Another Increase in Bonds

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Another Increase in Bonds

Heading into Wednesday’s market open, U.S. stock futures traded lower, influenced by another increase in bonds yields raising interest rates. The benchmark 10-year Treasury note yield rose by 3 basis points to 4.23%, a level not seen since July. This rise is attributed to robust economic data and concerns over the deficit, despite a half-point rate cut by the Federal Reserve in September. Traders are increasingly worried that central bank policymakers might be less inclined to reduce rates in the near future.

European markets traded flat as investors concentrated on corporate earnings reports and U.S. Treasury yields. Despite Deutsche Bank surpassing profit expectations for the three months ending in September, its shares fell by 3%. In contrast, Roche’s shares increased by 0.7%, Heineken rose by 2.3%, Volvo Cars climbed by 1%, and Swedbank saw a significant rise of 6%. However, AkzoNobel’s shares dropped by

Asia-Pacific markets experienced a mixed performance. Tokyo Metro’s shares surged dramatically, soaring by as much as 47% during the day and closing 45% higher. However, Japan’s Nikkei 225 index fell by 0.8%. In contrast, South Korea’s Kospi climbed 1.12%, Australia’s S&P/ASX 200 edged up by 0.13%, and Hong Kong’s Hang Seng index increased by 1.33%. Meanwhile, Singapore’s core consumer price index, which excludes private transport and accommodation, rose by 2.8% in September compared to the previous year, surpassing the Reuters poll forecast of 2.7%. The overall consumer inflation in Singapore also rose by 2% year-on-year, slightly above the expected 1.9%.

Economic Calendar

Earnings Calendar

Notable reports for Wednesday before the bell include APH, T, AVY, BA, CME, KO, CSTM, EVR, GEV, GD, HCSG, HLT, KBR, LII, LAD, COOP, EDU, NEE, NEP, NTRS, ODFL, PRG, PB, ROP, SF, TMHC, TDY, TMO, TRU, TNL, UNF, UCB, VRT, WAB, WSO, & WGO. After the bell reports include ALGN AMP, ASGN, CACI, CP, CLS, CHDN, CYH, CLB, EGP, EQC, EPRT, GL, GSHD, GGG, GBX, IBM, ICLR, PI, KALU, KNX, LVS, LC, MAT, MXL, MC, MOH, MSA, MEN, ORLY, OII, CASH, PTEN, PEGA, QS, RJF, ROL, SLM, SEIC, NOW, SLP, SSB, STC, TMUS, TER, TSLA, TYL, URI, VLTO, VKTX, WCN, WSBC, WU, WHR, & WH.

News & Technicals’

McDonald’s shares fell by approximately 7% in after-hours trading on Tuesday following a CDC report linking an E. coli outbreak to the chain’s Quarter Pounder burgers. The outbreak has resulted in 10 hospitalizations and one death. Preliminary findings from the ongoing investigation suggest that the illnesses may be connected to slivered onions used in the Quarter Pounder. In response, McDonald’s has stated that it is taking “swift and decisive action” to address the outbreak in affected states.

Starbucks has released its preliminary results for the fiscal fourth quarter, revealing a continued decline in same-store sales for the third consecutive quarter, driven by a 10% drop in traffic to its North American stores. In response to these challenges, the company has suspended its outlook for fiscal 2025. To reassure investors and provide some stability, Starbucks has raised its quarterly dividend as part of its efforts to turn the business around.

Amazon is discontinuing its same-day delivery service, Amazon Today, which facilitated deliveries from mall and brick-and-mortar retailers. The company has halted any new development of the service and will begin winding it down. Selected retail partners can continue fulfilling orders through January 24, 2025. As part of this transition, a small number of employees will be laid off and provided with severance, while others will be reassigned to different positions within Amazon.

The International Monetary Fund (IMF) has issued a warning about the worsening state of China’s property market, which has led to a reduction in the country’s growth outlook. The IMF emphasized that the contraction in China’s property sector poses significant downside risks to the global economic outlook. Last week, China reported a third-quarter GDP growth of 4.6%, slightly above the 4.5% forecasted by economists polled by Reuters. However, in a report published on Tuesday, the IMF lowered its growth forecast for China to 4.8% for this year, down by 0.2 percentage points from its July projection.

The market will be trying to focus on earnings inspiration today with a huge increase in reports. However, another increase in bond yields could keep that excitement in check. The bad news in MCD and SBUX have created a nasty overnight whipsaw down so plan carefully as price volatility is likely to increase over the next several weeks as earnings numbers increase.

Trade Wisely,

Doug

Earnings Season Accelerates

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As the corporate earnings season accelerates, stock futures fell in premarket trading on Tuesday. Investors are closely watching third-quarter earnings, with about 20% of the S&P 500 companies set to report their results this week. So far, approximately 14% of the companies in the index have shared their earnings. Despite being early in the season, there are concerns on Wall Street that expectations for corporate America might be too high. Megan Horneman, Chief Investment Officer at Verdence Capital Advisors, believes that 2025 estimates are overly optimistic, even after recent adjustments. She also noted that investors will be paying close attention to discussions on interest rates, inflation, and the overall economic outlook during this earnings season.

