A negative credit downgrade from Moody’s but the bulls shrug it off to continue the straight-up rally with a pending CPI number just around the corner.  Investors seem very sure that the Fed inflation fight is over.  We may find out this morning when the inflation data is revealed so be prepared for significant price volatility as the market reacts.  Home Depot reported a beat of expectations but also issued a caution on the forward strength of sales as the consumer weakens.  Keep in mind that on Wednesday bring a PPI and Retail Sales report so plan your risk accordingly.

Asian markets closed modestly higher overnight with only the tech-heavy Hong Kong exchange experiencing some light selling ahead of the Biden-XI talks.  European markets trade mostly bullish this morning with only the FTSE slightly lower as they wait on the pending inflation data.  However, U.S. futures trade cautiously bullish heading into the CPI report which will likely create a significant price reaction.  The question on everyone’s mind is whether the reaction is up or down.  Buckle up we will soon find out.

Economic Calendar

Earnings Calendar

Notable reports for Tuesday include ALC, ARMK, CAE, CSIQ, ENR, HD, HUYA, IHS, OCSL, ON, PSFE, SBH, TME, VREX, VIPS, & WKME.

News & Technicals’

Home Depot, the largest home improvement retailer in the U.S., reported its third-quarter earnings and revenue on Tuesday, beating the analysts’ expectations. However, the company’s sales dropped by 3% compared to the same quarter last year, as the demand for home improvement products slowed down amid the easing of the COVID-19 pandemic and the rising inflation. Home Depot also issued a cautious outlook for the full year, saying that it expects its sales to grow by 4.9%, lower than the previous estimate of 6%. The company said that it faces uncertainty and volatility in the market, as well as supply chain challenges and labor shortages. Home Depot’s stock price fell by 4.3% on Tuesday, following the earnings release.

Stellantis, the parent company of Chrysler and other car brands, is offering buyouts to about half of its U.S. white-collar workers, as part of its plan to reduce costs and improve efficiency in its North American operations. The company said on Monday that it will offer voluntary separation packages to 6,400 of its 12,700 nonunion U.S. employees, who can choose to leave the company with a lump sum payment and other benefits. This is the second time this year that Stellantis has offered buyouts to its salaried workers, after a similar offer in March. The buyout offer comes after Stellantis reached a tentative agreement with the UAW, the union that represents its hourly workers, in October. The agreement includes wage increases, bonuses, profit sharing, and investments in U.S. plants. Stellantis is the fourth-largest automaker in the world, formed by the merger of Fiat Chrysler and PSA Group in January 2021. The company faces several challenges, such as the global chip shortage, the competition from electric vehicles, and environmental regulations. The company hopes that the buyout offer will help it streamline its workforce and optimize its resources.

The consumer price index (CPI), which measures the change in the prices of goods and services, is expected to show a slight increase of 0.1% in October 2023 from the previous month and a moderate increase of 3.3% from the same month last year, according to a Dow Jones poll of economists. The CPI is one of the main indicators of inflation, which is the general rise in prices over time. The CPI is released monthly by the U.S. Bureau of Labor Statistics (BLS) and will be released on Tuesday, November 14, 2023, at 8:30 A.M. Eastern Time.

Moody’s downgrades U.S. credit from stable to negative and the bulls shrug it off in a relentless straight-line rally heading into Tuesday’s inflation report. Bond yield showed little change yesterday with investors seemingly very confident that the Fed inflation fight has concluded despite the continued hawkish comments from FOMC members. Home Depot beat estimates but issued a caution about the softer sales ahead due to the weakening consumer. Target and Walmart will report later this week helping to clarify how the consumer is feeling amid record credit card debit.  Today investors will be looking for inspiration in the CPI figures.  Be prepared for volatility as the market reacts.

Trade Wisely,

Doug

Investors chose to ignore the warnings from Jerome Powell reversing Thursday’s bearish engulfing as the tech giants led indexes higher breaking overhead resistance.  After the market closed Moody’s downgraded the U.S. creditworthiness with a possible government shutdown at midnight this Friday.  So the question for today is, can the market follow through and continue to ignore the massive debt problem we face? With CPI and PPI just around the corner, plan for volatility as we find out if the bulls have it right this time or if once again got it wrong as they have over the last 18 months.  In any case, be prepared for substantial price volatility as the week unfolds.

Asian markets began the week mixed but mostly higher waiting on Biden-Xi talks that could be a bit contentious. However, European markets start the week with modest bullishness across the board ahead of talks with China as well as pending inflation data.  U.S. futures recovered off of overnight lows after Moody’s credit downgrade but still point to a modestly lower open with CPI, PPI, and a possible government shutdown battle to curb the rapidly growing debt.

Economic Calendar

Earnings Calendar

Notable reports for Thursday include ACM, FTRE, GENI, HROW, HSIC, MNDY, SKIN, SLF, TSEM, & TSN.

