Stocks Rested

December 6, 2023 by Doug Campbell

Stocks rested though the bears briefly made an appearance after the China credit downgrade but we quickly shook off the mounting debits as traders bought the dip in the tech giant’s.  The labor market data in the JOLTS report pointed to a slowing economy but encouraged the bulls as bond yields fell that additional rate hikes are unlikely.  Today we have more labor data pending in the ADP along with Mortgage, Trade, Productivity, and Petroleum data along with a handful of notable reports to inspire traders.  Corporate buybacks will begin winding down as their blackout period begins next week so plan your risk accordingly. 

Overnight Asian markets shook off the China downgrade with the Nikkei leading the buying up 2.04% with only the Shanghai seeing modest selling.  European markets trade green across the board this morning with the DAX extending its record high. U.S. futures also point to a resurgence of buyers after a brief two-day rest ahead of earnings and economic data. 

Economic Calendar

Earnings Calendar

Notable reports for Wednesday include AI, BF.B, CPB, CHPT, CHWY, DSGX, GME, GEF, OLLI, OXM, SMTC, SPWH, THO, UNFI, VEEV, VRNT.

News & Technicals’

The world is facing a major change in 2024, according to the Danish investment bank. The bank said that the past decade’s trends are coming to an end, and that the future will be shaped by some unexpected events that could have a huge impact on the financial markets. These events are unlikely but possible, and the bank warned that investors should be prepared for them. Some of the events that the bank predicted are: a global cyberattack, a new pandemic, a war between China and Taiwan, a collapse of the European Union, and a massive solar storm. These events could disrupt the global economy, politics, and society, and create new opportunities and challenges for the financial sector.

Generative artificial intelligence, which can create realistic texts, images, and sounds, is attracting a lot of attention and investment from Big Tech companies. However, these models also consume a lot of water, which raises environmental concerns. A study by Shaolei Ren, a researcher at the University of California, Riverside, revealed that ChatGPT, a popular chatbot developed by OpenAI, uses 500 milliliters of water for every 10 to 50 prompts, depending on the location and time of its deployment. The water is needed to cool down the servers that run the model, which requires a lot of computing power. The study suggests that generative AI models should be designed and deployed more efficiently, and that their water footprint should be taken into account when evaluating their social and economic impacts.

The U.S. consumer spending, which has been the main driver of the economic growth, is facing a challenge from the high interest rates on credit cards, according to some economists. Carl Weinberg, an economist at High Frequency Economics, told CNBC that consumer spending is being financed by credit cards, where interest is “over the top, out of control, off the hook right now”. He predicted that consumers will cut back on their spending in the new year, as their debt burdens increase. However, he did not expect this to push the U.S. economy into a recession. Monica Defend, the head of the Amundi Investment Institute, had a more pessimistic view. She said that she sees a coming pullback in consumer spending as sufficient to trigger a recession in the first half. She cited the weak consumer confidence, the rising inflation, and the uncertainty over the fiscal and monetary policies as the main factors behind her forecast.

Stocks rested a second day largely shaking of the credit downgrade of China as the tech giant’s found their footing as buyer bought the dip. The JOLTS report showed signs of slowing economy, weakening bond yields as odds of additional rate hikes shrink. However, some doubts emerged about whether markets are too optimistic about rate cuts with the higher for longer theme gaining some attention. Today traders will look for inspiration in a handful of notable earnings as well as Mortgage Apps, ADP, International Trade, Productivity and Petroleum data on the economic calendar.  Corporate buybacks continue but keep in mind their blackout period is quickly approaching so a last ditch effort may well surge the market higher the rest to of the week.

Trade Wisely,

Doug

Corporate Buybacks

December 5, 2023 by Doug Campbell

The urgency of corporate buybacks as we near the beginning of the blackout period was not quite enough to recover the early selling with only the IWM managing to close the day in the green.  The rest of this week’s jobs data will be the center of attention as we head toward the market-moving Employment Situation report Friday morning.  Today we will begin with the JOLTS report and a handful of notable earnings to provide bullish or bearish inspiration. However, Moody’s credit downgrade highlighting the weakening economic conditions in China could start the day with some bearish activity so plan your risk carefully.

Overnight Asian markets have had a rough session selling off across the board after a credit downgrade adding the economic concerns in China.  However, European markets trade with modest gains and losses as Ericsson surges while Nokia plunges.  Ahead of earnings and economic reports U.S. Futures point to bearish open.

Economic Calendar

Earnings Calendar

Notable reports for Tuesday include AZO, AVAV, CRMT, ASAN, BOX, CNM, PLAY, FERG, GIII, MDB, PHR, S, SIG, SFIX, TOL, & YEXT.

