Though the market closed down on Monday, it still seems to be in the throes of its current bear rally. A little bit of optimism coming from the Biden-Xi talks, a little bit of pessimism coming from the Amazon layoffs.

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Yesterday the S&P 500 closed at 3,957, down 36 points, the Dow Jones Industrial Average closed at 33,537, down 211 points and the Nasdaq Composite closed at 11196, down 127 points.

Most actives were led by Advanced Micro Devices, up 1.6%, followed by Amazon, down 2.3% and Tesla, down 2.6%.

Chart: The New York Times

In Asian markets the Nikkei was nearly flat closing up 0.14%, while the Hang Seng closed strongly higher, up 3.25%. In overnight futures trading (3:00 am EST) S&P market futures are up  26 points, Dow market futures are up 162 points and Nasdaq 100 market futures are up 112 points.

TM contributor Diego Colman sums up yesterday's market mood in an article he titles: S&P 500 Stalls At Resistance On Cautious Mood. Is The Stock Market Rally In Peril?

"After struggling for direction and wobbling for much of the day, U.S. stocks finished lower on Monday, unable to extend last week's robust rally as sentiment turned a bit more cautious, but not panicky. There were no major catalysts, but comments from Fed Vice Chair Brainard indicating that the FOMC may soon downshift the pace of interest rate hikes seemed to prevent a larger pullback."

"When it was all said and done, the S&P 500 fell 0.89% to 3,957 after stalling at a key Fibonacci resistance near the psychological 4,000 level, with the real estate and consumer discretionary sectors leading the slide. Meanwhile, the Nasdaq 100 declined 0.98% to 11,700, dented by heavy selling in Microsoft (MSFT), Amazon (AMZN), and Tesla (TSLA) stocks...

In terms of market bias, there are reasons to believe that the mood could remain somewhat bullish in the near term. In the grand scheme of things, expectations that the Fed will slow its pace of tightening, easing inflationary pressures, news that China will fine-tune its zero-code policies to support its economy, and positive seasonal factors should all help support risk assets in the coming days and weeks, at least to some extent...

If the bullish scenario plays out, we need to see a decisive climb above 4,000 (SPX) to have confidence in the recovery prospects... if sellers manage to drive the market lower, initial support appears at 3,900 and then 3,825."

Contributor Christopher Vecchio gives us a round-up in what to expect in Forex this week for some of the major currencies in FX Week Ahead - Japan GDP; Canada & UK Inflation Rates; US Retail Sales; Australia Jobs Report.

Yen (FXY) "Typically overlooked, the incoming GDP report for Japan may have renewed focus as traders reassess the Japanese Yen in the wake of its surge at the end of last week...the Bank of Japan is in no such hurry to alter its own highly accommodative monetary policy (vis a vis the US Dollar). Indeed, the 3Q’22 Japan GDP report is expected to show a decelerating growth rate, from +3.5% annualized to +1.1% annualized."

Pound (FXB) "...the October UK inflation report (consumer price index) is due in at a staggering +1.7% m/m from +0.5% m/m and +10.7% y/y from +10.1% y/y, even as the core inflation rate is set to ease slightly to +6.4% y/y from +6.5% y/y. With the Bank of England having already declared that it believes rates markets are too aggressive in their pricing with respect to how high the BOE’s main rate will go, this data mix may once again prove toxic for the British Pound."

Loonie (FXC) "Although the Bank of Canada has already started to slow its pace of rate hikes, incoming price data may provide fresh evidence that more aggressive tightening is necessary...Rising BOC rate hike odds, coming at a time when Fed hike odds have receded, have been and may remain a tailwind for the Canadian Dollar."

US Dollar (UUP) "4Q’22 US GDP appears to be on strong footing, with the Atlanta Fed GDPNow growth tracker at +4% annualized based on the data thus far...A resilient US economy may give the Fed more slack to keep raising rates, helping reinvigorate Fed hike odds and support the recently beaten-down US Dollar."

Pineapples and Lobsters (FXA) "The Australian Dollar has been rallying in recent days after the weaker October US inflation report and news that China may be nearing the offramp of its zero-COVID policy. Incoming Australian labor market figures may help the rally...forecasters (are) anticipating jobs gains of +15K from +0.9K, which should keep the unemployment rate 3.5%."

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TalkMarkets contributor Bob Lang says Inflation Is Slowing But Don’t Celebrate Yet.

"After more than two years of rising prices, it appears that inflation is slowing – finally. There is no doubt that higher prices for groceries, gas, and housing have had a negative impact on our wallets, yet the economy has not been crippled. Job gains have been strong and positive GDP estimates continue to rise. But don’t celebrate yet."