On Tuesday, European markets saw a decline as investors evaluated earnings reports from key companies across the region. Despite the overall downturn, technology stocks managed to rise by 0.8%, driven by a notable performance from SAP. The software giant’s shares surged over 5% to a record high following an upward revision of its revenue guidance, fueled by robust growth in its cloud business. Conversely, the utilities and telecom sectors were the day’s laggards, falling by 2.05% and 1.43%, respectively. Shipping giant Maersk initially saw its shares climb 3.3% after upgrading its full-year earnings forecast due to strong container demand, but the gains were short-lived as the stock reversed to close 1% lower.

On Tuesday, Asia-Pacific markets experienced a general downturn, with most indices closing in the red amid a light day for economic data from the region. Australia’s S&P/ASX 200 dropped 1.66% to 8,205.7, marking its lowest point in nearly two weeks. South Korea’s Kospi fell 1.31% to 2,570.7, and the small-cap Kosdaq saw a significant decline of 2.84%, reaching its lowest level in over a month. Japan’s Nikkei 225 decreased by 1.39% to 38,411.96, while the broader Topix index fell 1.06% to 2,651.47. In contrast, Hong Kong’s Hang Seng index edged up 0.12% in its final hour of trading, and mainland China’s CSI 300 rose 0.57% to close at 3,957.78.

Economic Calendar

Earnings Calendar

Notable reports for Tuesday before the bell include GE, VZ, MMM, AOS, AUB, BANC, CMCSA, CBU, DHR, DENN, FL, GATX, GPC, HRI, IVZ, KMB, MCO, ONB, PCAC, PNR, PM, PII, PHM, DGX, RTX, & SHW. After the bell reports include ADC, BKR, BDN, CNI, CSGP, EWBC, ENVA, ENPH, HIW, JBT, MANH, MTDR, NBR, NBHC, PKG, PFSI, RRC, ROIC, RHI, STX, LRN, TXN, TRMK, VMI, VBTX, & VICR.

News & Technicals’

On Tuesday, Russia is hosting the latest BRICS summit, welcoming its allies in a display of strength aimed at the West. Originally formed as a coalition of rapidly developing economies, the BRICS group—comprising Brazil, Russia, India, China, and South Africa—has evolved into a significant geopolitical forum. The group’s influence has further expanded with the addition of Egypt, Ethiopia, Iran, and the United Arab Emirates in January. Russian President Vladimir Putin often speaks of his vision for a “new world order” designed to challenge and potentially surpass the geopolitical and economic dominance of the U.S.-led Western world.

HSBC has announced a significant restructuring, introducing a new geographic setup, streamlined operations, and appointing its first female Chief Financial Officer. This marks the second major leadership change for the bank in recent months, following the appointment of former finance chief Georges Elhedery as CEO in July. The reorganization will see HSBC divided into four key divisions: Hong Kong, U.K., international wealth and premier banking, and corporate and institutional banking. This overhaul aims to enhance the bank’s operational efficiency and strategic focus across its global markets.

The U.S. government is in the final stages of reviewing measures aimed at restricting investments into China, particularly in sensitive technologies such as artificial intelligence. According to a recent update, the Treasury Department will soon require notifications for outbound investments into these areas. The final rules are expected to be released within the next week. The Treasury Department highlighted the potential risks to U.S. national security posed by the military, intelligence, surveillance, and cyber applications of these technologies, especially when developed by countries of concern like China.

The U.S. government is in the final stages of reviewing measures aimed at restricting investments into China, particularly in sensitive technologies such as artificial intelligence. According to a recent update, the Treasury Department will soon require notifications for outbound investments into these areas. The final rules are expected to be released within the next week. The Treasury Department highlighted the potential risks to U.S. national security posed by the military, intelligence, surveillance, and cyber applications of these technologies, especially when developed by countries of concern like China.

Gold has entered a new bullish phase, according to Paul Wong, market strategist at Sprott Asset Management. This surge is driven by factors such as increased central bank buying, rising U.S. debt, and a potential peak in the U.S. dollar. Wong’s comments follow gold’s recent climb to a record high of $2,700 per ounce. Many analysts are optimistic that this upward trend will continue, with some forecasting that gold prices could surpass $2,800 within the next three months.

The price volatility is likely to expand as the earnings season accelerates with about 15% of the SP-500 expected to report throughout the remainder of the week. Before establishing any new trade, it would be wise to check the earnings date before pulling the trigger.  There is a growing concern that earnings estimates are to high so plan carefully and be prepared if reports happen to disappoint.

Trade Wisely,

Doug

Initial Weekly Jobless Claims

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Initial Weekly Jobless Claims

U.S. stock futures edged up slightly on Thursday as investors awaited the release of initial weekly jobless claims data and September retail sales figures at 8:30 a.m. ET. These reports are expected to provide insights into the health of the labor market and consumer spending in the U.S. Additionally, corporate earnings reports are set to continue, with Travelers, Blackstone, and Elevance Health among the major companies reporting Thursday morning. Regional banks, including KeyCorp, M&T Bank, and Truist Financial, are also scheduled to release their earnings, adding to the day’s financial data.

