Markets prepare for an extremely volatile week

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Published Date 11/4/2024

A nice improvement this morning, the 10 year note began down 11 bps from Friday, MBS prices started +27 bps. Prepping for the election in what was technically a very over-extended market sector. Investors are anxious about the possibility that it could take days, or even weeks, for the results of the U.S. presidential and congressional races to be known.

Beside the election the FOMC policy statement on Thursday with traders seeing a 25 bp cut but it is what Powell will have to say at his press conference that will have their attention. There won’t be the quarterly projections at the meeting. Some see that the election results may provide the Fed an opportunity to become a little more aggressive in lowering rates. The fact is markets (traders, investors, money managers, hedge funds) don’t know what lies ahead which has created a lot of uncertainty.

There is nothing more critical now than the election and how the country takes the results, but keeping an eye on Iran also is important. Iran sending a message it is planning a complex response involving even more powerful warheads and other weapons, said Iranian officials briefed on the plans. Just bluster, or a real warning? “Our military lost people, so they need to respond,” said an Iranian official. He said Iran could use Iraqi territory for part of the operation and would likely target Israeli military facilities “but much more aggressively than last time.”

At 9:30 am the DJIA opened -28, NASDAQ -18, S&P +1. 10 year at 9:30 am 4.28% -10 bps. FNMA 6.0 30 year coupon at 9:30 am +29 bp and -1 bp from 9:30 am Friday.

At 1 pm $58B 3 year note auction.

A nice relief today but it isn’t likely we will see much more improvement through the session. There hasn’t been any fundamental shift for markets in the face of election concerns and the FOMC on Thursday.

This Week’s Economic Calendar:

• Monday,

10 am September factory orders (-0.4%, reported -0.5%)

1 pm $58B 3 year note auction

• Tuesday,

8:30 am US September trade deficit (-$82.0B)

10 am October ISM services sector index (53.5 from 54.9)

1 pm $42B 10 year note auction

• Wednesday,

7 am weekly MBA mortgage applications

1 pm $25B 30 year bond auction

• Thursday,

8:30 am weekly jobless claims (225K from 216K)

Q3 prelim productivity and unit labor costs (productivity +2.4% from 2.5%, unit labor costs +0.9% from +0.4% in Q2)

2 pm FOMC policy statement

3 pm September consumer credit (+$13.3B from +$8.9B in August)

Source: TBWS

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