Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets in the day ahead. Today is Monday, Oct. 2. Welcome to the fourth quarter. The ‘Bottom Line’ segment of today’s podcast starts at (3:23) for those who want to skip ahead.
State of Play
The PCE Deflator, the Fed’s preferred inflation gauge, came in a little softer than anticipated on Friday but the stock market rally fizzled out to close the third quarter. Over the weekend lawmakers in Washington came were able to stave off a government shutdown exactly as had been anticipated in this space. As fourth-quarter trading gets underway, markets are showing a mixed range of expectations (as of 0635):
Stock index futures are pretty flat, with only tech moving from the break-even point (Nasdaq +0.2%);
Bonds are selling off again, with the 2-year yield up 6 basis points to 5.11% and the 10-year also up 6bps to 4.63% (yields move inversely to prices);
Cryptos are rallying. Bitcoin is up 4% to trade north of $28,000;
Commodities are mixed. Copper is down <1% but WTI crude oil is up 1% to trade around $91.50/barrel.
Known Events
Several Fed speakers today, but most are participating in roundtables or addressing subjects that have no bearing on monetary policy:
Fed Chair Jerome Powell is due to participate in a roundtable focused on local business at 0900;
Philly Fed President Patrick Harker is doing a similar roundtable (or maybe it’s the same one), also at 0900;
New York Fed President John Williams is moderating a discussion at the 2023 Environmental Economics and Policy Conference titled “Measuring and Adapting to Climate Risk” at 1230;
Cleveland Fed President Loretta Mester is speaking on the economy but not until after the close at 1730.
Construction spending data for August is out at 1000. Economists expect an increase of 0.5% after 0.7% last month.
ISM Purchasing Manager Indexes are out at 1000. This is the second reading, which will likely just confirm everything that was in the first. As such it can probably be ignored.
The Bottom Line©️
It’s unlikely we’ll get new clarity from the Fed speakers today as most of these are topical. Construction spending and ISM figures probably won’t do much to move markets either.
That leaves us monitoring prices for any hints of a prevailing investor mood. The selling in bonds tells us investors are still concerned about inflation and the Fed, but then the move in cryptos could be an indication of renewed risk appetite. Cryptos have been a leading indicator of this going back to the bank failures in March.
We did get a solid contrarian indicator this weekend where the labor market is concerned (see below). The headline is even better than the cover: “This Time Really Is Different for the Economy. Just Look at the Job Market’s Confounding Strength”
Housekeeping
Obviously this is not investment advice (duh). Do your own research, make your own decisions.
This Substack chat tracks The Contrarian’s trades in (almost) real time. The full portfolio is available upon request.
Be sure to check out our Substack notes, for more contrarian thoughts and missives throughout the day.
If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.
Please take the listener survey! It’s like, five questions and should only take a few minutes of your time. You can win free merchandise. A lucky respondent will be selected each month to receive a classic crew-neck T-shirt.
Fed Speakers, Construction Spending