European markets saw an uptick on Thursday morning as traders anticipated the upcoming monetary policy decision from the European Central Bank (ECB). The banking sector led the charge, with the banking index rising nearly 1.3%, while telecom stocks saw a slight decline of 0.5%. The ECB is expected to announce its third interest rate cut of the year, responding to inflation risks in the European Union that are diminishing more rapidly than anticipated. In September, inflation in the euro area cooled to 1.8%, falling below the ECB’s 2% target.

Most Asia-Pacific markets experienced a downturn on Thursday following a lackluster briefing from China’s housing ministry, which failed to meet investor expectations and led to a significant drop in the country’s property stocks. In Japan, exports declined by 1.7% in September compared to the same month last year, while import growth for the same period was 2.1%, falling short of forecasts. Meanwhile, Australia reported a slight decrease in its unemployment rate for September, which came in at 4.1%, marginally lower than the figure predicted by a Reuters poll.

Economic Calendar

Earnings Calendar

Notable reports for Wednesday before the bell include BMI, BX, CMC, ELV, HBAN, IIIN, IRDM, KEY, MTB, MAN, MMC, SNA, TCBI, TRV, TFC, WBS, & WNS. After the bell reports include NFLX, OZK, CCK, ISRG, FNB, WDFC, & WAL.

News & Technicals’

TSMC reported a net income of 325.3 billion Taiwanese dollars ($10.1 billion) for the July-September quarter, exceeding the LSEG estimate of 300.2 billion Taiwanese dollars. The company’s net revenue for the third quarter reached $23.5 billion, marking a 36% increase year-on-year. As the world’s largest producer of advanced chips, TSMC continues to serve major clients like Apple and Nvidia, highlighting its pivotal role in the global semiconductor industry.

Novavax announced that the Food and Drug Administration has placed a hold on its application for a combination shot targeting both Covid-19 and influenza, as well as a stand-alone flu vaccine. This decision, which caused a sharp decline in the company’s shares, stems from a single report of nerve damage in a patient who received the combination shot during a phase two trial completed in July last year. This development represents a setback for Novavax, which is urgently working to introduce new products to the market amid declining global demand for its Covid-19 vaccine.

Shares of Lucid Group declined during after-hours trading following the announcement of a public offering of nearly 262.5 million shares of its common stock. The electric vehicle startup plans to use the proceeds from this offering for general corporate purposes, which may include capital expenditures and working capital. This move aims to bolster the company’s financial position as it continues to expand its operations and market presence.

The Biden administration announced the forgiveness of an additional $4.5 billion in student debt, benefiting over 60,000 borrowers. This latest round of relief stems from the U.S. Department of Education’s improvements to the Public Service Loan Forgiveness program, which has faced challenges in the past. Eligible borrowers can expect to receive notifications about their cancelled debt in the coming weeks, marking a significant step in the administration’s ongoing efforts to address student loan burdens.

With a big round of earnings and economic reports that begin with initial weekly jobless claims, expect some price volatility with the T2122 indicator flashing an overbought warning.  We will also have to digest Retail Sales, Philly Fed Mfg., Industrial Production, Business Inventories, Housing Market Index, Natural Gas, Petroleum and more Fed talk from Goolsbee. So, buckle up it could be a wild and woolly day!

Trade Wisely,

Doug

Wait for Directional Signals

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Stock futures remained flat as investors wait for directional signals of follow-through up or down. This week’s earnings reports have been a mixed bag, with strong performances from major banks being counterbalanced by weaker outlooks from companies like UnitedHealth Group and Dutch chipmaker ASML. Investors are particularly focused on upcoming reports from Morgan Stanley and Abbott Laboratories, due before the market opens. Bryn Talkington, managing partner of Requisite Capital Management, mentioned on CNBC’s “Closing Bell” that the stock market is expected to be volatile in the coming weeks as investors navigate through earnings season and the presidential election.

European markets saw a decline as global market sentiment deteriorated. However, the FTSE 100 stood out among major regional indices, rising by 0.6% following the release of U.K. data indicating a significant drop in the inflation rate to 1.7% in September. Among individual stocks, LVMH experienced a notable drop of 6.3% at the opening, while British hotel group Whitbread emerged as the best performer, with its shares increasing by 3.7%.

Asia-Pacific markets experienced a downturn as investors remained cautious, anticipating potential stimulus measures aimed at bolstering China’s real estate sector. The upcoming press briefing by China’s housing minister on Thursday is expected to shed light on these measures. Meanwhile, New Zealand reported a 2.2% increase in its consumer prices index for the third quarter, indicating rising inflationary pressures. In South Korea, the seasonally adjusted unemployment rate slightly increased to 2.5% in September from 2.4% in August, reflecting minor fluctuations in the labor market.

Economic Calendar

Earnings Calendar

Notable reports for Wednesday before the bell include ABT, ASML, DFG, FHN, MS, OFG, PLD, SYF, USB, & WAFD. After the bell reports include AA, CNS, CCI, CSX, DFS, EFX, FR, HOMB, KMI, PPG, REXR, SLG, STLD, & SNV.