News & Technicals’

The U.S. government is facing a potential shutdown next week unless Congress can agree on a funding plan. However, the outlook for the U.S. fiscal strength has been downgraded by Moody’s, a credit rating agency, to negative from stable. This means that the U.S. may lose its top credit rating in the future if it does not address its rising deficits and debt. Moody’s said that the U.S. has unique credit strengths, such as its economic size, diversity, and resilience, but also faces downside risks, such as political polarization, social inequalities, and environmental challenges. Moody’s affirmed the U.S. long-term issuer and senior unsecured ratings at Aaa, the highest possible rating, but warned that the U.S. needs to improve its fiscal governance and sustainability. The Moody’s report was based on the data from the second quarter of 2023. Meanwhile, the newly elected House Speaker Mike Johnson, a Republican, said he will release a Republican government funding plan on Saturday. He did not provide any details about the plan but said he hopes to avoid a shutdown and reach a bipartisan agreement with the Democrats. The current government funding expires on Friday, November 17, 2023. If Congress fails to pass a new funding bill by then, the government will have to shut down non-essential services and furlough federal workers. This would have a negative impact on the economy and public services. The last government shutdown occurred in December 2022, and lasted for 35 days, the longest in U.S. history.

The workers of Ford’s two plants in Louisville, Kentucky, have given a mixed verdict on the proposed contract between the company and the United Auto Workers (UAW) union. The contract, which would last for four and a half years, was rejected by the majority of the production workers, who make up most of the workforce. The production workers voted 55% against the contract, according to the UAW Local 862 union. However, the skilled trades workers, who are a smaller group of workers with specialized skills, voted 69% in favor of the contract. The contract would offer wage increases, bonuses, profit sharing, and retirement benefits to the workers, as well as investments in the plants. The reasons for the rejection by the production workers are not clear, but some workers have expressed dissatisfaction with the contract terms, such as the lack of cost-of-living adjustments, the two-tier wage system, and the health care costs. The contract vote is still ongoing at other Ford plants across the country, and the final result will depend on the overall majority of the workers.

The U.S. bond market is stable on Monday, as investors weighed the economic outlook and awaited the inflation data that will be released this week. The inflation data, which will show the consumer price index (CPI) and the producer price index (PPI) for October, will be closely watched by the investors, as they will provide clues about the future direction of the monetary policy. The Federal Reserve, the U.S. central bank, has signaled that it will start tapering its bond purchases this month, and may raise interest rates next year if the inflation remains high and persistent. The bond yields, which reflect the market’s expectations of the interest rates, were little changed on Monday. The 10-year Treasury yield, which is a benchmark for long-term borrowing costs, rose slightly to 4.63%, from 4.62% on Friday. The 2-year Treasury yield, which is more sensitive to short-term interest rate changes, fell slightly to 5.056%, from 5.064% on Friday. The bond yields have been volatile in the past few months, as investors reacted to the changing economic conditions, such as the COVID-19 pandemic, the supply chain disruptions, the fiscal stimulus, and the labor market recovery.

The stock market rebounded Friday with a surprising reversal as the tech giants led indexes higher. The market was spooked Thursday by Fed Chair Powell’s comments at the IMF, which suggested a more aggressive monetary policy, and by a weak bond auction, which pushed the yields higher. However, investors defiantly choose to ignore the Chairman’s warning believing they have it right this time despite their poor track record in predicting a pivot over the last 18 months. We may not have long to find out if the bulls are correct with a CPI report on Tuesday followed by the PPI on Wednesday.  We will also get a reading on the strength of the consumer with Retail Sales figures mid-week.  That said, it could be a hurry-up and wait Monday with volatility in the morning after Moody’s downgrade and possible government shutdown this Friday at midnight.  Buckle up it could be a wild week ahead.

Trade Wisely,

Doug

The bulls and bears ended the day equally matched as the DIA, SPY, and QQQ chopped below resistance and above their 50-day averages.  However, without the benefit of the magnificent seven, the IWM slipped lower closing the day well below its 50-day average.  The tech giants enjoyed most of the bullish energy as they almost exclusively determine the direction of the big three indexes.  Today traders have a busy day of earnings to keep them guessing as well as Jobless Claims and Fed speeches that include Jerome Powell at 2 PM Eastern.  While the bulls seem determined to extend the rally into the end of the week the pending inflation data next week could keep price action choppy into the weekend.

Overnight the Asian markets closed mostly higher with only Hong Kong closing modestly lower after China’s deflationary price reports.  European markets look to extend their rally this morning boosted by earnings sentiment.  Ahead of another busy day earnings, Jobless Claims, and a Powell speech, U.S. futures suggest a modest yet mixed open with slight a weakness showing up in the Nasdaq but that could quickly change as data rolls out.  Buckle up for another day of challenging price action.

Economic Calendar

Earnings Calendar

Notable reports for Thursday include ALRM, AQN, MT, ARLO, AZN, BDX, BLNK, CPRI, CLNE, CCOI, DGII, FA, FVRR, FLO, GDRX, GRAB, HBI, HIMX, HOLX, ILMN, INDI, IRWD, KELYA, DNUT, LI, LGF, MTD, NWSA, NOMD, NVAX, OTLY, PLUG, RDNT, STNG, TPR, TTD, TDG, U, USFD, UTZ, VERX, WB, WRK, WPM, WWW, & YETI.

News & Technicals’

Sony, the Japanese electronics and entertainment giant, reported a lower operating profit for the second quarter of 2023, as it faced challenges in its imaging sensor business and other segments. The company’s operating profit fell by 29% to 211.8 billion yen ($1.9 billion), compared to the same quarter last year. The main reason for the decline was the weakness in the imaging sensor business, which supplies camera chips to smartphone makers such as Apple and Samsung. The business was affected by the global chip shortage, the slowdown in smartphone demand, and the increased competition from other suppliers. Sony also saw lower profits in its financial services and entertainment, technology, and services units, which include its music, movie, and gaming businesses. However, the company said it expects its PlayStation 5 console, which launched in November 2020, to meet its sales target of 25 million units shipped in 2023, despite the supply constraints and the rising costs of components. The PlayStation 5 is one of the most popular gaming consoles in the world and has been in high demand since its release.