News & Technicals’

Moody’s, a global credit rating agency, has lowered its outlook on China’s government credit ratings from stable to negative, citing concerns over the country’s fiscal, economic, and institutional strength. Moody’s said that China’s government may have to provide more support and bailouts for local governments and state-owned enterprises that are facing financial difficulties, which could weaken China’s fiscal position and increase its debt burden. Moody’s also said that China’s economic growth may slow down further due to structural challenges and external pressures and that China’s institutional capacity may not be able to cope with the rising complexity and risks of its economy. Moody’s maintained China’s long-term rating on its sovereign bonds at “A1”, which is the fifth-highest level in its scale, but warned that it could downgrade it in the future if China’s fiscal, economic, and institutional situation deteriorates.

Some experts believe that the Fed is lagging behind the market expectations and needs to cut interest rates sooner rather than later. Paul Gambles, managing partner at MBMG Group, said that the Fed is behind the curve and that traders are anticipating a 25-basis-point cut as early as March 2024. David Roche, a veteran investor and president of Independent Strategy, said that he is “almost certain that the Fed is done raising rates” and that inflation will not go back to 2% anymore. These views suggest that the Fed may have to adjust its policy stance and communication in response to the changing economic and financial conditions.

Banque Pictet, a major Swiss bank that provides private banking services, has admitted that it helped U.S. taxpayers and others evade taxes by hiding over $5.6 billion from the IRS. The bank has reached an agreement with the U.S. prosecutors to pay about $122.9 million in restitution and penalties and to cooperate with the ongoing investigation. In exchange, the Justice Department will defer the prosecution of the bank for three years and then drop a criminal charge of conspiracy to defraud the IRS, if the bank complies with the terms of the deal. The bank is one of the several Swiss banks that have been accused of facilitating tax evasion by U.S. clients, and the latest to settle with the U.S. authorities.

The S&P 500 ended its five-week winning streak on Monday, with most of the indexes closing lower despite the energy of the corporate buybacks. The best-performing sector was real estate, while sectors that rely on growth, such as information technology and communication services, lagged. Small-cap stocks gained nearly 1% today adding to their more than 3% increase last week. Today’s market movement may reflect some profit-taking in areas like large-cap technology that have driven the market higher in the recent rally. The bulls and bears will look for inspiration in several reports on the labor market, starting with the JOLTS report today. There will also be a dozen or so notable earnings reports that have the potential to inspire price action. The Moody’s credit downgrade of China could make the bears a bit more aggressive so it may be wise to take some profits or raise stoploss orders to protect your capital.

Trade Wisely,

Doug

Declining Market Breadth

November 30, 2023 by Doug Campbell

After an energetic gap up to begin the Wednesday session, it faded away after more tough-talking Fed speak to end the mostly flat suffering from low-volume and declining market breadth. Today has the potential to a wild on with Jobless Claims, PCE figures, and a dozen or notable earnings events for investors to decipher.  With pre-market futures pumping hard this morning working to finish the month strong we can’t rule out the possibility of a big point whipsaw so be prepared.  If OPEC decides to cut production in today’s meeting it would be wise to keep an eye on the energy sector as well.

While we slept Asian markets closed the day green across the board despite another month of manufacturing declines in China.  European markets are also bullish this morning as they work to close November strong.  Overnight futures gained strength pointing to a gap up that may well pop the Dow to a new high for the year but be careful the data out this morning could provide considerable price volatility including big point whipsaws.

Economic Calendar

Earnings Calendar

Notable reports for Thursday include ASO, AMBA, AMWD, BIG, CBRL, DELL, DOMO, FRO, KR, PD, RY, TITN, TD, UBS, ULTA, PATH, ZUMZ.

News & Technicals’

Sweden’s bid to join NATO has been delayed by the opposition of two member states, Hungary and Turkey. Sweden, along with Finland, applied to join the military alliance in May 2022, hoping to strengthen their security and cooperation with other European countries. Finland became a full member of NATO in April 2023, but Sweden’s accession has been stalled by the veto of Hungary and Turkey, who have expressed concerns over Sweden’s stance on human rights, migration, and regional conflicts. In July 2023, at a NATO summit, Turkish President Erdogan agreed to lift his veto and allow Sweden to join the alliance, after receiving assurances from Sweden’s Prime Minister Stefan Löfven on various issues. However, the Turkish Parliament still has to ratify the decision, and it is unclear when that will happen. Sweden’s NATO membership remains uncertain, as the country awaits the final approval from its last obstacle.

China’s factory activity contracted for the second consecutive month in November, as the country faced slowing demand and supply chain disruptions amid the COVID-19 pandemic. According to the official manufacturing Purchasing Managers’ Index (PMI), which measures the activity level of large and state-owned enterprises, China’s manufacturing sector shrank to 49.4 in November, down from 49.5 in October and below the median forecast of 49.7. A reading below 50 indicates contraction, while a reading above 50 indicates expansion. China’s non-manufacturing PMI, which covers the services and construction sectors, also weakened to 50.2 in November, from 50.6 in October. The data suggests that China’s economic recovery is losing momentum, as the country faces challenges from domestic outbreaks, power shortages, environmental regulations, and external pressures. China’s central bank has recently taken steps to ease monetary policy and support growth, such as cutting the reserve requirement ratio for banks and injecting liquidity into the financial system. However, analysts expect that China’s growth will remain subdued in the fourth quarter and the first half of 2024.

