Market Brief: Powell Whipsaws Markets, Apple Earnings on Tap

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  • The Federal Reserve initially delivered a “hawkish cut,” reducing interest rates by 0.25% to the 1.50-1.75% range, though Chairman Powell noted that monetary policy is now “in a good place” and that it would take a “material reassessment” of the central bank’s outlook to change policy from here. However, many markets reversed their initial moves when he noted that it would take a significant rise in inflation before the central bank considers an interest rate hike.
  • Separately, the Bank of Canada left interest rates unchanged at 1.75% as expected, though dovish comments from Governor Poloz suggest that the central bank was considering an “insurance cut” to rates.
  • Chile cancelled the planned APEC summit in November, where Presidents Trump and Xi were planning on signing the “Phase One” trade deal. China has reportedly offered to hold a signing event in Macau instead.
  • FX: The loonie was the weakest major currency on the back of the BOC and falling oil prices. The Swiss franc was the strongest major.
  • US data: US GDP (Q3) printed at 1.9%, above expectations of 1.6% growth, though the accompanying inflation readings were lower than anticipated. ADP employment (Oct) printed at 135k vs. 110k expected and a revised 93k last month.
  • Commodities: Oil fell -1% on the day to hit a 1-week low after a surprisingly large build in inventories. Gold rallied about 0.5%.
 
  • US indices closed higher on the day, supported by the perception of a “Powell Put” if economic data worsens.
  • Utilities (XLU) were the strongest sector, while Energy (XLE) was the weakest, falling more than -2% on the day.
  • Stocks on the move:
    • Apple (AAPL, +0%) is poised to report earnings as we go to press.
    • Facebook (FB) reported $2.12 in EPS vs. $1.88 expected. Revenues also came in stronger than expected at $17.65B vs. $17.45B eyed. The stock is trading up 3% in after hours trade on the initial reaction.
    • General Electric (GE) gained +12% after it forecast better cash flow in 2020 on the back of its renewable energy division.


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