Disney, the world’s largest entertainment company, reported its quarterly earnings on Wednesday, beating the profit estimates but missing the revenue expectations. The company’s profit was $1.12 per share, higher than the analysts’ forecast of $0.98 per share. However, the company’s revenue was $16.25 billion, lower than the expected $16.76 billion. The company’s revenue was affected by the decline in ad revenue, which fell by 13% to $2.6 billion, as well as the impact of the COVID-19 pandemic on its theme parks and movie studios. On the positive side, the company’s streaming segment, which includes Disney+, Hulu, and ESPN+, reduced its operating loss to $312 million, from $580 million a year ago. The streaming segment also added 18.5 million subscribers in the quarter, reaching a total of 179 million. Disney also revealed the quarterly results of its ESPN unit for the first time, showing that both revenue and operating income increased in the quarter, to $2.8 billion and $814 million, respectively. Disney’s CEO Bob Iger announced that the company plans to launch ESPN as a direct-to-consumer service by 2025, which will allow sports fans to access ESPN content without a cable subscription.

SoftBank, the Japanese technology conglomerate, reported a mixed performance for the second quarter of its fiscal year, as it recorded an investment gain on its Vision Fund but also a net loss for the quarter. The Vision Fund, which is SoftBank’s main vehicle for investing in startups, posted a gain of 1.3 trillion yen ($11.6 billion) for the quarter, thanks to a gain from the sale of its stake in Arm, a chipmaker, to a SoftBank subsidiary. However, this gain was partly offset by a decline in the value of some of the Vision Fund’s portfolio companies, such as SenseTime, a Chinese artificial intelligence company, which faced regulatory challenges in China. SoftBank also reported a net loss of 131.7 billion yen ($1.2 billion) for the quarter, compared to a net profit of 627.4 billion yen ($5.6 billion) a year ago. The loss was mainly due to a loss on derivatives and a loss on investments in listed stocks. SoftBank’s CEO Masayoshi Son said that the company remains confident in its long-term vision and strategy and that it will continue to invest in innovative and disruptive companies.

The DIA, SPY, and QQQ chopped sideways Wednesday lacking the volume to push through resistance levels though holding above their 50-day averages. Once again the magnificent seven enjoyed most of the bullish activity that held the indexes steady. The SPY edged up by 0.1%, extending its winning streak to eight days. The IWM, which is the only index that does not have representation from the magnificent seven continues to lag well below its 50-day average. Bond yields fell, with the 10-year Treasury yield dropping to around 4.5%, while the 2-year yield stayed around 4.95% and oil continued to fall sharply.  Today we have another busy earnings calendar with Jobless Claims, Fed speeches that include Jerome Powell, Natural Gas, and Fed Balance Sheet figures to find inspiration.  Expect choppy price action to continue with the uncertainty of inflation data pending next week.

Trade Wisely,

Doug

The tech giants almost exclusively extended the market winning streak to seven days in a row as index prices continued to pound on the door of overhead resistance. At the same time, oil prices plunged as China’s export declines suggest slowing economic growth in major economies of the world including the U.S.  Today investors will look for inspiration in Mortgage Applications, Inventories, Petroleum Status, Fed speakers that include Jerome Powell and busy day of earnings to keep prices volatile and challenging. Be prepared for just about anything as weakening consumer demand concerns and the current buying enthusiasm battle for control of market sentiment.

While we slept Asian markets closed mostly lower with only Australia gaining a modest 0.26%. European markets this morning have chopped between gains and losses waiting on earnings to break the log jam of caution.  U.S. futures are also rather cautious this morning currently suggesting a flat open that could change dramatically by the open depending on the reaction to all the earning and economic data ahead.

Economic Calendar

Earnings Calendar

Notable reports for Wednesday include ME, DDD, AFRM, ADNT, BIRD, AMC, ARM, APP, ASH, ATO, BYND, BIIB, BE, CEVA, CRL, CDE, CTVA, APPS, DIOD, DIS, DUOL, EVGO, AG, FICO, FSR, FLT, FNV, GNK, G, HP, HLMN, HLLY, HUBS, CART, JAZZ, K, KRNT, LITE, LYFT, MCFT, MGM, NYT, PAAS, PYCR, PFGC, PUBM, RL, REYN, RBLX, SEAS, STWD, SGOO, TTWO, TEVA, TTGT, MODG, COOK, TTEC, TWLO, UAA, SPCE, WRBY, WDB, WOW, KLG, XPEL, & ZIP..

News & Technicals’

Credit card debt in the U.S. has reached a record high of $1.08 trillion, according to a report from the Federal Reserve Bank of New York. This reflects the impact of rising inflation, which has eroded the purchasing power of consumers and forced them to use up their savings and rely more on credit cards to cover their expenses. However, credit cards are also one of the most costly forms of borrowing, as they charge high-interest rates and fees. This can create a vicious cycle of debt, as consumers struggle to pay off their balances and incur more interest and penalties. Therefore, consumers should be cautious about using credit cards and try to pay more than the minimum amount each month to reduce their debt burden.