The Fed may face a difficult decision in 2024, as the market expects it to slash interest rates aggressively to support a weakening economy and a rising unemployment rate. According to Fed funds futures, which reflect the market’s expectations of future monetary policy, the Fed is expected to cut its benchmark rate by 1.25 percentage points in 2024, or five times by 0.25 percentage points each. However, some analysts doubt that the Fed will deliver such a dovish policy stance, as it may have to balance the risks of inflation, financial stability, and policy effectiveness. “The market keeps trying to front-run these rate cuts, only to be disappointed,” said Kathy Jones, chief fixed income strategist at Charles Schwab. The Fed has indicated that it will be data-dependent and flexible in its policy decisions, but it may face challenges in communicating and managing the market’s expectations.

The stock market ended the day mostly flat, whipsawing on low-volume and declining market breadth after attempting a break to a new annual high Dow. However, investors continued efforts to front-run lower interest rates but one might have to consider the hot 5.2 GDP provides the Fed all the coverage it needs to keep rates up. Today, we will look to Jobless Claims, PCE, PMI, Pending Home Sales, and several notable reports to find inspiration to keep the buying party going until the end of the month. It may be wise to keep an eye on the energy sector as well if Thursday’s OPEC+ meeting results in an overall production cut due to the weakening demand. With the big effort to gap the market higher this morning watch for clues of whipsaw from this very extended market condition.

Trade Wisely,

Doug

Investors Weighed Data

November 29, 2023 by Doug Campbell

Equity markets sea-sawed on low-volume Tuesday as investors weighed better-than-expected consumer confidence data against the mixed signals on inflation and rates from the Fed governors. The one thing consistent with their statements is the 2% inflation target that they say will require the rate to stay higher for longer.  That aside, today traders will grapple with GDP, International Trade, Inventories, Petroleum Status, Fed Speak and Beige Book reports.  Along with that busy day of earnings with a theme of retail for the bulls or bears to find inspiration.  Futures are popping with confidence this morning but expect considerable price volatility traders react to the data.

Asian markets closed the day mostly lower with China hitting a one-month low and the tech-heavy HIS declined more than 2%.  However, European markets trade mostly bullish this morning hoping to finish the month strong with only the FTSE trading modestly lower.  U.S. futures point to another gap-up bullish open seemingly very confident the pending data with support the higher prices but remember anything is possible so be prepared!  

Economic Calendar

Earnings Calendar

Notable reports for Wednesday include ARWR, BILI, CRDO, CRM, DCI, DLTR, FTCH, FIVE, FL, HRL, LZB, NTNX, OKTA, PDCO, WOOF, PVH, SNOW, SNPS, VSTS, VSCO, ZUO.

News & Technicals’

Apple, the tech giant, is considering ending its partnership with Goldman Sachs, the bank, on its credit-card and savings account products, according to a report by Bloomberg. Apple has reportedly given Goldman Sachs a proposal to terminate the partnership within the next 12 to 15 months. The partnership, which was launched in 2019, involved offering the Apple Card, a credit card that is integrated with Apple Pay and the iPhone, and the Apple Savings, a savings account that offers high-interest rates and cash-back rewards. The partnership was seen as one of the most prominent examples of the collaboration between a tech company and a bank and was expected to attract millions of customers and generate billions of dollars in revenue. However, the partnership has also faced some challenges, such as regulatory scrutiny, customer complaints, and technical glitches. The report said that Apple and Goldman Sachs have not reached a final decision on the partnership and that both companies declined to comment on the matter.

The economic outlook for the G7 countries in 2024 is very pessimistic, according to some of the major banks and asset managers. Deutsche Bank has the most gloomy forecast, predicting that Canada will have the highest GDP growth among the G7 at only 0.8%, while the other countries will have negative or zero growth. Goldman Sachs Asset Management economists are also skeptical about the prospects of a rate cut by the Fed next year unless the growth slows down much more than expected. JPMorgan Asset Management strategists also warn that the risk of a U.S. recession is not gone, but only postponed, as the higher interest rates will eventually hurt the economy. These forecasts suggest that the G7 countries will face a lot of challenges and uncertainties in 2024, as they try to recover from the pandemic and deal with the inflation and debt pressures.

