A World of Uncertainty

So far, U.S. financial markets have shown little in the way of any kind of response to internal strife among key U.S. allies. Sure, the U.S. Dollar Index is stronger this week as the euro has weakened a bit, but not to an earth-shattering degree. Yields on French sovereign debt are higher as a vote of confidence (or not) is expected by the French legislature at some point today.

U.S. Treasury securities are off the pace very early on Wednesday morning, but that very likely has as much to do with a public appearance scheduled for this afternoon by Fed Chair Jerome Powell and the release of the latest Fed Beige Book as it does with what is going on in France. The potential failure of the French government could be unsettling as the dispute boils down to a fight over the budget and fiscal deficit with the French right and left coming together in opposition of French Prime Minister Michel Barnier.

President Emmanuel Macron, who personally would not be impacted (at least not immediately), could short-circuit a "no-confidence" vote by appointing a new technocratic government with a new president. Still, such a state of flux at what arguably is the second most important member of the NATO alliance can only be seen as unwelcome at this time.

Meanwhile, in South Korea, President Yoon Suk Yeol shocked both Asia and the world by declaring martial law for the first time since that nation chose a democratic form of government in 1987 when a constitutional referendum put an end to a sequence of military dictatorships. The South Korean legislature was quick to vote unanimously to overturn that declaration, and Yoon had to back down, rescinding the order. The president has now offered to resign and will very likely face impeachment. Again, a key U.S. ally that lives in a tough neighborhood now enters into a state of flux. The Bank of Korea (South Korea's central bank) has vowed to maintain a liquid environment until the crisis passes.

U.S. Markets

On Tuesday, U.S. Treasuries largely made a round trip, rallying and then selling off a bit. The U.S. Ten Year Note paid 4.22% on the way out on Tuesday evening, up one basis point for the session. I see that Ten Year Note yielding 4.25% through the zero-dark hours on Wednesday morning. The U.S. Two Year Note yields 4.19% this morning after paying 4.16% (down 3 bps) late Tuesday.

WTI Crude, which moved higher on Tuesday, has continued to spike overnight. I see front month WTI futures trading at more than $70.40 per barrel on Wednesday morning after trading as low as $67.90 on Monday. Keep in mind that OPEC+ meets this week on Thursday.

U.S. equities posted a second consecutive day of sloppy trade on Tuesday. Again, the S&P 500 (up just 0.05%) and the Nasdaq Composite (up 0.4%) posted record high closes with little help from the broader marketplace. The small to mid-cap indexes ranged for the day from -0.74% to -0.29%, while the KBW Banks and Philadelphia Semis both stumbled into the red. Perhaps most notably, the Dow Transports surrendered 2.03% on Tuesday, led lower by both FedEx FDX and United Parcel Service UPS.

Record Highs?

Really? Doesn't look like it. Nine of the 11 S&P sector-select SPDR exchange-traded funds closed out the regular session on Tuesday, in the red, led lower by the Utilities XLU and the Financials XLF. The only two sectors that closed in the green were both "growthy" in nature, as Communication Services XLC and Technology XLK nudged higher. Interestingly, not one of these eleven funds moved even 1% on Tuesday away from where it closed on Monday.

Losers beat winners by roughly 3 to 2 at the NYSE and by about 5 to 3 at the Nasdaq. Advancing volume took a 48% share of composite NYSE-listed trade and a 48.9% share of composite Nasdaq-listed activity. Meaningful? Not so much. With Powell doing the hokey pokey later this afternoon and November Jobs this Friday (as well as November inflation next Wednesday), activity quieted back down from Monday's levels and dropped in the aggregate for names domiciled at both of New York's main exchanges.

Joltin' Job Openings

The JOLTs report for October was rather well received by the street on Tuesday. While true that job openings for October increased to 7.744 million, which was above estimates and up from 7.372 million in September, the ugly truth is that that makes October the second worst month for open positions since February 2021. Job Quits in October hit their highest level since May. That's seen as a positive as folks generally don't leave jobs unless they have another job lined up or think it won't be difficult to find one.