UBS, the Swiss banking giant, is issuing a new type of bond that can be wiped out if the bank faces a financial crisis, according to CNBC. The bond is called additional tier 1 (AT1) security, and it is designed to absorb losses and protect the bank’s capital. However, the bond also carries a high risk for investors, as they can lose their entire investment if the bank fails or needs a bailout. This happened to Credit Suisse, another Swiss bank, in March when its AT1 bonds worth $17 billion were canceled as part of a rescue deal by the Swiss authorities. The bondholders were outraged by the decision, which left them with nothing. UBS did not disclose the details of its AT1 offering but said it will provide more information when the deal is completed.

Salesforce, the leading cloud-based software company, and San Francisco, the host city of its annual conference, Dreamforce, have reached an agreement that will ensure the event will stay in the city in 2024. The agreement came after Salesforce CEO Marc Benioff hinted that the conference might move to another location, due to the challenges of hosting a large-scale event amid the COVID-19 pandemic and the social issues facing the city. However, Benioff later praised the conditions of this year’s Dreamforce, which was held in a hybrid format, with both online and in-person sessions. He also thanked the city officials and the local community for their support and cooperation. Dreamforce is one of the largest and most influential tech conferences in the world, attracting tens of thousands of attendees, speakers, and exhibitors every year.

The stock market extended its winning streak to seven days on Tuesday, as the S&P 500 index rose again predominately due to the energy of the magnificent seven the. The bond yields held firm and are once again ticking higher this morning but are still well below the peak of over 5.0% in mid-October. However, oil and energy prices had a rough day with export declines out of China showing a weakening consumer demand. WTI crude oil plunged by more than 3.5% to around $77. Concerns about the slowing economic growth in major regions of the world, such as the U.S., the eurozone, and Canada, hint that job declines could be just around the corner. Today we have another big of earnings to keep traders guessing as well as Mortgage Applications, Inventory figures, Petroleum status, and a slew of Fed speakers adding in a touch of uncertainty. 

Trade Wisely,

Doug

Markets paused on light volume Monday as stocks caught their breath holding 50-day averages while struggling with overhead resistance levels and longer-term downtrends.  The tech giants garnered most of the bullish attention while the vast majority of stocks saw modest declines. Today brings us a busy day of earnings events, International Trade figures, and several Fed speakers to keep traders guessing.  Don’t be surprised if we see another choppy day of price action as we rest and wait for Jerome Powell’s comments on Wednesday morning.

While we slept China reported an export decline raising worries about consumer demand and resulting in Asian markets closing lower across the board. European markets trade modestly lower across the board this morning as worries of a slowing consumer downshift from last week’s momentum. Ahead of a busy day of earnings, trade numbers, and a parade of Fed speakers U.S. futures suggest a lower open with oil reversing Monday’s gains on consumer demand concerns.

Economic Calendar

Earnings Calendar

Notable reports for Tuesday include ACMR, AHCO, APD, AKAM, AMPL, ANDE, ANGI, ARRY, AXON, BMBL, BLDP, BLUE, BHF, BCO, CARG, CAVA, CHH, CIVI, CNHI, CRSR, COTY, CPNG, DHI, DAR, DDOG, DVA, DK, DVN, BROS, EBAY, EMR, EXPD, EXR, FIS, FNF, FLW, GILD, GFS, GMED, GOGO, GPRO, GO, GXO, HRB, HAIN, IAC, IMXI, INSW, JKHY, KVYO, KKR, KD, LZ, KCID, MNKD, MLCO, MOS, NOVT, OXY, OSUR, PLNT, PINC, PRI, PGNY, RXT, RIVN, HOOD, RXO, SNBR, SQSP, TOST, UBER, VTRS, WTI, WAT, & ZBH.

News & Technicals’

WeWork, the company that provides shared office spaces and services, filed for bankruptcy on Monday, after struggling with financial losses and a failed attempt to go public. The company, which was once valued at $47 billion by SoftBank, a major investor, in 2019, saw its valuation plummet to less than $3 billion in 2020. The company faced several challenges, such as the COVID-19 pandemic, which reduced the demand for office space, as well as the controversial leadership and governance of its former CEO, Adam Neumann, who stepped down in 2019. The company disclosed in an August filing that it had “substantial doubt” about its ability to continue as a going concern. The company said it plans to restructure its debt and operations under Chapter 11 protection and hopes to emerge as a more sustainable and profitable business.

The IMF, the international organization that monitors and supports the global economy, has revised its China growth forecast for 2023 upward, from 5.1% to 5.4%. The IMF said that China’s economy performed better than expected in the third quarter of 2023 and that the recent policy measures announced by Beijing, such as the easing of credit conditions and the fiscal stimulus, would support the recovery. However, the IMF also warned that China’s growth would moderate in 2024, to 4.6%, due to the ongoing challenges in the property sector and weak external demand. The IMF said that China needs to address the structural imbalances and vulnerabilities in its economy, such as the high debt levels, the environmental issues, and the social inequalities.

The central banks of the U.S., Europe, and the U.K. have raised their interest rates significantly in the past year and a half, in an attempt to curb the high inflation that has been affecting their economies. However, they have also paused their rate hikes at their latest meetings, and the markets expect them to lower their rates by the end of 2024, despite their cautious outlooks. This suggests that the central banks are facing a dilemma between fighting inflation and supporting growth so expect further policy adjustments as economic condition data dictates.

After a strong run last week, stocks caught their breath ending Monday little changed holding 50-day averages while struggling against overhead resistance with weak volume. The so-called magnificent seven enjoyed most of the bullish attention while the majority of stocks declined slightly. However, the bond market saw some rebound, as Treasury yields clawed back some of last week’s losses as the dollar rallied slightly recovering early losses. Today investors have a full plate of earnings results to find bullish or bearish inspiration along with International Trade numbers and several Fed speaker speeches to keep an eye on.