Okta, a leading provider of identity and access management solutions, has admitted that a recent cyberattack compromised the data of all its customers. The company had initially claimed that the breach only affected less than 1% of its clients, but a new message sent on Tuesday revealed the full extent of the damage. The hackers exploited a vulnerability in Okta’s customer support system and gained access to sensitive information such as names, email addresses, passwords, and security questions. The news of the massive data breach sent Okta’s stock price tumbling by 11% on Tuesday, adding more pressure on the company as it prepares to announce its third-quarter earnings on Wednesday. Okta has apologized for the incident and said it is working with law enforcement and security experts to investigate the attack and prevent future ones.

Equity markets ended the day slightly higher on Tuesday, as investors weighed data from a consumer confidence report against the mixed signals from Fed officials about the future course of monetary policy. While Fed Governor Waller expressed confidence that the current policy stance is adequate to bring inflation back to 2%, Fed Governor Bowman warned that the Fed may need to tighten policy further to lower inflation to 2%, as inflation readings have not eased enough in recent months. Higher for long has been the montara of the but overall the market seems convinced the Fed will soon cut rates. However, those decisions are a bit further down the road while the task at hand will be today’s earnings events and the pending GDP figures.  Futures are pushing with confidence that those numbers will support more bullishness but if it happens to disappoint be prepared for a morning of volatility if the bears wake up.

Trade Wisely,

Doug

Anemic Volume

November 28, 2023 by Doug Campbell

The indexes struggled to find momentum on Monday suffering from post-holiday anemic volume which is pretty typical as traders extend vacations and travel home.  With a GDP reading on Wednesday and the Core PCE numbers on Thursday, it is possible the light volume chop could continue today.  However, we have some earnings and economic reports today that may well inspire the bulls or bears so be prepared for just about anything in this short-term very extended condition.

Asian markets closed mixed overnight with modest gains and losses trying to shake off the growing real estate crisis in China.  However, European markets trade in the red across the board this morning with modest losses as momentum stalls.  Ahead of earnings and economic data, the U.S. futures suggest a flat to slightly bearish lean but that could quickly improve or get worse depending on the reaction to pending data.

Economic Calendar

Earnings Calendar

Notable reports for Tuesday include AZEK, BMO, CRWD, HPE, INTU, LESL, NTAP, PDD, SPLK, & WDAY.

News & Technicals’

Some regional banks in the U.S. are facing the risk of being acquired by their more profitable rivals, according to a report by KBW, a financial services research firm. KBW analysts said that Comerica, Zions, and First Horizon are among the banks that might be targeted for takeover, as they have lower returns and weaker growth prospects than their peers. On the other hand, larger banks with strong returns, such as Huntington, Fifth Third, M&T, and Regions Financial, are well-positioned to expand their market share and scale by buying smaller banks. KBW analysts also said that two other banks, Western Alliance and Webster Financial, could also consider selling themselves, as they have attractive franchises and valuations. The report said that the consolidation in the regional banking sector is likely to continue, as the banks face competitive pressures, regulatory challenges, and technological changes.

Wells Fargo Securities has released its 2024 stock market forecast, and it is not very optimistic. The firm’s head of equity strategy, Chris Harvey, predicts that the S&P 500 will end 2024 at 4,575, which is only 75 points higher than its closing level on Monday. Harvey expects the stock market to face a lot of volatility and uncertainty in the first half of 2024, as the economic growth and the Federal Reserve’s policy will be in a dilemma. He said that if the economy grows faster, the Fed will not ease its monetary policy, and if the economy slows down, the earnings will be lower, and the Fed will eventually cut its interest rate. He said that the second half of 2024 will be better, but the first half will be “really, really sloppy.” Harvey’s forecast is based on his analysis of the economic, earnings, valuation, sentiment, and technical factors that affect the stock market. He also shared his views on the sector and style preferences, as well as the risks and opportunities for investors.

The European tech sector has faced a significant drop in funding in 2023, according to a report by Atomico, a venture capital firm. The report, titled “State of European Tech”, showed that the total funding for European tech companies backed by venture capital is expected to decline by 45% in 2023, compared to 2022. The report attributed the decline to the reduced inflow of institutional capital from the U.S. and Asia, which had boosted the European tech market in 2020 and 2021, but retreated in the last year due to the macroeconomic uncertainties. The report also highlighted the bright spot of artificial intelligence, which attracted 11 mega funding rounds of $100 million or more in 2023, showing the strong potential and innovation of the European AI sector. The report also covered other aspects of the European tech ecosystem, such as talent, diversity, regulation, and social impact. You can read the full report here.

The indexes ended the day with modest losses on Monday, suffering from anemic volume which is pretty normal after a holiday shutdown. Today we have a bit more inspiration for the bulls and bears on the economic calendar and several notable earnings that have the potential to be market-moving as they are in the tech sector. However, the T2122 indicator continues to signal a short-term over-bought condition so guard yourself from getting caught up in the fear of missing out and chasing already extended stocks. That said the bulls remain in control and the so-called magnificent seven seem to have the ability to lift three of the indexes without the help of other stocks so it would be unwise to ignore the bullish enthusiasm.