News & Technicals’

United Airlines reported third-quarter revenue and earnings that exceeded Wall Street expectations, signaling a strong performance. The airline also announced a $1.5 billion share buyback, marking its first repurchase since the onset of the Covid-19 pandemic. Additionally, United’s fourth-quarter earnings estimate surpassed analysts’ forecasts, further highlighting the company’s positive financial outlook.

On Wednesday, Asian and European chip stocks declined following disappointing sales forecasts from Dutch semiconductor equipment maker ASML, which negatively impacted global stocks in the sector. In Asia, Japan’s Tokyo Electron experienced the most significant losses, with its stock plummeting nearly 10%. Meanwhile, in Europe, ASML’s stock fell for the second consecutive day, losing 4% of its value. ASML’s CEO, Christophe Fouquet, highlighted customer caution in the company’s early released results, noting that the recovery is progressing more gradually than previously anticipated.

Boeing announced plans to raise up to $25 billion to strengthen its balance sheet, a move aimed at enhancing its financial stability. In a separate filing, the company disclosed that it has secured a $10 billion credit agreement with banks. Despite these efforts, Boeing is under scrutiny from credit ratings agencies, which have issued warnings that the company could lose its investment-grade rating. This highlights the ongoing financial challenges Boeing faces as it navigates a complex economic landscape.

Venture funding for cloud startups in the U.S., Europe, and Israel is expected to increase by 27% year-over-year, marking the first rise in three years, according to a report from VC firm Accel. Of the $79.2 billion raised by cloud firms, 40% was allocated to generative AI startups. Philippe Botteri, a partner at Accel, highlighted the dominance of AI in the sector, stating that “AI is sucking the air out of the room” in an interview with CNBC. This trend underscores the growing focus and investment in AI technologies within the cloud industry.

Mortgage Apps number came with a substantial disappointment this morning as investors wait for directional signals of what the follow-though will look like today. The ASML early report had bearish effects not only here in the U.S. but also translated into selling around the world last night.  Of course, earnings results or the economic numbers are likely to provide the inspiration for the bulls or bears to make that decision.  Remember that Thursday is a very big day of economic reports so plan your risk accordingly.

Trade Wisely,

Doug

Record Highs

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Record Highs

Stock futures remained relatively stable on Tuesday following record highs for both the Dow Jones Industrial Average (DIA) and the S&P 500 (SPY). Information technology stocks were the standout performers, driving the S&P 500 up by nearly 1.4%, with Nvidia’s 2.4% rally to a record close providing significant upward momentum. The focus now shifts to corporate earnings, with major financial institutions like Goldman Sachs, Citigroup, and Bank of America set to report. Additionally, earnings from United Airlines, Walgreens Boots Alliance, and Johnson & Johnson are anticipated. Investors are also keeping a close watch on manufacturing data and comments from several Federal Reserve speakers, which could influence market sentiment.

European stocks showed a mixed performance on Tuesday as third-quarter earnings reports began to emerge. The market saw a divergence across sectors, with travel stocks rising by 1.3%, while oil and gas stocks fell by 3.15%, mirroring declines in the oil market. Telecom stocks gained 1.39%, largely driven by a significant 8.5% jump in Sweden’s Ericsson, which exceeded earnings expectations despite a 4% drop in year-on-year sales. Meanwhile, the U.K.’s statistics agency reported that average wages excluding bonuses increased by 4.9% year-on-year, though earnings including bonuses fell to a two-year low of 3.8%.

China’s stock markets experienced a significant downturn on Tuesday following the release of disappointing September trade data. Both exports and imports fell short of expectations, with exports rising only 2.4% and imports increasing a mere 0.3% compared to the previous year. This led to a 2.66% drop in the CSI 300 index and a 3.67% decline in Hong Kong’s Hang Seng index. In contrast, South Korea’s Kospi index saw a modest gain of 0.39%, buoyed by revised trade data showing a substantial surplus of $6.7 billion for September. Japan’s Nikkei 225 and Australia’s S&P/ASX 200 also posted gains, rising 0.77% and 0.79%, respectively.

Economic Calendar

Earnings Calendar

Notable reports for Tuesday before the bell include ACI, BAC, C, SCHW, GS, JNJ, PNC, PGR, STT, UNH, & WBA. After the bell reports include FULT, HWC, IBKR, JBHT, OMC, PNFP, SGH, & UAL.

News & Technicals’

Nvidia shares have reached an all-time high, driven by soaring demand for it’s artificial intelligence chips. Major tech companies like Microsoft, Meta, Google, and Amazon are purchasing Nvidia’s graphics processing units (GPUs) in large quantities to build extensive AI computing clusters. This surge in demand has propelled Nvidia’s market valuation to over $3.4 trillion, underscoring its pivotal role in the AI revolution and solidifying its position as a leading player in the tech industry.

A federal appeals court has expedited the Commodity Futures Trading Commission’s (CFTC) case against the Kalshi exchange, which is offering contracts that function as bets on U.S. political elections. These contracts, facilitated by Kalshi and Interactive Brokers, allow bets on outcomes such as the presidential election, U.S. Senate races, and which party will control Congress. Notably, Kalshi has already booked over $7 million in contracts on the presidential race between former President Donald Trump and Vice President Kamala Harris. The court’s decision to fast-track this case underscores the regulatory scrutiny surrounding the legality of such political betting markets.

