Significant Corporate Earnings

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Significant Corporate Earnings

U.S stock futures remained relatively unchanged as investors prepared for significant corporate earnings releases, particularly from prominent tech companies. The market seemed to react positively to a decline in oil prices, which followed weekend airstrikes by Israel on Iran that did not impact energy facilities. As the busiest week of the earnings season progresses, traders are closely monitoring reports from major firms. Pfizer and McDonald’s are set to release their results before the market opens, while Alphabet, Snap, Reddit, Chipotle, and Advanced Micro Devices will report after the closing bell.

European markets saw modest gains as investors processed the latest earnings reports. HSBC’s London-listed shares surged by 4.5% following a third-quarter earnings report that exceeded analyst expectations and the announcement of a $3 billion share repurchase plan. Conversely, shares of Novartis dropped by 3.5%, despite the pharmaceutical giant raising its full-year guidance after reporting increased third-quarter sales. This mixed performance highlights the varied investor reactions to corporate earnings and strategic announcements.

On Tuesday, Asia-Pacific markets experienced mixed movements, with most indices showing gains. Japan’s Nikkei 225 rose by 0.77%, despite the ruling Liberal Democratic Party losing its parliamentary majority, indicating investor confidence in the market’s resilience. South Korea’s Kospi managed to reverse earlier losses, ending the day up by 0.21%. Hong Kong’s Hang Seng Index also saw a modest increase of 0.35%. In contrast, China’s CSI 300 fell by 1%, reflecting some market challenges. Additionally, Japan’s jobless rate for September improved slightly to 2.4%, down from 2.5% in the previous month.

Economic Calendar

Earnings Calendar

Notable reports for Tuesday before the bell include AMT, AWI, ABG, ATI, CBZ, CECO, CHKP, CMCSA, CVLT, GLW, CTS, DHI, DTM, EXP, ECL, EPD, ESAB, FELE, ULCC, GPK, HEES, HRMY, HNI, HUBB, INCY, IPGP, ITT, JBI, JBLU, KNSA, LDOS, MAS, MCD, MSCI, NWBI, PYPL, PFE, PSX, PJT, RCL, STNG, SSTK, SOFI, SWK, SYY, THC, XRX, & ZBRA. After the bell reports include TXG, ATGE, AMD, ALHC, ALSN, GOOGL, AMH, APAM, BRMN, BXP, CZR, CAKE, CHE, CMG, CB, DVA, EIX, EA, ENVX, EQT, ESS, EXEL, EXE, EXR, FCF, FSLR, FE, FMC, HURN, IEX, NGVT, LSTR, LFUS, MTH, MIR, MOD, MDLZ, NRDS, OI, OKE, PK, PRQ, PFS, QRVO, RDDT, RSG, SAGE, SKWD, SNAP, STAG, SKY, UDMY, UMBF, UIS, UNM, VRNS, V, WPC, WERN, & ZWS.

News & Technicals’

Ford has adjusted its 2024 earnings forecast to the lower end of its previously announced range, now expecting an adjusted EBIT of approximately $10 billion, down from the initial range of $10 billion to $12 billion. Despite this adjustment, the automaker slightly exceeded Wall Street’s third-quarter expectations. The company’s third-quarter performance was driven by strong results from its “Pro” commercial and fleet business, along with solid contributions from its traditional operations, known as “Ford Blue.”

BP reported an underlying replacement cost profit of $2.3 billion for the July-September period, surpassing analyst expectations of $2.1 billion according to an LSEG-compiled consensus. Despite this, the British oil major’s third-quarter net profit of $2.3 billion was a decline from the $2.8 billion reported in the second quarter and the $3.3 billion in the third quarter of 2023. This marks BP’s weakest quarterly performance since the fourth quarter of 2020, a period when industry profits were severely impacted by the coronavirus pandemic.

Delta Airlines is seeking over $500 million in damages, along with litigation costs and punitive damages, following an IT outage linked to CrowdStrike’s security software. The outage caused Delta to cancel thousands of flights and struggle with recovery, lagging its competitors. Delta claims that flaws in CrowdStrike’s software affected its computers despite having disabled automatic updates. In response, CrowdStrike has filed its own suit, arguing that the issues were due to “Delta’s own negligence.”

Microsoft has accused Google of orchestrating “shadow campaigns” to undermine its reputation with European regulators. According to a blog post by a Microsoft lawyer, Google is allegedly leading a coalition of cloud companies to sway policymakers and mislead the public. This accusation comes in the wake of Google’s announcement that it plans to file an antitrust complaint against Microsoft with the European Union’s executive body, criticizing Microsoft’s software licensing practices. The escalating tensions highlight the ongoing rivalry between the two tech giants in the competitive cloud services market.

