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[Quick Facts]

1. Minutes show divisions within the Bank of Canada.

2. Fed's Cook: Geopolitical tensions could change U.S. economic outlook.

3. Fed's Jefferson: Fed must sometimes act despite uncertain outlook.

4. S&P 500 gains for an 8th day, the longest win streak in 2 years.

5. Earnings season is coming to an end.

[News Details]

Minutes show divisions within the Bank of Canada

The Bank of Canada (BOC) meeting minutes released yesterday showed that officials faced the same problems in October as they did in September, that was, they remained perplexed by the persistent core inflationary pressures. Some Board members argued that the policy rate may need to be raised further, showing certain disagreement among policymakers. It's unclear what's behind the members' views, but the minutes suggested that some members could start pushing for further policy tightening if the economy and inflation don't match.

Fed's Cook: Geopolitical tensions could change U.S. economic outlook

In a speech on Wednesday, Nov. 8, Fed Governor Lisa Cook said that worsening geopolitical tensions, including in Russia and the Middle East, could trigger broad negative spillovers to global markets. Escalating conflicts could drag down economic activity and trade, raise financing and production costs, and create more persistent supply chain challenges and inflationary pressures that could ultimately alter the path of the U.S. economy.

Geopolitical tensions, in particular, could destabilize commodity markets and the credit system in the current environment of higher interest rates. We are watching and need to be vigilant about this.

However, she did not elaborate on her views on the U.S. economic outlook or comment on Fed policy rates, nor did she state how likely she thought these potential risks were to come true.

Fed's Jefferson: Fed must sometimes act despite uncertain outlook

Despite the high uncertainty surrounding the economic outlook, policymakers will need to respond forcefully if inflation expectations begin to heat up, said Fed Vice Chair Philip Jefferson said on Nov. 8. As Fed Chair Jerome Powell mentioned in his 2018 speech, there are two particularly important cases in which doing too little when there is high uncertainty comes with higher costs than doing too much.

The first case is when attempting to avoid severely adverse events such as a financial crisis. In this situation, words like "we will do whatever it takes" will likely be more effective than "we will take cautious steps." The second case is when inflation expectations threaten to become unanchored. If expectations were to begin to drift, the reality or expectation of a weak monetary policy response would exacerbate the problem.

S&P 500 gains for an 8th day, the longest win streak in 2 years

The S&P 500 gained 0.1%, matching an eight-day string of gains it notched in November 2021. The Nasdaq Composite Index edged up 0.08%. The Dow Jones Industrial Average fell by 40.33 points, or 0.12%, ending its best streak of gains since July.

While upcoming inflation and economic data could weigh on the stock market's gains, the data continues to suggest the economy is slowing, but not falling off a cliff. Cautious remarks from several hawkish Fed members dampened optimism that interest rates have peaked, weakening the stock market's rally.

Earnings season is coming to an end

Out of the approximately 88% of companies in the S&P 500 have reported results, more than 88% have surpassed earnings estimates. However, only 62% have beaten revenue expectations. Some companies offer cautious outlooks.

Rivian shares fell by 2.4% even after reporting better-than-expected results, while Robinhood slumped by 14.3% in a single day after announcing a sharp drop in trading volume. Warner Bros. shares plummeted by 19% after posting a wider-than-expected loss. It was its worst day since March 2021. Roblox rose by 11.8% on the back of its strong results.

Disney reported better-than-expected quarterly earnings after the close, thanks in part to earnings from ESPN+ and continued theme park growth, but a decline in advertising revenue hurt total revenue. Shares of the company were up more than 4% after Wednesday's close. Semiconductor technology firm Arm reported its first earnings on Wednesday after being listed, with sales beating Wall Street's expectations and showing that the company's lucrative licensing business has doubled in the past year. However, Arm's shares fell more than 7% in after-hours trading as the company's revenue estimates came in below expectations.

The recent market moves further confirm the trend throughout the quarterly earnings season: In the current market environment, stocks are falling more than usual if they fail to meet Wall Street's earnings estimates. Stocks of S&P 500 companies that missed earnings-per-share estimates for the third quarter fell by an average of 5.2% over the next two days, according to data released on Tuesday by FactSet. That's more than the average for the past five years.

[Focus of the Day]

UTC+8 16:10 European Central Bank Chief Economist Philip Lane Speaks

UTC+8 16:30 Bank of England Chief Economist Huw Pill Speaks

UTC+8 16:35 Bank of Japan Governor Kazuo Ueda Gives an Interview with Financial Times

UTC+8 22:30 2024 FOMC Voting Members Raphael Bostic and Thomas Barkin Speak

UTC+8 00:00 Next Day: Richmond Fed President Thomas Barkin Speaks

UTC+8 01:30 Next Day: European Central Bank President Christine Lagarde Speaks

UTC+8 03:00 Next Day: Fed Chair Jerome Powell Speaks at an Expert Panel Organized by the IMF