Ericsson reported adjusted third-quarter earnings of 7.327 billion Swedish crowns ($0.7 billion) on Tuesday, significantly exceeding the analysts’ forecast of 5.75 billion crowns. This impressive performance was largely driven by robust sales growth in North America, which saw a year-on-year increase of over 50%. The company’s strengthened position in the U.S. market, bolstered by securing a major contract with AT&T last year, where it outperformed Finnish competitor Nokia, has been a key factor in this success.

Federal Reserve Governor Christopher Waller indicated on Monday that upcoming interest rate cuts will be more measured compared to the significant reduction in September. He emphasized a gradual approach to lowering the policy rate over the next year, despite short-term uncertainties. Waller’s comments come amid mixed economic data, which the Fed is closely monitoring to guide its policy decisions. This cautious stance reflects the Fed’s aim to balance economic growth with inflation control.

With the DIA and SPY sporting fresh record highs we now face the ramp up of earnings reports likely to inspire significant price volatility.  The rising dollar and bond yields continue to be a contradiction to the market’s bullish enthusiasm and the T2122 indicator continues to flag a short-term overbought condition.  Stay with the trend but tighten stops as it would only take a minor stumble to trigger a profit taking wave.

Trade Wisely,

Doug

September’s CPI Report

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September's CPI Report

U.S. stock futures dipped on Thursday as investors await the release of September’s CPI report, scheduled for 8:30 a.m. ET. The report is expected to provide further indications of whether inflation is continuing to cool. Economists surveyed by Dow Jones predict a modest 0.1% increase in the CPI monthly and a 2.3% rise over the past year. Additionally, Thursday morning will see the release of weekly initial jobless claims, adding to the day’s economic data that investors will be closely monitoring.

European markets opened slightly lower on Thursday morning as investors awaited the latest U.S. inflation data. The insurance sector saw a boost, with stocks rising by 0.72%, driven by stronger prospects following Hurricane Milton’s severe impact on Florida. Conversely, mining stocks experienced a decline, falling by 0.8%. This mixed performance reflects the varied investor sentiment across different sectors in anticipation of the upcoming economic indicators.

Asia-Pacific markets experienced a positive close on Thursday, with several key indices showing gains. In China, the central bank announced it is accepting applications from financial institutions to participate in a new liquidity tool, initially valued at 500 billion yuan ($70.7 billion), aimed at providing easier access to capital for the stock market.

Economic Calendar

Earnings Calendar

Notable reports for Wednesday before the bell include DAL, DPZ, NEOG, & TLRY. After the bell there are no notable reports.

News & Technicals’

Japanese convenience retailer Seven & i Holdings, the parent company of 7-Eleven, has revised its earnings forecast for the fiscal year ending February 2025, lowering its expectations. This decision comes as the company faces increasing pressure from investors to streamline its extensive business portfolio. In response, Seven & i Holdings announced plans to establish an intermediate holding company to manage its supermarket food business, specialty stores, and other ventures. This strategic move aims to enhance operational efficiency and address investor concerns about the company’s diverse range of businesses.

Amazon is experimenting with integrating automated mini warehouses into Whole Foods supermarkets, creating a new store format that enhances the shopping experience. This innovative approach allows customers to purchase items from Amazon’s online store and its mass-market supermarket chain while browsing Whole Foods, with the convenience of picking up their orders at checkout. By streamlining the shopping process, Amazon aims to attract more grocery shoppers and gain a competitive edge over its rivals, offering a one-stop solution for all their shopping needs.

Two former Pfizer executives, Ian Read and Frank D’Amelio, who were previously associated with activist investor Starboard Value’s campaign at the struggling pharmaceutical company, announced late Wednesday that they would step back from the effort. Both Read, the former CEO, and D’Amelio, the ex-CFO, expressed their full support for current CEO Albert Bourla and his management team. Meanwhile, Starboard Value has acquired a significant stake in Pfizer, amounting to approximately $1 billion, as it seeks to drive a turnaround at the company.

At their September meeting, Federal Reserve officials agreed to cut interest rates but faced uncertainty about the extent of the reduction. Minutes released on Wednesday revealed that a substantial majority of participants supported a half-percentage-point cut, though some expressed reservations about such a significant move. Since the meeting, economic indicators have suggested that the labor market is stronger than anticipated by those advocating for the 50-basis point cut, adding complexity to the decision-making process.

As we wait for September’s CPI report one must wonder if yesterday’s big push that set new record highs in the DIA and SPY if investors will be rewarded for their anticipation or disappointed should prices reverse.  We will soon find out.  The sharp rally in bond yields pushing rates higher seems to be a substantial contradiction to the bullishness.  That said, it would be wise to be prepared for anything including the possibility we will still have to wait for earnings to really get prices moving.

