10.4.23: Wall St. optimistic about corporate profits yet Market in 'Extreme Fear'

For Public Readers: Weekly Key U.S. and China brief market notes by Larry Cheung's Analyst Staff Team for our Public Email List

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Oct 04, 2023

Make sure to check out Interactive Brokers above as idle cash now will yield more than 4.5% as the Fed just raised rates.

Note from Tim Chang:

Net income at S&P 500 companies is projected to grow about 7.6% year over year in the period, snapping a run of four straight contractions, according to data compiled by Bloomberg. Third-quarter earnings reports that start next week are likely to show profits fell slightly — 0.3% — but that’s also still a quick rebound from the 5.7% profit drop of the previous three months.

Key Investing Resource: Strategist Larry uses Interactive Brokers as his core brokerage. Feel free to check out IB. I currently park excess cash at Interactive Brokers. Check it out. It’s a great brokerage.

In our emails, we will provide the following coverage points:

Brief Overview of U.S. & China Markets
Macro Chart in Focus
U.S. & China Upcoming Economic Calendar
Chart That Caught Our Eye

U.S and China Markets Brief Snapshot 🇺🇸 🇨🇳

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S&P 500 Index: 4229.45

KWEB (Chinese Internet) ETF: $26.78

Analyst Team Note:

Macro Chart In Focus

Analyst Team Note:
In the last 18 months, significant deposit outflows from large banks occurred following Federal Reserve interest rate hikes in March 2022, with funds primarily moving to money market mutual funds.
The failure of Silicon Valley Bank briefly disrupted small banks by causing deposit outflows amid stability concerns, but quick policy interventions mitigated the impact. As regional bank stresses have eased, deposit flows stabilized with money market funds continuing to see large inflows due to investors avoiding risky assets.

Upcoming Economic Calendar

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U.S Economic Calendar (Upcoming Data Points)

China Economic Calendar (Upcoming Data Points)

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Analyst Team Note:
The average 30-year US mortgage rate reached a 23-year high of 7.88%, a significant increase compared to sub-3% rates three years ago.
This spike has widened the gap with the average effective rate of 3.6% that current homeowners enjoy, leading to a 6% weekly drop in total mortgage demand and marking the lowest level since 1996, according to the Mortgage Bankers Association (MBA). The purchase market is experiencing its lowest activity since 1995, with purchase applications down 22% year-over-year and refinance applications plummeting further.