Trade Wisely,

Doug

The data last week eased inflation fears shifting sentiment from fear to exuberance and leaving behind multiple gaps in the price action pushing index charts back up to test downtrend resistance levels.  The T2122 indicator shifted from an extremely oversold condition on Monday to a short-term overbought condition by Friday’s close.  The question for this week is, can the rally be held or will bears trigger a profit-taking wave to test support levels?  With a busy earnings calendar and a very light economic calendar this week your guess is as good as mine but plan for price volatility to remain high.

Asian markets kicked off the week green across the board with South Korea surging more than 5% after banning short selling.  However, European markets trade mixed but mostly lower seemingly resting after the huge buying spree of last week.  U.S. futures in the premarket want to keep the buying party going suggesting a modestly bullish open as earnings data rolls out kicking off another busy week.

Economic Calendar

Earnings Calendar

Notable reports for Monday include AMG, AAON, ADTN, AL, ATSG, AYX, AMK, CBT, CE, COUR, CXW, FANG, DISH, ENVO, FRPT, GT, HALO, HL, HGV, IFF, MTTR, MED, MYGN, NEO, NXPI, OLO, OPK, O, RNG, ROVR, RHP, SWAV, TALO, SKT, TDC, TRIP, VECO, VRTX, VMEO.

News & Technicals’

Berkshire Hathaway, the diversified conglomerate led by Warren Buffett, reported a strong increase in its operating earnings for the third quarter of 2023. The company earned $10.761 billion from its various businesses, up 40.6% from the same quarter last year. Berkshire also accumulated a record amount of cash, reaching $157.2 billion by the end of September. The company has been investing in short-term Treasury bills that yield at least 5%, taking advantage of the rising bond yields. Geico, Berkshire’s insurance subsidiary, posted another profitable quarter, benefiting from its low-cost strategy and loyal customer base.

Elon Musk, the visionary entrepreneur and founder of Tesla and SpaceX, has launched a new AI venture called xAI. The company’s first product is an AI chatbot technology named Grok, which is designed to learn from natural language conversations and generate engaging and intelligent responses. Grok is still in its early stages of development and is only accessible to a limited number of users who are testing its capabilities and providing feedback. Musk aims to make xAI a leading player in the AI field, competing with other companies such as OpenAI, Inflection, Anthropic, and others.

Tyson Foods, one of the largest meat producers in the U.S., is recalling about 30,000 pounds of its dinosaur-shaped chicken nuggets due to possible metal contamination. The recall affects the 29-ounce plastic bags of Fully Cooked Fun Nuggets Breaded Shaped Chicken Patties, which were distributed to retail stores nationwide. The FSIS announced the recall on Saturday after some consumers reported finding small pieces of metal in the nuggets. The FSIS said there have been no confirmed reports of adverse reactions due to consumption of the product, but advised consumers to throw away or return the product to the place of purchase.

Stocks rose on Friday, as weaker-than-expected data on jobs and services eased inflation fears and raised hopes that interest rate increases are behind us. The October jobs report showed a slowdown in hiring and wage growth, while the ISM services index indicated a slower pace of expansion in the services sector. Stocks had a strong week, with the S&P 500 gaining more than 5.5%. Small-cap stocks also did well, rising more than 2.5%. We kick off this week with a light economic calendar with a bunch of Fed speakers including Jerome Powell.  Although we’re past the tech giant reports we still have a busy week of earnings events to inspire the bulls or bears.  After a huge rally a little resting consolidation or even a pullback seems likely so be careful chasing into already extended stocks as profit takers move quickly on any hint of selling. Expect volatility to remain high.

Trade Wisely,

Doug

Markets continued the relief rally on Wednesday as investors chose to hear the FOMC is not in a hurry to raise rates and ignored pretty much everything else.  Big tech had a great day as buyers inspired by AMD earned results pushed higher with the added benefit of bond yields pulling back.  Today we have a massive day of earnings reports that will culminate with a report from Apple after the bell.  The fear of missing out is kicking in the rally extends so remember to keep an eye on overhead resistance levels as economic reports roll in this morning. Whipsaws are possible with a gap open so plan your risk carefully.

Asian markets traded mostly higher overnight with only Shanghai just slightly lower even after their big stimulus efforts.  European markets trade decidedly bullish seeing green across the board adding to the relief rally after Powell’s comments.  U.S. futures ahead of earnings and economic report point to a gap up open with the tech sector leading the premarket surge.  Buckle up for another day of volatility.

Economic Calendar

Earnings Calendar

Notable reports for Thursday include AAPL, ACAD, ACCO, ACIW, ADT, ATI, SLGT, ALGM, AEP, AMH, APTV, ARW, TEAM, AVNT, BALL, BHC, BAX, BILL, SQ, BKNG, BWA, CNQ, CARS, LNG, CHUY, CRUS, CWEN, COHU, ED, COP, CROX, CUBE, CMI, CYBR, DOCN, BOOM, DKNG, DBX, DUK, LOCO, LLY, ENTG, EOG, EVH, EXC, EXPE, RACE, FIVN, FLWS, FND, FTNT, FOXA, FOXA, FOXF, FNKO, GIL, GDDY, HAE, HELO, HEP, HWM, HIII, HMN, HURN, H, IDA, ICE, IDCC, IONS, IRM, ITT, K, KN, LYV, MAR, MTZ, MERC, MCW, MRNA, TAP, MSI, MP, MUR, NRG, OGE, OMCL, OGN, PLTR, PZZA, PARA, PH, PCTY, PTON, PENN, PNW, PXD, PBI, PTLO, PPL, QLYS, PWR, RMAX, RGA, RYAN, SPGI, SBAC, SEE, SHAK, SHOP, SWKS, SO, SWN, SRC, SPXC, SBUX, SYK, SG, TPX, TRN, OLED, VTR, VIRT, WEN, WLK, WW, YELP, & ZTS.