Anticipation is high as we wait for significant corporate earnings that will include reports from the tech giants over the next three trading days.  Expect significant price volatility that could create meaningful morning gaps in the index charts so plan your risk carefully. New record highs in the QQQ and SPY are very possible but if some earnings disappoint big declines are also possible as traders run for the door.  Be prepared as all this pent-up emotion spills out over the market.

Trade Wisely,

Doug

Mega-cap earnings

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Mega-cap earnings

U.S. equity futures surged on Monday as investors anticipated a series of mega-cap earnings reports from technology companies, expected to propel the Nasdaq Composite to new highs. The weekend airstrikes by Israel against Iran, which did not target oil or nuclear facilities as initially feared, led to a decline in oil futures during early trading. Wall Street is gearing up for a significant week, marked by the busiest period of third-quarter earnings reports and the final stretch before the U.S. Presidential election on November 5. Notably, five of the “Magnificent Seven” companies—Alphabet, Microsoft, Meta Platforms, Amazon, and Apple—are set to release their third-quarter earnings this week.

European markets opened higher on Monday, with media and construction and materials stocks each gaining over 1%. However, oil and gas stocks declined by approximately 2.3%. Shares of Dutch medical devices giant Philips plummeted by 16.8% after the company revised its full-year sales outlook downward due to weak demand from China. Additionally, oil prices dropped by 6% on Monday following news that Iranian energy facilities were not damaged during an Israeli attack over the weekend.

On Monday, Japan’s benchmark Nikkei 225 and Topix indices saw gains, buoyed by a weaker yen amidst political uncertainty following the ruling LDP’s loss of its parliamentary majority. Meanwhile, China’s CSI 300 edged up by 0.2% to close at 3,964.16, despite the country reporting its worst industrial profit figures since the pandemic, with a significant 27.1% year-on-year decline in September. In other markets, Australia’s S&P/ASX 200 rose by 0.12%, South Korea’s Kospi increased by 1.13%, and Hong Kong’s Hang Seng index reversed earlier losses to finish 0.18% higher.

Economic Calendar

Earnings Calendar

Notable reports for Thursday before the bell include ACAD, BOH, CNP, HOPE, ON, PRCT, & SJW. After the bell reports include AGYS, AMKR, AESI, BOOT, BRX, BRO, CDNS, CALK, CWH, CSWC, CCCS, CDP, CR, CVI, PLOW, ESI, EHC, FFIV, FLS, F, HILT, NARI, FRC, LEG, LTC, NEW, PCH, RMBS, REG, SAFE, SBAC, SKY, TMDX, TREX, UFPI, UCTT, VFC, WM, & WELL.

News & Technicals’

Volkswagen is contemplating significant pay cuts, layoffs, and the closure or downsizing of its plants in Germany, according to the company’s works council. Management recently proposed a plan that includes a 10% across-the-board pay reduction and wage freezes for 2025 and 2026. The works council estimates that these measures will result in an overall pay cut of approximately 18% for workers over the period. Additionally, Volkswagen plans to shut down three factories and reduce the size of all other plants in Germany.

China’s industrial profits experienced their sharpest decline since the pandemic in September, according to data from the National Bureau of Statistics. Following a 17.8% drop in August, industrial profits plummeted by 27.1% year-on-year in September, marking the steepest fall since March 2020, which saw a 34.9% decrease. In response, Chinese authorities have intensified efforts in recent weeks to stimulate economic growth.

Shares of Japanese camera giant Olympus Corp dropped on Monday following the announcement of CEO Stefan Kaufmann’s resignation amid a drug allegation. Olympus disclosed that it had received an allegation that Kaufmann, a German national, had purchased illegal drugs. The company, in consultation with outside legal counsel, promptly investigated the matter, reported it to the authorities, and fully cooperated with their investigation.

Robinhood announced on Monday the launch of U.S. presidential election event contracts, allowing customers to trade based on their predictions for the closely contested race between Vice President Kamala Harris and former President Donald Trump. Event derivatives involve buying and selling contracts that let traders speculate on the outcomes of specific events, such as elections, economic data releases, or policy decisions, without owning the underlying assets. These derivatives, which are relatively new and generally considered high-risk compared to traditional financial instruments, have gained popularity in recent years.

The market looks to reverse Friday bearishness with huge anticipation of the mega-cap tech reports throughout the week ahead.  We are also seeming celebrating the Israel’s attack didn’t affect the oil infrastructure but strangely there seems to on concern about what Iran may do in response. Stay tuned as there may be more come on the geopolitical front.  Remember we have a big week of jobs data along with the earnings and those pesky bonds continue to march higher suggested a possible problem with this bull run. Plan carefully this week as price volatility could be wild!