Trade Wisely,

Doug

Unchanged over the Holiday

November 27, 2023 by Doug Campbell

Markets largely unchanged after the Thanksgiving holiday and its possible it could be a light and choppy Monday as many traders likely traveling home or extending their vacation time with family.  The T2122 indicator continues to display a short-term overbought condition but there is no clue in the price action that the bulls are ready to stop buying just yet.  Today we will look for inspiration in the New Home Sales and Dallas Fed MFG numbers with a very light day of earnings.  However, with pending GDP and PCE numbers mid-week we can expect substantial volatility as the market reacts. 

Asian markets sold off across the board while we slept with Chinese real estate decline and a Japanese surge of 2.3% in service inflation bringing out the bears.  European markets are also starting the week lower across the board modestly giving up some of last week’s gains.  U.S. futures point to a slightly lower open with eyes on the market moving GDP and PCE numbers pending mid-week. 

Economic Calendar

Earnings Calendar

Notable reports for Tuesday include CRNC,& ZS.

News & Technicals’

Nuclear power is one of the most controversial topics in the global efforts to reduce greenhouse gas emissions and fight climate change. Nuclear power is a low-carbon source of energy, but it also poses significant risks and challenges, such as safety, waste management, proliferation, and cost. Nuclear power is expected to be a key issue at the COP28 conference in Dubai, where world leaders and experts will discuss how to achieve net-zero emissions by 2050. One of the events that will focus on nuclear power is the “Atoms4NetZero” ministerial event on Dec. 5, where representatives from countries that use or plan to use nuclear power will share their views and experiences. The event will also address the role of nuclear innovation and technology in the energy transition. The event is organized by the International Atomic Energy Agency (IAEA), the United Nations agency that promotes the peaceful use of nuclear energy. The event aims to highlight the potential benefits and challenges of nuclear power, and to foster dialogue and cooperation among stakeholders.

The stock markets in the Asia-Pacific region fell on Monday, as the Chinese market was dragged down by the slump in the property sector, while the Japanese market faced the pressure of rising service inflation. The Chinese property firms suffered from the ongoing debt crisis of Evergrande, the largest real estate developer in China, which missed another bond payment deadline last week. The property sector accounts for a large share of the Chinese economy, and its troubles have dampened the investor sentiment and the consumer confidence. The Chinese industrial profits also declined for the third consecutive month in November, but at a slower pace than before, indicating some signs of recovery. The Chinese market will be closely watching the official and the Caixin manufacturing data for November, which will be released later this week. The Japanese market was also under stress, as the service producer price index, which measures the changes in the prices of services, rose to 2.3% in October, the highest level since January 2020. This was higher than the 2% increase in September, and reflected the impact of higher energy and transportation costs. The service inflation added to the worries of the Bank of Japan, which has been struggling to achieve its 2% inflation target for years.

U.S. consumers spent $9.8 billion online on Black Friday, the biggest shopping day of the year, according to Adobe Analytics. This was a 7.5% increase from last year, and showed that consumers were eager to take advantage of the big discounts offered by retailers. Consumers also found it easier to compare prices and deals online, rather than going to physical stores. However, the online spending spree is expected to slow down after Cyber Monday, the next big deal day, as retailers will reduce their discounts for the rest of the holiday season.

The stock market was almost unchanged on Friday, after the Thanksgiving holiday. The S&P 500 had a small 1% increase for the week, extending its positive streak for the fourth week in a row. There was not much news to move the market today, from the economic or the earnings front. The market seems to be waiting for the PCE inflation report next week, which is the Fed’s preferred measure of inflation. The interest rates on Treasury bonds rose slightly, with the 10-year yield ending at around 4.45%. The Asian markets struggled do to the sharp declines in real estate price while Japanese service inflation surged 2.3% bring out the bears. We have a light day on the earnings calendar but we have New Home Sales and the Dallas Fed numbers for the bulls or bears to find inspiration.  Keep in mind many traders will be traveling home from the holiday so don’t be surprised if the volume is light.

Trade Wisely,

Doug

Parabolic Bull Run

November 21, 2023 by Doug Campbell

The parabolic bull run continued on Monday as the magnificent seven surged to a new high for the year with the composite up % in 15 trading days. Though the T2122 indicator continues to display an overbought condition corporate buybacks and fear of missing out continue to fuel bullish momentum. Today with will get Existing Home Sales figures and the FOMC minutes along with a busy day of earnings highlighted by the highly anticipated report from NVDA after the bell.  Plan carefully as volumes are likely to start declining as traders escape early to beat the travel rush for the holiday.

While we slept Asian markets closed mixed but mostly lower with modest gains and losses as China’s real estate crisis deepened requiring more government intervention.  European markets trade mostly lower this morning with modest declines in a cautious session.  U.S. futures point to a slightly bearish open ahead of earnings and economic reports with the holiday shutdown just around the corner. 