News & Technicals’

Starbucks, the coffee giant, reported strong results for the fourth quarter of 2021, beating analysts’ expectations. The company’s net income attributable to the company rose to $1.22 billion, or $1.06 per share, up from $878.3 million, or 76 cents per share, a year ago. The company’s net sales increased by 11.4% to $9.37 billion. The company’s same-store sales, which measure the performance of its existing cafes, grew by 8%, driven by higher average spending and a 3% increase in customer traffic. The company attributed its success to its digital initiatives, menu innovation, and loyalty program. The company also raised its dividend by 10% and announced a new $20 billion share buyback program.

Shell, one of the world’s largest oil and gas companies, reported a lower profit for the third quarter of 2023 compared to the same period last year. The company earned $6.2 billion in the quarter, which was close to analysts’ expectations, but down from $9.45 billion in the third quarter of 2022. Shell attributed the decline to lower oil and gas prices, as well as weaker refining margins and chemical performance. Despite the lower profit, Shell announced a $3.5 billion share buyback program for the next three months, signaling its confidence in its cash flow and balance sheet.

Delta Air Lines, one of the largest U.S. carriers, is cutting some of its corporate and management staff as part of its efforts to reduce costs and improve efficiency. The company did not reveal how many employees will be affected by the layoffs but said they will not impact frontline workers such as pilots or flight attendants. Delta said the move is necessary to adjust to the changing market conditions and customer expectations. “While we’re not yet back to full capacity, now is the time to make adjustments to programs, budgets, and organizational structures across Delta to meet our stated goals — one part of this effort includes adjustments to corporate staffing in support of these changes,” the company said in a statement.

The Fed’s signal that it is not in a hurry to raise interest rates helped boost both U.S. and global stocks, as long-term bond yields fell sharply. The Treasury also announced that it will slow down the increase of its long-term debt sales, easing some of the pressure on the bond market. Moreover, weaker-than-expected jobs data suggested that the labor market recovery is still uneven. The 10-year Treasury yield dropped to its lowest level in 15 days, at 4.76%. Investors favored the tech giants inspired by the big rally in AMD.  Today we have a massive round of earnings events that include the behemoth market mover Apple after the bell. On the economic calendar, the bulls or bears will look for inspiration in Jobeless Claims, Productivity and Costs, Factory Orders, and a few bond auctions to keep an eye on as yields continue to decline this morning. Remember, the fear of missing out is a powerful emotion so be careful chasing stocks into major resistance levels.

Trade Wisely,

Doug

Markets edged higher on building on Monday’s gains but momentum was weak with all the uncertainty facing the Wednesday market.  Not only do we have three-quarters of a Trillion government funding debit raise announcement but we also have an FOMC decision and press conference so keep a close eye on bond yields that have been ticking higher this morning.  Add in Mortgage Apps, ADP, PMI, ISM, Construction Spending, JOLTS, Petroleum Status, and the huge number of earrings today the statement, “challenging price action”, could be a massive understatement!  Buckle up and be ready for just about anything.

While we slept Asian markets closed mostly higher with the Nikkei surging 2.42% while Hong Kong slipped slightly lower.  European markets trade cautiously this morning chopping between gains and losses as they monitor the big day of data releases. However, U.S. futures suggest a bearish open ahead of all the market-moving earnings and economic reports likely to keep volatility high as traders react.

Economic Calendar

Earnings Calendar

Notable reports for Wednesday include AFL, ABNB, ALB, ALKT, ALL, ATUS, AFG, AIG, AWK, APO, ASTE, ACA, CAR, AXTA, BALY, BHCO, BMRN, BXP, EAT, BLDR, CHRW, CRC, CWH, GOOS, CDW, CF, CAKE, CHEF, CLH, CTSH, CFLT, CLB, CVS, DIN, DASH, DD, DXC, ELF, EA, ET, ETR, EL, ETSY, EXAS, EXTR, FSLY, FWRG, GRMN, GNRC, GSK, HLF, HST, HPP, HUM, IDXX, IR, IIPR, IQV, JHG, KHC, LMND, LNC, LMND, LNC, MGY, MTW, MOR, VAC, MLM, MCK, MLNK, MET, MSTR, MDLZ, MUSA, NSA, NOG, NCLH, NUS, NTR, PGRE, PK, PYPL, PRU, PTC, QRVO, QCOM, RDN, RDWR, RYN, RVLV, ROKU, SMG, SCI, SIMO, SBGI, SITM, SEDG, RGR, SMCI, TEL, TT, TRMB, TYL, VRSK, W, WERN, WMB, WING, YUM, & ZG.

News & Technicals’

AMD, one of the leading chipmakers in the world, announced its third-quarter earnings on Tuesday. The company is known for making high-end graphics processing units (GPUs), which are essential for training and deploying generative AI models. Generative AI models are capable of creating new and realistic content, such as images, videos, texts, and sounds, based on existing data. AMD said that its AI GPU sales could surpass $2 billion in 2024, as the demand for generative AI applications grows. The company also said that it is investing in developing new and innovative AI GPUs that can deliver better performance and efficiency. AMD’s earnings report showed that the company had a strong quarter, with revenue up 54% year-over-year and net income up 68% year-over-year.