That said, as Peter Boockvar noted in his musings on Tuesday, the hiring rate fell to a mere 3.3%, matching its weakest level (outside of the pandemic) since the year 2013. Bottom line, labor markets are still notably weaker than they have been in years even if layoffs have not picked up sustainably and things look better relative to September.

Birds of a Fed-ther ...

Flock together. These birds are doves, not birds of prey....

• San Francisco Fed Pres. Mary Daly, speaking at Fox Business, said: "In order to keep the economy in a good place we have to continue to recalibrate policy." Daly added, "Whether it'll be in December or sometime later, that's a question we'll have a chance to debate and discuss in our next meeting, but the point is we have to keep policy moving down to accommodate the economy." Hmmm, maybe she meant to accommodate a fiscally reckless federal government by giving inflation a shot in the arm. Maybe?

• Chicago Fed Pres. Austan Goolsbee spoke on Tuesday and said that the economy remains in a "good position" and that inflation was on a "sustainable path" toward the central bank's 2% target. Keep in mind that Goolsbee is the same one who referred to 2023 as a "Hall of Fame" year for inflation. Oh baby. 2023. The year middle- and lower-class America fell behind less rapidly than they had in 2022. Just super.

• Fed Gov. Adriana Kugler spoke from Detroit on Tuesday: "I view the economy as being in a good position after making significant progress in recent years toward our dual mandate goals of maximum employment and stable prices." Kugler then added. "The labor market remains solid, and inflation appears to be on a sustainable path to our 2% goal, even if there have been some bumps along the way." Guess she hasn't noticed the reacceleration in consumer prices since September. Or maybe she chooses to see it as transitory.

re:Invest

On Tuesday, at Amazon's AMZN re:Invest event, new AWS AI-focused partnerships were announced with both Gilab GTLB and PagerDuty PD. Ashley Kramer of GitLab commented: "By leveraging Amazon Q's advanced capabilities and integrating them into our unified data store, GitLab Duo and Amazon Q provides an enterprise-grade platform that accelerates and automates software development while ensuring security, compliance, and privacy."

PagerDuty CEO Jennifer Tejada chimed in, "PagerDuty and AWS are strengthening our 11-year partnership, which already supports nearly 6,000 joint customers, to further integrate generative AI into digital operations management."

I still like Amazon, and I am still long the shares. Just beware that the chart is at a crossroads that could result in an obstacle that will need to be overcome. Not that it cannot be done. I just want my readers fully cognizant that we have something to potentially move past prior to resuming our march to glory.

Readers will see the trend. That's a positive. Readers will also see the potential for a double-top reversal without even breaking that trend. The daily Moving Average Convergence Divergence is improving, but is not yet displaying a fully bullish posture, while Relative Strength continues to improve.

More AI

Improving AI metrics are behind the overnight flights of both Marvell Technology (MRVL) and Salesforce CRM. Not to mention Tuesday's glorious run by Sarge fave Palantir Technologies PLTR.

Economics (All Times Eastern)

07:00 - MBA 30 Year Mortgage Rate (Weekly): Last 6.86%.

07:00 - MBA Mortgage Applications (Weekly): Last 6.3% w/w.

08:15 - ADP Employment Report (Nov): Expecting 165K, Last 233K.

09:45 - S&P Global Services PMI (Nov-F): Flashed 57.0

.10:00 - ISM Non-Manufacturing Index (Nov): Expecting 55.5, Last 56.0.

10:00 - Factory Orders (Oct): Expecting 0.3% m/m, Last -0.5% m/m.

10:30 - Oil Inventories (Weekly): Last -1.844M.

10:30 - Gasoline Stocks (Weekly): Last +3.314M.

The Fed (All Times Eastern)

08:45 - Speaker: St. Louis Fed Pres. Alberto Musalem.

1:45 p.m. - Speaker: Federal Reserve Chair Jerome Powell.

2:00 - Beige Book.

Today's Earnings Highlights (Consensus EPS Expectations)

Before the Open: CPB (.87), CHWY (.23), DLTR (1.08), FL (.40), HRL (.43), THO (.72)

After the Close: AVAV (.68), AEO (.46), FIVE (.17), PVH (2.59), S (.01)

At the time of publication, Guilfoyle was long S, URA, AMZN, PLTR.