Trade Wisely,

Doug

Struggle to Follow Through

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Struggle to Follow Through

U.S. stock futures dipped Wednesday as prices struggle to follow-through after a strong session Tuesday, driven by tech stocks and a decline in oil prices from their recent highs. Despite this positive momentum, the market could face further volatility, as October is historically the most turbulent month, especially with the U.S. presidential election just weeks away. Investors are also keenly awaiting the release of the latest Federal Reserve meeting minutes at 2 p.m. ET, which could provide further insights into the economic outlook and monetary policy direction.

On Wednesday, European markets experienced slight gains despite fluctuating positive sentiment, largely influenced by the volatility in Chinese markets. The mixed performance in Asia, especially the significant sell-off in Chinese stocks, led to a cautious mood among European investors. Nevertheless, certain sectors managed to post gains, with banks rising by 1.7% and oil and gas stocks adding 1.6%. Key events to watch in Europe today include the German government’s latest economic forecasts and the NATO defense ministers’ meeting in Belgium.

On Wednesday, Chinese stocks experienced a significant sell-off amid a volatile trading day across Asia-Pacific markets. The mainland CSI 300 index plummeted by 7.05%, ending a 10-day winning streak and closing at 3,955.98. Similarly, Hong Kong’s Hang Seng index dropped 1.7% in its final hour of trading. In contrast, Japan’s Nikkei 225 rose by 0.87% to 39,277.96, and the Topix index increased by 0.3%, closing at 2,707.24. Australia’s S&P/ASX 200 saw a modest gain of 0.13%, finishing at 8,187.4. Meanwhile, New Zealand’s central bank cut its policy rate by 50 basis points to 4.75%, whereas the Reserve Bank of India maintained its rate at 6.5%.

Economic Calendar

Earnings Calendar

Notable reports for Wednesday before the bell include HELE. After the bell reports include AZZ.

News & Technicals’

Boeing announced it has withdrawn its contract offer following a breakdown in negotiations with the machinist union. Over 32,000 Boeing machinists went on strike on September 13 after decisively rejecting a new contract proposal. The union stated that Boeing failed to offer wage increases and other improvements during the latest round of discussions, leading to the current impasse. This development marks a significant escalation in the labor dispute between Boeing and its machinists.

Starting Wednesday, Disneyland will increase the prices of its most popular tickets. While the base entry price will stay at $104, other ticket prices will rise by $7 to $12. Additionally, the cost of the Magic Key annual passes will see a hike of 6% to 20%, translating to an increase of $100 to $125 depending on the pass type. These adjustments reflect Disneyland’s ongoing efforts to manage demand and enhance the guest experience.

Late Tuesday, the Department of Justice announced it is contemplating a potential breakup of Google as an antitrust measure. The DOJ is evaluating both behavioral and structural remedies to prevent Google from leveraging products like Chrome, Play, and Android to favor its search engine. The judge has not yet ruled on these remedies, and Google is expected to appeal, which could prolong the legal process for years. This development marks a significant step in the ongoing scrutiny of Google’s market practices.

On Monday, a U.S. judge issued a permanent injunction requiring Google to provide alternatives to its Google Play store for downloading apps on Android phones. This ruling, delivered by Judge James Donato in a California court, represents the most significant outcome of Epic Games’ antitrust lawsuit against Google, which began in 2020. Additionally, Epic and Google will establish a three-person committee to review technical issues related to Google’s compliance with the injunction, according to the court filing.

Although very select stocks gave us an impression of a very bullish shift this morning, futures prove that the market remained locked in the consolidation range and struggle to follow through continues. The rising bond yields pushed mortgage rates higher triggering a sharp decline in applications this morning raising some uncertainty as we wait for the FOMC minutes. However, we are likely getting closer to big move in the market perhaps inspired by the Thursday CPI report or the big bank reports beginning Friday morning.  Buckle up for a possible explosion of volatility in the days ahead.

Trade Wisely,

Doug

Slight Rebound

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Slight Rebound

Stock futures saw a slight rebound following a challenging day on Wall Street, where rising oil prices and bond yields exerted downward pressure on the markets. On Tuesday morning, these factors eased somewhat, improving investor sentiment. The 10-year Treasury yield notably climbed above 4%, reaching its highest level since early August, while West Texas Intermediate oil futures rose above $77 per barrel, impacting the broader market negatively. However, the energy sector benefited from the rise in oil prices, making it the only one of the 11 sectors in the S&P 500 to close Monday in positive territory. Investors are now turning their attention to upcoming economic data on small businesses and the trade deficit.

European markets continued to decline as regional sentiment worsened amid ongoing concerns about the Middle East conflict. Mining stocks led the losses, dropping 4.54%, while household goods fell by 2.37%. European luxury stocks, including major brands like LVMH and Kering, also opened lower as hopes for a demand boost from Chinese stimulus measures faded. This downturn follows a shaky start to the week, reflecting broader investor apprehension.

Chinese markets experienced a volatile session following a briefing from the National Development and Reform Commission that lacked specifics on additional stimulus measures. The CSI 300 index in mainland China surged over 10% at the opening but eventually trimmed its gains to close 5.93% higher at 4,256.1. Meanwhile, Hong Kong’s Hang Seng index saw a dramatic drop of over 10% before recovering slightly to end with a 9% loss. Other Asia-Pacific markets also faced declines, influenced by Japan’s economic data showing a 1.9% year-on-year decrease in household spending for August, marking the steepest decline since January.