"Last week we finally saw a decline in prices when the CPI came in slightly lower than expected. That reading induced a roar from the crowd and a furious buying spree that we had not seen in over two years...Even if inflation is slowing and prices are starting to decline, the year-over-year numbers are troubling. The Fed crafts their monetary policy on those numbers. More interest rate hikes are coming and rates will stay elevated for a longer stretch of time (into 2024). The peak rate may not hit 6%, but anything above 5% will be a high hurdle for companies to jump over."

In the ongoing FTX-Alameda scandal contributor Tyler Durden shares some of what SBF knew and did and said he didn't in Alameda Fronted Crypto Tokens Ahead Of New Listings On FTX. Here's a bit of the juice...

"In the latest episode in this relentless scandal-drama, the WSJ reports that the trading arm of Sam Bankman-Fried's empire, Alameda Research, was quietly amassing stakes in various cryptos ahead of announcements that FTX would be listing them for trade, a practice that is patently illegal. Citing analysis of public blockchain data from analytics firm Argus, the Wall Street Journal reported that on the days FTX said it would be listing "new" tokens between 2021 and March of this year, Alameda had already amassed roughly $60 million worth of tokens ahead of time, arguably to sell into the burst of customer demand and make a huge risk-free profit...although Bankman-Fried did tell the WSJ back in February that Alameda "had the same access to information as all other market makers on the platform and that its traders didn’t have special access to client information". Spoiler alert: they did."

Following on the heels of the FTX collapse author Dean Baker writes the Crypto Meltdown Is A Great Time To Eliminate Waste In Bloated Financial Sector.

"I remember talking to a progressive group a bit more than a decade ago, arguing for the merits of a financial transactions tax (FTT). After I laid out the case, someone asked me if we had lost the opportunity to push for an FTT, now that the financial crisis was over. I assured the person that we could count on the financial sector to give us more scandals that would create opportunities for reform."

"It seems that FTX has given us yet another great case study in greed and corruption in the financial sector...Finance can be thought of as similar to the trucking industry. Trucking is enormously important to the economy in getting goods to consumers and essential inputs to manufacturers and service providers. But it does not directly produce value. We only benefit from having more workers and trucks if they allow the industry to serve its function better. That means getting goods to their destination more quickly or getting them there with less damage or spoilage.

This is the same story with finance. We benefit from having more resources in finance only insofar as they allow it to service the productive economy better. That means facilitating payments to make them easier and quicker and better allocating capital to its most productive uses...However, as the financial sector has continued to expand relative to the economy, productivity growth has slowed further. While there was a strong decade of productivity growth from 1995 to 2005, in the years from 2005 to 2019, productivity growth averaged just 1.4 percent...If the growth of the financial sector has not led to corresponding benefits to the productive economy, we should view it as a source of waste and inefficiency, just as we would view a massive increase in the size of the trucking industry without any benefits in terms of improved delivery times. From the standpoint of policy, we should be looking at every opportunity to whittle down the size of the financial sector to reduce waste in the economy.

Applying a financial transactions tax, which would be similar to the sales tax paid in other sectors, would be a great place to start...While crypto may help facilitate criminal transactions (apparently this is no longer clearly true), it serves no legitimate purpose. In a world of scammers, it should not be surprising that we would see a sham exchange like FTX that seems to have defrauded its customers bigtime.

The proper government response is not to encourage people to gamble in crypto by regulating the industry and make it safer for ordinary people to throw their money in the toilet. The proper response is to throw the fraudsters in jail and tell people they invest in crypto at their own risk. If they want to engage in honest gambling, let them go to Vegas."   

Closing out the column for today is contributor Jill Mislinski's U.S. Workforce: October 2022 Update.

As usual Mislinski's artcile features charts of the status of the workforce broken out into various cohorts. I have posted the data and chart for the age 25-54 cohort below. See the full article for the rest of the data.

"

Unemployment in the Prime Age Group

Let's look at the same statistic for the core workforce, ages 25-54. This cohort leaves out the employment volatility of the high-school and college years, the lower employment of the retirement years and also the age 55-64 decade when many in the workforce begin transitioning to retirement ... for example, two-income households that downsize into one-income households.

In the latest report, this indicator is at 3.2% (to one decimal place), down from the previous month. The cohort population increased by 32 thousand and the labor force decreased by 177 thousand. The breakdown of the growth is a decrease of 489K employed and a 312K increase in the unemployed.

One of Mislinski's conclusions from the current batch of data is that "(there is) strong evidence that our economy is in the midst of a massive structural change. Two of the three mainstream employment statistics — labor force participation and employment-to-population — document a structural change that seems deeper than just the result of a business cycle downturn. Unemployment has essentially reached its "natural" rate, but labor force participation and employment-to-population are both very low compared with other post-recession periods."

Have a good one.

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