Economic Calendar

Earnings Calendar

Notable reports for Tuesday include ADI, ADSK, ANF, BIDU, BBY, BURL, CAL, DKS, DY, GES, HIBB, HPQ, JACK, J, KSS, LOW, MDT, NVDA, JWN, URBN.

News & Technicals’

Microsoft, the tech giant and the major investor of OpenAI, has expressed its continued support for the artificial intelligence research company and its former CEO Sam Altman, who was removed from his position on Friday. Microsoft’s CEO Satya Nadella said in an interview with CNBC on Monday that he still believes in OpenAI’s vision and mission and that he respects Altman’s contributions to the company. Nadella also said that he understands that OpenAI needs to change its governance structure, after facing a backlash from its employees and investors over Altman’s ouster. He said that he hopes that OpenAI can resolve its internal issues and continue to pursue its ambitious goals of creating artificial general intelligence and benefiting humanity.

OpenAI, the artificial intelligence research company that aims to create artificial general intelligence and benefit humanity, is facing a crisis of leadership and trust, as hundreds of its employees have signed a letter demanding the resignation of its board. The letter, which was leaked to the media, accuses the board of mismanaging the company, violating its values and principles, and ousting its former CEO Sam Altman without a proper explanation. The letter also warns that if the board does not step down, many employees will leave the company and join Altman’s new venture at Microsoft, where he and another co-founder and board member of OpenAI, Greg Brockman, have been hired to lead a new AI division. The letter claims that the employee exodus will happen “imminently.” Among the signatories of the letter are some of the top executives and researchers of OpenAI, such as Mira Murati, who served as the interim CEO after Altman’s departure, Brad Lightcap, the chief operating officer, and Ilya Sutskever, a co-founder and board member of OpenAI. The letter reflects the deep dissatisfaction and frustration of the employees with the board’s decisions and actions, and the loss of confidence in the company’s direction and vision.

Lowe’s, the home improvement retailer, has reduced its sales forecast for the year, as it faced lower demand from customers for do-it-yourself projects in the third quarter. Lowe’s reported that its sales fell by nearly 13% compared to the same quarter last year and that its comparable sales, which measure sales at stores open at least a year, declined by 7.5%. Lowe’s said that customers spent less on home improvement projects, as they shifted their spending to other categories, such as travel, entertainment, and dining out. Lowe’s also faced supply chain challenges, labor shortages, and higher costs, which affected its margins and profitability. Lowe’s now expects its comparable sales to drop by about 5% for the fiscal year, which is worse than its previous estimate of a 2% to 4% decline. Lowe’s shares slid by more than 8% on Tuesday, after the disappointing results.

The stock market continued its parabolic bull run driven mostly by the so-called magnificent seven as the QQQ stretched to a new year high ahead of the Thanksgiving holiday. Treasury bonds went down slightly with the 10-year U.S. Treasury bond yield, trading around 4.42%, which is good for both stocks and bonds. The Bloomberg U.S. Aggregate bond index, which represents the overall U.S. bond market, is up more than 3.0% in November but is still slightly negative for the year 2023. Today we have a busy earnings calendar with the higher anticipated report from NVDA after the bell.  Investors will also look for inspiration in the Existing Home Sales and FOMC minutes coming at 2 PM Eastern. As you plan forward please keep in mind the U.S. markets will be closed on Thursday and will have a half-day on Friday, ending at 1 PM.

Trade Wisely,

Doug

Third Week in a Row

November 20, 2023 by Doug Campbell

Although Friday proved to be a light choppy day the bulls held the bullish parabolic run for the third week in a row.  The Bears after working so hard this year seem to have entered hibernation heading into the holidays. However, with a shortened week with light earnings and economic calendars can the corporate buybacks keep the party going this week?  Perhaps, but keep in mind volume could quickly decline this week with record travel expected over the Thanksgiving holiday.  Plan your risk accordingly.

Asian markets closed mostly higher overnight with China holding benchmark lending rates unchanged.  European markets trade mixed but mostly lower this morning with modest gains and losses in a cautious session.  U.S. futures bounced around the flatline this morning but will look for inspiration in a light earnings and economic day to begin this holiday-shortened week.

Economic Calendar

Earnings Calendar

Notable reports for Monday include A, BRBR, KEYS, & ZM.

News & Technicals’

Disney, the entertainment giant, has been struggling to produce high-quality films since the pandemic ended, according to its CEO Bob Iger. He admitted last week that he was not satisfied with the quality of Disney’s films in the past two years. Disney’s film business has been losing money, as it has not reported positive operating income in its “Content Sales/Licensing and Other” segment, which includes theatrical releases, since the quarter that ended in April 2022. However, Disney hopes to turn things around in 2024, with some highly anticipated films, such as Marvel’s “Deadpool 3,” Pixar’s “Inside Out 2,” and “Mufasa: The Lion King,” a prequel to the classic animated film.