Economic Calendar

Earnings Calendar

Notable reports for Monday before the bell notable reports include PEP, & ACCD. After the bell there are no notable reports.

News & Technicals’

Uber is enhancing its platform with new sustainability-focused features. One notable addition is the “EV preference” option, allowing customers to choose fully electric vehicles by default when hailing a ride. On the delivery side, Uber Eats is expanding its offerings to include farmers’ market produce in New York City and Los Angeles. For drivers, Uber is introducing an “EV Mentor” program and an AI chatbot powered by OpenAI’s ChatGPT, designed to assist drivers with questions about purchasing and using battery electric vehicles instead of traditional gas-powered ones. These updates reflect Uber’s commitment to promoting environmentally friendly practices across its services.

A Delaware bankruptcy judge has approved FTX’s reorganization plan nearly two years after the cryptocurrency exchange filed for bankruptcy. The company has amassed between $14.7 billion and $16.5 billion in assets, which it intends to distribute to its creditors. Under the court-approved plan, 98% of FTX’s creditors are expected to receive 119% of their allowed claims, marking a significant recovery for those affected by the exchange’s collapse.

On Tuesday, South Korean tech giant Samsung Electronics announced that it anticipates lower-than-expected profits for the third quarter. The company, a leading memory chip manufacturer, projected an operating profit of approximately 9.10 trillion won, a significant increase from last year’s 2.43 trillion won. However, this figure falls short of the 11.456 trillion won ($7.7 billion) forecasted by analysts polled by LSEG for the quarter ending September 30.

Super Micro shares surged by 15% after the computer server company announced it is shipping over 100,000 graphics processing units (GPUs) per quarter, driven by the growing demand for artificial intelligence. As a major player in the AI boom, Super Micro provides computers that serve as servers for data storage, websites, AI training models, and more. Despite this positive momentum, the company is currently about nine weeks behind in releasing its annual report, which was initially expected in August.

Although the easing bond yields are providing a slight rebound this morning, we should remember the indexes remain within their choppy range and market breadth remains very low.  Of course, big moves are possible if something changes in the Middle East.  Other than that, the market will likely continue to chop until waiting on FOMC minutes, CP, PPI and beginning of earnings season on Friday.  Trade wisely and try not anticipate ahead of these big data points.

Trade Wisely,

Doug

Struggle to Maintain Momentum

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Struggle to Maintain Momentum

Stock futures declined on Monday as Wall Street faced struggle to maintain momentum. Contributing to the pressure was a rise in U.S. Treasury yields, with the benchmark 10-year Treasury yield increasing nearly 3 basis points to 4.008%, marking its first time above 4% since August. Keith Lerner, co-chief investment officer at Truist Wealth, warned that the upcoming U.S. presidential election and the potential for an “October surprise” could sustain market volatility in the coming weeks. Investors are also closely monitoring international developments, particularly the ongoing tensions in the Middle East.

European stocks began the new trading week on a positive note, initially buoyed by gains in Asia overnight, but quickly pared back those gains. Currently, banks and household goods are the only sectors in positive territory, with increases of 0.2% and 0.4%, respectively. Shares of Rio Tinto fell by 0.26% after the mining company confirmed it was in discussions to acquire lithium producer Arcadium Lithium. On the data front, the U.K.’s Halifax House Price Index revealed that British house prices rose in September at the fastest annual pace since November 2022. Additionally, euro zone retail sales in August edged up by 0.2% from the previous month, aligning with expectations from a Reuters poll.

This week, the financial spotlight is on the Asia-Pacific region as three central banks—the Bank of Korea (BOK), Reserve Bank of New Zealand (RBNZ), and Reserve Bank of India (RBI)—prepare to announce their interest rate decisions. According to a Reuters poll, economists anticipate rate cuts from both the BOK and RBNZ, while the RBI is expected to maintain its current rate. The Nikkei index saw a significant rise, climbing 1.8% to close at 39,332.74, driven by gains in financial and consumer cyclical stocks, with Mizuho Financial Group and Nikon among the top performers.

Economic Calendar

Earnings Calendar

Notable reports for Monday before the bell we have no notable reports. After the bell reports include NAPA.

News & Technicals’

Early Monday, Hurricane Milton intensified to a Category 2 storm, prompting Florida to prepare for its largest evacuation in seven years. The hurricane is projected to impact major population centers such as Tampa and Orlando. Although forecast models show varying paths, the most likely scenario indicates that Milton could make landfall in the Tampa Bay area on Wednesday and maintain its hurricane status as it traverses central Florida before moving into the Atlantic Ocean.

Beginning October 7, banks in the U.K. will be mandated to compensate victims of online fraud up to £85,000. This new regulation comes amid ongoing tensions between financial institutions and tech companies over the responsibility for combating online scams. On Thursday, London-based digital bank Revolut criticized Meta, claiming it has fallen “woefully short” in its global efforts to address fraud. For years, banks have felt they are shouldering the majority of the financial burden from virtual scam attacks, exacerbating the friction between these sectors.