The Treasury Department will announce on Wednesday the details of its refunding, which is the process of issuing new debt to pay off the maturing debt. The refunding announcement will reveal the size and duration mix of the Treasury auctions, which are the primary way of selling government debt to investors. The refunding announcement is expected to attract more market attention than usual, as investors are concerned about the rising government borrowing and its impact on the interest rates and the economy. The Treasury Department gave a preview of its borrowing plans on Monday when it said that it will auction off $776 billion of debt in the fourth quarter of 2021. The market will be watching closely the actual sizes of the auctions and the maturities mix, which are the key variables that affect the supply and demand of Treasury securities. The Treasury Department has been increasing the issuance of longer-term debt, such as 10-year and 30-year bonds, to lock in low-interest rates and reduce refinancing risks. However, this also exposes the government to higher interest payments and inflation pressures.

The Bank of England (BoE) is expected to keep its interest rate unchanged at 4.5% on Wednesday after it stopped its streak of 14 consecutive rate hikes in September. The market is pricing in a high probability of a second hold, as the BoE faces a mixed economic outlook. The BoE has been raising its interest rate since 2020 to curb inflation, which reached 5.2% in August, well above the BoE’s target of 2%. However, the BoE also has to consider the impact of its monetary policy on economic growth, which slowed down to 0.4% in the third quarter, below the BoE’s forecast of 0.7%. Mike Riddell, an analyst at Allianz Global Investors, said that it was “striking that the market’s central case is for the BoE to not cut interest rates below 4% ever again.” He said that this implies that the market expects inflation to remain high and persistent and that the BoE will not be able to ease its policy in the future.

Equities rallied to close higher on Tuesday, building on Monday’s gains, but unfortunately, the momentum was weak as investors worried about the pending data.  Bond yields retreated slightly yesterday but are once again ticking higher as the Treasury moves forward with a three-quarters of a Trillion debt raise to keep the government spending practices funded. Today we have a very big day of earnings events and the economic calendar is chalked full of potential market-moving reports to keep traders guessing.  Although it is very unlikely the Fed will raise the rate today be prepared to hear hawkish talk from Jerome Powell suggesting their work is not done on inflation.  Plan for considerable price volatility as the data is revealed.

Trade Wisely,

Doug

The bears ran roughshod over Friday’s market as Middle East tensions worried investors with oil prices surging and bond yields holding steady.  This week will be very busy with market-moving job numbers, a FOMC rate decision, and a huge number of earnings events as we slide into November.   The T2122 indicator is in a short-term very oversold condition so watch for a relief rally and a possible short squeeze to get it moving.  However, don’t rule out a retest of lows, and expect challenging price volatility so plan your risk carefully.

Overnight Asian markets closed mixed but mostly higher ahead of Japan’s central bank decision.  European markets trade green across the board this morning reliving some of last week’s selling despite Middle Eastern worries.  U.S. futures suggest a substantial gap up hoping for a relief of some of the short-term oversold conditions as we wrap up October and slide into the holiday’s highly anticipated rally.

Economic Calendar

Earnings Calendar

Notable reports for Wednesday include AGNC, AMKR, ACGL, ANET, BCC, CHGG, CHKP, CRK, CWK, DENN, PLOW, FMC, FWRD, HTLF, IRT, KMPR, KFRC, LSCC, LEG, MPWR, ON, OGS, OTTR, PDM, PINS, PCH, PSMT, PCH, PSA, RMBS, SPG, SOFI, THC, RIG, VFC, VRNS, VNO, WELL, WDC, WOLF, XPO, & ZI.

News & Technicals’

Stellantis, the parent company of Chrysler, is facing a national labor strike in Canada, just days after it reached a tentative deal with the United Auto Workers union in the U.S. The strike, which started on Monday, affects two assembly plants in Ontario that produce some of the company’s popular models, such as the Chrysler 300 sedan and Pacifica minivan and the Dodge Challenger and Charger muscle cars. The workers, who are members of the Unifor union, are demanding better wages, benefits and working conditions. The strike could disrupt the production and supply of Stellantis vehicles in North America and hurt the company’s sales and profits.

The United Auto Workers union and Ford have reached a tentative agreement that includes $8.1 billion in new investments by the automaker and $5,000 bonuses for the workers. The tentative deal, which was approved by the local union leaders on Sunday, will now be presented to the 57,000 UAW-Ford members for regional meetings and voting, the union said on Sunday. The tentative agreement was achieved after the union launched selective strikes against Ford, General Motors, and Stellantis, as the three companies failed to meet the union’s demands by the Sept. 14 deadline. The union is seeking higher wages, better benefits, and more job security for its members.

Evergrande, the troubled Chinese property developer, saw its shares plummet to a record low on Monday, as it faced a possible liquidation by a Hong Kong court. The company’s shares dropped more than 20% from last Friday’s close of 23.6 Hong Kong cents to 18.8 Hong Kong cents in early Monday trading, before recovering slightly to 22.2 Hong Kong cents. The company is facing a winding-up order from a group of bondholders who claim that Evergrande has defaulted on its debt obligations. A Hong Kong judge said that the Dec. 4 hearing would be the last one before a decision is made on the order, according to Reuters. Evergrande is the world’s most indebted property developer, with more than $300 billion in liabilities. The company’s financial woes have sparked fears of a contagion effect on the Chinese and global economy.