Cruise, the self-driving car company owned by General Motors, has announced a major leadership change, as its co-founder and CEO Kyle Vogt has stepped down from his role. Vogt, who founded Cruise in 2013 and sold it to GM in 2016, said he was leaving the company to spend time with his family and explore new ideas. He did not explain the reason for his departure, which comes after a series of setbacks for Cruise, such as delays in launching its robotaxi service, lawsuits from competitors, and regulatory hurdles. Cruise has appointed Mo Elshenawy, its former executive vice president of engineering, as its new president and CTO. Elshenawy, who joined Cruise in 2018, will lead the company’s efforts to develop and deploy its autonomous vehicles.

OpenAI, the artificial intelligence research company co-founded by Elon Musk, has undergone a dramatic leadership shake-up in the past few days. On Friday, the board of OpenAI announced that it was removing Sam Altman, the former president of Y Combinator, as its CEO and replacing him temporarily with Mira Murati, the chief technology officer of OpenAI. Then on Sunday night, OpenAI revealed that it had hired Emmett Shear, the former CEO of Twitch, the live streaming platform, to be its new CEO. However, the story did not end there, as on Monday morning, Satya Nadella, the CEO of Microsoft, announced that Altman and Greg Brockman, the co-founder and chairman of OpenAI, would be joining Microsoft as part of a new AI division. Microsoft is a major investor and partner of OpenAI and has provided it with cloud computing and technical support. The reasons for the sudden changes in OpenAI’s leadership are unclear, but they could signal a shift in the company’s vision and direction.

Stocks ended the week with little change on Friday but extended the third week in a row and it seems the bears went into hibernation heading into the holidays. The S&P 500 and QQQ are very near 2023 highs and though this rally has gone parabolic the fear of missing out could keep the chaise going this week. However, other than corporate buybacks there is very little to earnings and economic calendar to garner a lot of enthusiasm in this holiday-shortened week.  With the expectation of a record holiday, travel volumes could begin dropping sharply by Tuesday afternoon so plan your trading carefully.

Trade Wisely,

Doug

Bulls are on a Roll

November 16, 2023 by Doug Campbell

The bulls are on a roll extending the indexes on Wednesday with better-than-expected retail numbers in the short-term government spending bill to avoid shutdown worries until after the holidays.  Today investors will key off earnings reports with a big box retail theme and a busy economic calendar full of reports and Fed speakers.  Although the fear of missing out is strong right now be wary of chasing this parabolic because a pullback to punish those last in the door could begin at any time.  That said it is entirely possible the extremely bullish enthusiasm could remain through the rest of the week so plan carefully.

Asian market closed mostly lower overnight seeming not very encouraged by the U.S.-China talks.  European markets trade cautiously mixed this morning with consumer weakness worries as luxury brand seller Burberry posted disappointing results.  U.S. futures also suggest a hesitation to keep driving higher this morning ahead of a busy day of earning and economic reports. 

Economic Calendar

Earnings Calendar

Notable reports for Thursday include BABA, AMAT, BBWI, BZH, BERY, BORR, BRC, BV, DLB, DOLE, GPS, M, POST, ROST, SCVL, SSYS, UGI, WMG, WMT, & ZTO.

News & Technicals’

China’s President Xi Jinping delivered a message of cooperation to U.S. business leaders on Wednesday, after meeting with U.S. President Joe Biden for the first time since he took office. Xi said that China and the U.S. have to choose between being partners or adversaries, and urged them to work together on global issues such as climate change, trade, and pandemic response. He also announced that China would send two of its giant pandas to the San Diego Zoo, as a gesture of goodwill and friendship. The dinner, which was held in San Francisco, was part of the Asia-Pacific Economic Cooperation conference, where leaders from 21 countries discussed ways to boost economic growth and cooperation in the region.

Cisco, a leading provider of networking and communication products and services, reported its quarterly earnings on Wednesday, beating the analysts’ expectations. However, the company’s guidance for the next quarter was lower than anticipated, as the company faced a slowdown in product orders from its customers. The company explained that its customers were busy implementing the Cisco products and services that they had purchased in the previous quarters, and therefore had less demand for new orders. The company also said that it was facing some supply chain challenges and higher costs due to the global chip shortage and the pandemic. The company’s shares fell by 4% in after-hours trading.

The Congress has averted a government shutdown for now, by passing a short-term funding bill on Wednesday night. The bill, which would keep the government running until February 18, 2024, received bipartisan support in the Senate, with 87 senators voting for it and 11 voting against it. The bill had already passed the House of Representatives on Tuesday. The bill now goes to President Joe Biden, who is expected to sign it into law. The bill also includes some emergency funding for disaster relief, health care, and defense. The bill does not address the debt ceiling, which is expected to be reached by mid-December. The Congress will have to deal with the debt ceiling and other contentious issues, such as immigration and social spending, after the holidays.