Starboard Value has acquired approximately $1 billion stake in Pfizer, as reported by sources familiar with the situation. The activist fund, led by Jeff Smith, is considering involving former Pfizer CEO Ian Read and ex-finance chief Frank D’Amelio, though their potential roles remain unspecified. This investment comes at a challenging time for Pfizer, which is aggressively cutting costs due to declining demand for its Covid-19 treatments.

The 10-year Treasury yield, a key benchmark for mortgages and car loans, surged back above 4% amid stronger labor market data. This marks its highest level since early August and a significant rebound from its 2024 low of approximately 3.58% just over a month ago. Investors are closely watching speeches from Federal Reserve officials Neel Kashkari, Raphael Bostic, Michelle Bowman, and Alberto Musalem, scheduled for Monday. Additionally, the 10-year Treasury auction is set for Wednesday, which could further influence market dynamics.

I would not be surprised if the struggle to maintain momentum continued this week despite the bullish rally in the market on Friday squeaking out new record high close in the DIA.  Market is highly anticipating the kick-off on earnings on Friday hoping the results will finally push us out of this choppy consolidation. However, between now and then we have an FOMC minutes release, a CPI report and a PPI report along with rising bond yields and oil prices providing uncertainty. Of course, all the geopolitical tensions and pending election just piles on the uncertainty facing the market.

Trade Wisely,

Doug

Escalating Tensions

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Escalating Tensions

October trading has begun on a challenging note, with escalating tensions in the Middle East dampening market enthusiasm. These growing concerns have also pushed oil prices higher, with U.S. crude futures rising by over 1.5%, contributing to a week-to-date gain of 4.6%. On Wall Street, investors are anticipating new labor market data, including the release of weekly initial jobless claims on Thursday and September’s payrolls report, which is due on Friday morning.

European stocks declined on Thursday, influenced by the ongoing conflict in the Middle East, which dampened regional investor sentiment. Auto stocks were particularly affected, falling by 1.87% amid reports that the European Union might impose tariffs of up to 45% on Chinese electric vehicle (EV) manufacturers as early as Friday. Investors also evaluated new unemployment data from the euro zone, which revealed that the unemployment rate remained steady at a record low 6.4% in August.

On Thursday, Hong Kong stocks experienced a significant drop, ending a six-day winning streak as the momentum from China’s stimulus measures began to wane. Concurrently, the Japanese yen weakened against the U.S. dollar, marking its largest single-day decline since June 2022. Meanwhile, markets in mainland China will remain closed until October 8th due to a week-long holiday, and South Korea’s markets are also closed for National Foundation Day. Additionally, Taiwan’s markets were shut for a second consecutive day as Typhoon Krathon brought heavy rainfall to the island.

Economic Calendar

Earnings Calendar

Notable reports for Thursday before the bell include ANGO & STZ. After the bell reports include TLRY.

News & Technicals’

Levi Strauss reported mixed quarterly results, announcing plans to sell its Dockers business. While the company experienced robust growth in its namesake brand and Beyond Yoga, sales at Dockers fell by 15% during the quarter. Despite this, Levi’s focus on direct selling and lower cotton costs contributed to a 4.4 percentage point increase in its gross margin.

Europe’s leading car manufacturers are growing increasingly anxious about the potential for substantial fines, especially as demand for electric vehicles (EVs) weakens ahead of stricter carbon regulations. Starting next year, European carmakers will face more stringent emission targets, with the EU cap on average emissions from new vehicle sales dropping to 93.6 grams of CO2 per kilometer. Renault CEO Luca de Meo recently indicated that if EV sales do not improve, the European auto industry could face financial penalties amounting to 15 billion euros ($16.5 billion).

Atlanta is expected to experience haze and a chlorine odor on Thursday as authorities work to manage the aftermath of a chemical lab fire that started on Sunday. Air quality monitoring around the BioLab facility in Conyers detected elevated chlorine levels overnight, according to a news release from the Georgia Emergency Management and Homeland Security Agency on Wednesday. The presence of chemical gas has led to a shelter-in-place recommendation for the entire county, which has a population of 93,570, and mandatory evacuation orders for residents in the vicinity of the plant.

The British pound dropped by over 1% against the U.S. dollar on Thursday following comments from Bank of England Governor Andrew Bailey. In an interview with the Guardian, Bailey suggested that further positive news on inflation could enable the central bank to adopt a more proactive stance on rate cuts. The Bank of England maintained interest rates at 5% in September after a 25-basis point cut in August, citing concerns about high services inflation. Bailey also expressed optimism that cost of living pressures had not been as persistent as previously anticipated.

Israel’s response early Thursday put geopolitics front and center in the minds of investors as the escalating tensions weigh on sentiment. The DIA, SPY and QQQ remain in choppy yet bullish patterns while market breadth continues to wane. I would expect more of the same today unless we can find some substantial inspiration in the weekly claims data.  However, the pending employment situation report Friday could also inspire a break of this 2 week long consolidation.

Trade Wisely,

Doug