Trade Wisely,

Doug

Attempting to Recover

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Attempting to Recover

U.S. stocks are attempting to recover after a significant downturn, with the Dow experiencing its largest one-day loss since early December. Strong earnings from Tesla have provided a boost of confidence, encouraging bullish sentiment as SPY and QQQ aim for a premarket rebound. Meanwhile, the 10-year Treasury yield has been on an upward trajectory this week, surpassing the 4.25% mark during Wednesday’s session high. This increase in yields has exerted pressure on stocks recently, contributing to the market’s volatility.

Thursday, European stocks saw a modest rise, with most major bourses and sectors trading in positive territory. Renault’s shares surged over 7% following an unexpected increase in third-quarter revenue, showcasing the French carmaker’s resilience. Similarly, Barclays experienced a 4% boost in its share price after reporting better-than-expected third-quarter results, reflecting strong performance in the British banking sector.

Asia-Pacific markets experienced a general downturn. South Korea narrowly avoided a technical recession, with its third-quarter GDP growing by a modest 0.1% quarter-on-quarter. Despite this, South Korea’s benchmark Kospi fell by 0.72%. Australia’s S&P/ASX 200 also saw a slight decline of 0.12%. Hong Kong’s Hang Seng index dropped significantly by 1.35%, and mainland China’s CSI 300 experienced a larger loss of 1.12%. In contrast, Japan’s Nikkei 225 was the notable outlier, managing to reverse earlier losses and gain 0.1%.

Economic Calendar

Earnings Calendar

Notable reports for Thursday before the bell include ADT, ALKS, ALLE, AB, AAL, AIT, BHLB, BFH, BC, CRS, CARR, CBRE, COLB, DOV, DOW, DTE, EEFT, XPRO, FRME, FSV, FCN, HOG, HAS, HON, ITGR, KDP, KKR, LH, LEA, LTH, LNN, LKQ, MSM, NDAQ, NOC, OSIS, PPBI, POOL, RDUS, RS, RCI, RES, R, SPGI, SMPL, SAH, SBSI, LUV, FTI, TECK, TXT, TSCO, TPH, UNP, UPS, VLO, VLY, VIRT, VC, WNC, WST, & WEX. After the bell reports include ABCB, APPF, ART, AJG, ASB, BYON, SAM, BYD, COF, CSL, CINF, COUR, CUZ, DECK, DXCM, DLR, EW, EXPO, FHI, FFBC, FIBK, GLPI, GBCI, HIG, DOC, KNSL, KN, LHX, MGRC, MTX, NOV, OLN, PECO, PDM, PFG, RMD, SBCF, SKX, SPSC, SSNC, TXRH, TROX, UHS, VRSN, WDC, WY, & WSFS.

News & Technicals’

On September 13, Boeing machinists initiated a strike after decisively rejecting a labor proposal, with 64% voting against it. The proposal included substantial benefits such as 35% raises, a $7,000 ratification bonus, and increased 401(k) contributions. Resolving this strike has become a top priority for Boeing’s new CEO, Kelly Ortberg, as the company faces ongoing financial strain and is projected to continue burning cash through 2025. Ending the strike is crucial for stabilizing Boeing’s operations and financial outlook.

United Parcel Service (UPS) reported an increase in third-quarter profit on Thursday, driven by a rebound in volume ahead of the holiday season, which boosted revenue. Cost-cutting measures also helped mitigate the impact on margins from consumers opting for cheaper delivery options. Notably, the growth has been largely fueled by new e-commerce players, specifically China-linked bargain retailers Shein and Temu. This shift has intensified the move from premium air services to more affordable ground services, and further to the even lower-profit SurePost services, reflecting changing consumer preferences in the delivery market.

IBM’s software division saw strong performance, driven by accelerated growth in its Red Hat business. However, the company’s consulting and infrastructure units fell short of revenue expectations. Looking ahead, IBM anticipates that fourth-quarter revenue growth, at constant currency, will match the 2% growth seen in the third quarter. This outlook reflects a balanced perspective on the company’s varied business segments and their contributions to overall growth.

Hyundai Motor issued a warning on Thursday about slowing demand and increasing competition yet maintained its 2024 earnings target despite a 7% decline in third-quarter operating profit. This announcement led to a more than 5% drop in its share price. During a conference call, CFO Lee Seung-jo highlighted the deteriorating business environment for the automotive industry, pointing to rising policy uncertainties and global geopolitical risks as significant challenges.

SPY and QQQ are attempting to recover on the back of the TSLA earnings, however, the disappointing results from IBM are keeping the DIA rather subdued in the premarket.  That said, with a huge number of earnings reports today and some potential market moving economic reports anything is possible.  Bond yields continue to apply significant pressure to the market as gold continues to surge will keep investors on edge despite the hype the earnings season creates.

Trade Wisely,

Doug

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