese asset manager eyes restructuring to ease liquidity crunch amid contagion fears
• Explainer-Country Garden: How bad is China's property crisis?
• Analysis: Why is China not rushing to fix its ailing economy?
• Chinese central bank issues warnings while promising stimulus:
• China cenbank says it will keep policy 'precise, forceful' to aid recovery
• Chinese banks should keep a 'proper level' of profit margins -central bank
• Bigger trouble developing in the Eurozone:
• Mild recession ends Dutch economy's strong post-COVID boom
• Wall Street ends lower on healthcare losses, interest rate jitters

Friday, 18 August 2023

• Signs and portents for the U.S. economy:
• Oil up 1% on signs of slow US output, posts first weekly loss in 8 weeks
• "Slim" majority of economists say Fed minions done with rate hikes:
• Fed done hiking; slim majority of economists say no rate cut through March - Reuters poll
• Bigger trouble developing in China:
• China Evergrande seeks Chapter 15 protection in Manhattan bankruptcy court
• China trust deficit: crisis spurs shadow banking policy response calls
• Analysis-China's sputtering economy curbs outlook for diesel demand for rest of 2023
• Other signs of China's trouble spreading in Asia:
• Malaysia posts weakest GDP growth in nearly 2 years as exports slump
• Taiwan sees economic growth this year at slowest in 8 years
• Japan exports fall for first time since 2021, stoking concerns about economy
• Bigger stimulus developing in China:
• China set to cut lending benchmarks next week as economy worsens
• BOJ minions see justification to keep never-ending stimulus alive:
• Japan's core inflation eases, bolstering view BOJ will stand pat
• ECB minions thinking about declaring victory over inflation despite sluggish economy in Germany, want to keep Eurozone banks from new taxes in EU countries:
• Euro zone inflation fall confirmed, easing pressure on ECB to hike
• Euro zone set for growth over next 'couple' of years - ECB's Lane
• German home building permits tumble amid calls for stimulus
• ECB to raise objections to Italy's windfall tax on banks - press
• Nasdaq, S&P 500 and Dow finish relatively unchanged as yields cool a bit

The CME Group's FedWatch Tool developed an interesting quirk this week. While it continues to show no rate hike in September (2023-Q3), it is now giving a greater than 50% probability the Fed will hike rates by a quarter point when it meets on 1 November (2023-Q4). But only for six weeks, because it also shows the Fed reversing to cut rates by a quarter point just six weeks later in December (2023-Q4). After that, it anticipates no other rate changes through May 2024, followed by a series of quarter point rate cuts will begin as early as 12 June (2024-Q2) and continue at six-to-twelve-week intervals through the end of 2024.

The Atlanta Fed's GDPNow tool strapped its estimate of real GDP growth in 2023-Q3 onto a rocket in the last week. It is now predicting annualized real growth of +5.8%, which is up a lot from the previous week's estimate of +4.1%. It's also much higher than the top end of the projected range for the so-called "Blue Chip Consensus" for the quarter. We'll find out which set of forecasters is more right a little over two months from now.

Image credit: Photo by Ussama Azam on Unsplash.