Morning Notes

Today’s Jobs Report came in mostly inline, reaffirming outlook. Non-farm payrolls were up +263,000 in September vs. consensus for +250,000.

Catalysts ahead include tomorrow’s Jobs Report and next Thursday’s CPI print. Markets are in a ‘bad news is good’ phase with today’s weaker labor data helping to calm markets ahead of tomorrow’s official BLS Jobs Report. 

Recovery signal appears in markets, despite a mixed session for U.S. equities after the S&P 500 gained +5.8% over the last two sessions.

Several catalysts ahead, though quiet in terms of earnings until CQ3 earnings season kicks off next Friday. 

Terminal rate expectations are down -12.1bp this morning to 4.41% and are still the dominant cross market for equities.  Terminal rate expectations are derived from the Overnight Index Swap (OIS) forward market and levels below 4.50% should provide broad support for equities.

Near term outlook driven by a calmer tone following reports that UK PM Truss and Chancellor Kwarteng are holding an emergency meeting today with the Office for Budget Responsibility (OBR). 

Higher global bond yields put renewed pressure on equities after the new UK PM and Chancellor unveiled energy price caps/stimulus package (£220B) and series of tax cuts (£45B) last Friday.  

Terminal rate expectations are in focus as lower bond yields follow the BOE’s announced bond purchase program that erases about half the yield backup since Friday’s controversial stimulus rollout.

The S&P 500 (SPX) is in deeply oversold territory and susceptible to another reflex rally in the 10-15% range. Internal breadth indicators show only ~3% of SPX stocks trading above their respective 50-day moving average and only ~11% of members trading above their 200-day moving

The S&P 500 (SPX) has lost ~5.3% since the September Fed policy statement and press conference where Powell mentioned ‘pain’ six times. Looking only at the updated dot plot, we can expect the rate hikes to end in January at 4.50% Fed funds (now 3.25%)