The bulls are on a roll this week, reaching up in a parabolic bull run trying once again to anticipate how the FOMC will approach the rates in the future. However, it would be wise to keep in mind that the market’s track record on Fed predictions has been 100% wrong over the last year. The positive mood continued Wednesday, as retail sales beat the forecasts and producer prices moderated. Another factor that boosted the confidence of investors was the House passing a bill to prevent government shutdown worries until after the holidays. We have a busy day of economic reports and Fed speakers on the economic calendar with a big box retail theme on the earnings calendar to keep investors guessing in the current extremely over-bought parabolic conditions.  Be very careful chasing stocks higher as a pullback could begin at any time.

Trade Wisely,

Doug

Market Raced Higher

November 15, 2023 by Doug Campbell

A milder-than-expected inflation report than analysts forecast produced a huge morning gap that continued to extend in wild bullish exuberance.  Although the T2122 indicator suggests a short-term extreme overbought condition there is a very good chance the QQQ will make a new high for the year in the remarkable reversal.  The bull or bears will look for inspiration in Mortgage Apps, PPI, Retail Sales, Empire State MFG, Business Inventories, Petroleum Status, Fed speakers, and a dozen or so notable earnings reports.  Avoid the fear of missing out chase as it is highly likely a pullback or at a minimum a longer choppy market consolidation is just around the corner.  I would not rule out a substantial whipsaw to punish those last-minute buyers.

While we slept Asian markets reacted in kind closing green across the board with Japan and Hong Kong zooming while China was only able to muster a 0.55% gain.  Across the pond, European markets are looking to extend the bullish celebration currently decidedly green across the board. U.S. Futures also want to keep the party going headed for another gap up open ahead of earnings and economic reports.

Economic Calendar

Earnings Calendar

Notable reports for Wednesday include AAP, CTLT, CSCO, CPA, DAVA, HI, JJSF, JD, KLIC, PANW, SONO, TGT, TTEK, & TJX.

News & Technicals’

Congress has reached a last-minute deal to avoid a government shutdown that would have affected millions of Americans. The House passed a bill on Saturday that would fund the government for another 45 days, with bipartisan support from both Republicans and Democrats. The bill also includes billions of dollars for disaster relief but does not include any new aid for Ukraine, which was part of a separate agreement in the Senate. The Senate quickly approved the bill by unanimous consent, and President Biden signed it into law. The bill will give lawmakers more time to negotiate a longer-term funding solution and address other pressing issues, such as the debt ceiling and the Biden administration’s request for additional security assistance to Israel and Ukraine.

The economy shrank by 2.1% year-on-year in the third quarter, reversing the 4.8% growth in the previous quarter, according to the latest data from the Bureau of Economic Analysis. This was worse than the 0.6% contraction that analysts had expected. The economy also contracted by 0.5% quarter-on-quarter, compared to a 0.1% decline that was forecast. The data showed that the recovery from the pandemic-induced recession was losing momentum, as consumer spending, business investment, and exports all slowed down. The third quarter GDP data was the last major economic indicator before the presidential election on November 7.

The U.K. inflation rate dropped to its lowest level in two years in October, according to the latest data from the Office for National Statistics. The consumer price index, which measures the changes in the prices of goods and services, fell to 4.6% year-on-year in October, down from 6.7% in September. This was lower than the 4.8% that economists had predicted. On a monthly basis, the consumer price index was unchanged in October. The core consumer price index, which excludes the prices of food, energy, alcohol, and tobacco, also declined to 5.7% year-on-year in October, from 6.1% in September. The main factors that contributed to the lower inflation rate were the decreases in the prices of clothing, footwear, furniture, household goods, and recreation and culture. The inflation rate is still above the Bank of England’s target of 2%, but the central bank expects it to fall further in the coming months. The lower inflation rate could ease some of the pressure on consumers, who have been facing higher costs of living and lower wage growth.

The stock market raced higher on Tuesday after a milder-than-expected inflation report, which showed both the overall and the core CPI inflation rates lower than what analysts had forecasted. All the sectors in the S&P 500 index gained, with the real estate sector leading the way with a 5% increase. The sectors that benefit from economic growth, such as technology, communication, consumer discretionary, and small-cap stocks, also performed well. The bond market reacted positively to the inflation report, as the yields on the 10-year and the 2-year Treasury bonds dropped to around 4.45% and 4.85%, respectively. Today we have about a dozen notable earnings reports with Mortgage Apps, PPI, Retail Sales, Empire State MFG, Business Inventories, Petroleum Status, and some Fed speakers for the bull or bears to find inspiration.  The T2122 is now in a short-term extreme overbought condition so a pullback or consolidation could begin at any time but expect the price action to be wildly volatile if the current exuberance begins to fade.

Trade Wisely,

Doug