The stock markets ended Friday with bears overwhelming the bulls as Middle East tensions grew and those pesky bond yields held firm. The S&P 500 and the Nasdaq, finished the week with more than 2.5% losses and are now more than 10% below their highs on July 31. However, the sell-offs in large tech companies like Google and Facebook (Meta) after they announced their earnings took some shine off the “Magnificent 7”.  As we finish up October about 40% of companies will come out from under their blackout period meaning buybacks could prove an increase in market breadth.  Today is the only light day of economic reports and keep in mind the earnings events will continue to increase through Thursday afternoon when Apple reports earnings.  Jobs numbers will be in focus this week as well as the FOMC rate decision on Wednesday afternoon. Plan for significant volatility.

Trade Wisely,

Doug

Though the Dow benefited from MSFT and BA the bears remained resilient attacking the tech sector with the so-called magnificent seven leading the way lower. Bond yields edged higher and unfortunately continue to do so this morning facing a huge day of earnings as well as a busy economic calendar chalked full of market-moving reports.  Indexes remain in a short-term extreme oversold condition that suggests a relief rally could begin at any time but if the data continues to pile on panic selling is possible to break recent market lows.  Plan for signalment price volatility!

Overnight Asian markets closed mostly lower with only the Shanghai index managing a 0.14% gain as Australia shares close at a one-year low. European markets are lower across the board this morning in reaction to earnings and the likelihood the ECB will hold rates steady.  U.S. futures also suggest a bearish open led by the tech sector ahead of a huge day of earnings and economic reports that could move the market substantially.  Buckle up for a potentially wild day of volatility as the investors react.

Economic Calendar

Earnings Calendar

Notable reports for Thursday include AMZN, AOS, AB, MO, AMT, AIT, ARCH, BJRI, SAM, BSX, BC, BG, CPT, COF, CSL CARR, CNP, CMS, CC, CMG, CINF, COLM, CMCSA, COUR, CFR, DECK, DXCM, DLR, EMN, EHC, ENPH, ESS, FAF, FHI, FE, F, FGLI, GWW, HOG, HIG, HAS, HSY, HTZ, HON, HUBG, INTC, IP, JNPR, KVUE, KDP, KIM, LHX, LH, LII, LIN, MAS, MA, MPW, MRK, MBLY, MHK, NRDS, NEM, NOC, NVCR, OLN, OSTK, BTU, PCG, PFG, PTCT, RS, RSG, RCL, STX, SKYW, LUV, STAG, STM, TEX, TXRH, TXT, TSCO, TW, TSCO, TW, TPH, UPS, X, UDR, VLO, VRSN, VMC, WTW, and WY.

News & Technicals’

Mercedes-Benz, the German luxury carmaker, reported lower profit and revenue for the third quarter of 2021, as it faced tough competition in the electric vehicle (EV) market. The company’s Chief Financial Officer, Harald Wilhelm, said that the EV market was a “pretty brutal space,” according to Reuters. He said that some traditional automakers were selling EVs at a loss, despite their higher production costs, to gain market share. This put pressure on Mercedes-Benz’s pricing and margins, as it tried to balance profitability and growth. The company’s shares fell by 2.6% on Thursday, as investors were disappointed by its results.

The U.S. economy may have performed well in the third quarter of 2021, but one strategist warns that the U.S. consumer, a key driver of the economy, is facing a looming crisis. Chris Watling, the chief executive of Longview Economics, a financial advisory firm, told CNBC’s “Squawk Box Europe” that the U.S. consumer is “walking towards a cliff.” He said that consumer spending, which has been boosted by stimulus checks and pent-up demand, is unsustainable and will soon run out of steam. He also said that the rising inflation, supply chain disruptions, and labor shortages will hurt consumer confidence and purchasing power. He predicted that the U.S. economy will slow down significantly in 2022 and 2023, as consumer spending weakens.

The commercial real estate markets in the U.S. and China are facing challenges in a scenario where interest rates remain high for a long time, according to Singapore’s United Overseas Bank (UOB). The bank said that higher rates could affect the demand and supply of commercial properties, as well as the financing and valuation of these assets. However, the bank also expressed optimism about one key region: Southeast Asia. The bank said that Southeast Asia has attracted strong investment flows, especially in the new economy sectors such as sustainability. The bank cited examples of green buildings, renewable energy projects, and digital infrastructure that have received funding from both domestic and foreign investors. The bank said that Southeast Asia offers attractive opportunities for commercial real estate investors, as the region has a large and growing population, a rising middle class, and a supportive policy environment.

Hints of a selling relief gave way to more selling Wednesday as the bears remained resilient, reacting to the earnings reports and the rising bond yields. The technology sector suffered the most as the so-called magnificent seven lost some of their shine. The Dow did better, thanks to the strong performance of Microsoft and Boeing shares. Interest rates remain the main factor for the financial markets. Ten-year Treasury yields rose again on Wednesday, going back over 4.9% but still below the recent highs after reaching 5% on Monday. Today we have a huge day of earnings with AMZN in focus after the bell.  We also have market-moving economic reports that include Durable Goods, GDP, International Trade, Jobless Claims, Pending Home Sales, as well as more Fed speak and bond auctions to keep traders guessing and volatility high.  Fasten your seat belts folks its likely to be a bummy day as we test recent lows in a very oversold short-term condition.

Trade Wisely,

Doug