The Dividend Cafe - The DC Today - Wednesday, November 15, 2023

Episode Date: November 15, 2023

Today's Post - https://bahnsen.co/46gNK3n With over 90% of companies now having reported Q3 earnings, we stand at a 6.3% growth rate and well above Octobers estimate of just 1.6%. Just as I mentioned on CNBC World Monday night, profit growth is exceeding revenue growth as companies with pricing power that raised prices the past year due to inflation are showing margin expansion as some of those input prices ease. Also, for all you wondering, it really was just CPI and not my global television debut that fueled the market rally the following day. Links mentioned in this episode: TheDCToday.com DividendCafe.com TheBahnsenGroup.com

Welcome to the DC Today, your daily market synopsis of the Dividend Cafe, brought to you every Monday through Thursday to bring you up-to-date information and perspective on financial markets. Hello and welcome to DC Today. Brian Saitel with you here today. I'm in our New York office studio and it's been a great week here in the city. Did a CNBC hit on Monday night, which was fun and exhilarating and really good. And I have some market news for you today to go through. I am recording this a little bit earlier than I normally would. So the market hasn't fully

closed yet, but I've got plenty to go through with you anyways. And if the numbers shift slightly the next hour or so, so be it. But we had big rally yesterday, obviously with CPI coming in far lower than expected and markets rallied big. The advanced decline ratio yesterday was 14 to 1. And so that's as big as we've seen in about a year. So that's good. The bond market rallied really hard yesterday as well. Rates came in a lot. So today we had PPI, which is the producer price index. So what wholesale goods inflation is versus the consumer side come in far lower than expected as well. So you had CPI lower yesterday. Now you have PPI the next day, far lower. And it was something like it came in at a negative 0.5%, which is

basically the biggest decline since we've had since the peak of the pandemic. So this is a big decline in inflation the last two days. It was expected to be positive 0.1, so negative 0.5 versus positive 0.1 as expected. And so stocks sort of followed suit. The market was up, at least when I typed this, 170 points. It had been floating around 120 or so most of the day. The futures were up about a 120 as well. I frankly thought we may give some of that back as interest rates moved higher a little on the day, which is a little counterintuitive. If you had lower inflation numbers two days in a row, why rates would move a little higher today. The 10-year was up like 10 basis points today. And I think part of it is just that yesterday was not necessarily super overdone, but it was just such a massive rally in the bond market that I think we just

gave a little bit back. There was an auction in the UK yesterday on 20-year gilts, which is their treasury version, that they issued 7 billion pounds of government bonds and they had $93 billion worth of interest. So it's 13 times bid to cover ratio, which is huge. It means that the world, the markets are looking at bonds as fixed income instruments, thinking that rates are going to go nowhere but lower. And I'd say they probably will go lower, but it won't be a straight line. But the point is that the amount of money now that is trying to get into the bond market is pretty massive. I know our own high yield bond manager was up over 5% last couple of weeks. So the bond market rally has been pretty big. Core numbers, so the decline in PPI, a lot of it was energy. And we were initially worried about energy keeping CPI or PPI high, that energy prices would keep inflation high or sticky because of Middle East,

because of Ukraine, all these different things. And that hasn't been the case. Oil has gone from 100 to 75. So the headline number on PPI was lower because energy came out. But even if you strip that out and you just looked at core, it was still lower than expected. We got basically unchanged and we were expecting a positive two. So again, if you're in the camp of lower inflation means the Fed's done and may start cutting rates as most of us are, then I think these numbers are good. And then here's the mixed bag. Retail sales today were better than expected. So there goes your U.S. consumer not giving up. They're going to spend until the end. That rhymes. But the retail sales were up, I'm sorry, down 0.1%. We were expecting a negative 0.3. So better than expected.

And as I said here in New York, we had the Empire Fed Index, Manufacturing Index, here in New York, we had the Empire Fed Index manufacturing index come in far better than expected. So it was a 9.1% for the month versus negative 3% expected and negative 4.6% for the month prior. So more things going on in New York on the manufacturing side. It's busy here. It doesn't shock me. Big news on geopolitical, Xi Jinping, President of China, is in San Francisco in a CEO summit, and he's meeting with President Biden and has a big agenda planned. They're talking about things that range from improving relations, as far as Biden and Xi Jinping, improving relations, communicating with militaries. We haven't been doing that for a while. There's some AI discussion and implementation on some military things and applications that they've agreed to not use. Everything from trade to fentanyl and the issues of it coming out of China and the US and all these sorts of things. But I think any communication, and I wrote this, is going to be deemed as good.

I don't know exactly what will come of it. A lot of times we have communication and then nothing really seems to happen after it. But the market tends to feel better just the fact that there's two people meeting in person on U.S. soil. And I suspect that'll put a little bit of a tailwind in markets. And I think that's part of what you're seeing a little follow through on the day. The House of Representatives did pass a stopgap bill to keep the government open. It goes to the Senate now, and that'll need to get voted through before midnight on Saturday. Otherwise, we're going to have the fourth government shutdown in 10 years if they don't. So I'm optimistic that they actually will.

It's in the Democratic Senate at this point. All that to say, you know, the market action today was positive. You know, the rally yesterday, everything participated, small caps, which had been lagging historically, have started to catch up and really participate. Pretty much everything was positive except for oil and copper. So I guess that makes some sense. You have inflation, which is commodity sensitive, moving lower, and some of the risk assets that are interest rate sensitive, moving higher. But all that to say, another good day in the markets. I won't attribute it to my CNBC hit and my time in New York, but you never know. And I'm off here leaving this office, and I'll be back with you probably after Thanksgiving.

So for all of those I don't speak with, I wish you all a happy Thanksgiving with your families, and we'll talk to you soon. Thank you for listening. Hightower Securities LLC. Advisory services are offered through Hightower Advisors LLC. This is not an offer to buy or sell securities. No investment process is free of risk. There is no guarantee that the investment process or investment opportunities referenced herein will be profitable. Past performance is not indicative of current or future performance and is not a guarantee. The investment opportunities referenced herein may not be suitable for all investors. All data and information referenced herein are from sources believed to be reliable. Any opinions, news, research, analyses, prices, or other information contained in this research

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