AMZN and APPL disappoint, Eurozone inflation spikes to a 13 year high, and U.S. Treasury yield surged in early Friday trading, providing the first twinge of uncertainty in this robust earnings fueled rally.  Though signs are emerging of a global economic slowdown, I would not expect the bulls to give up easily.  I would not be surprised to see some end of window dressing to close the October strong.  Next week could bring uncertainty as we wait for the FOMC taper decision and find out if they will begin fighting inflation.  Should the bears gain control today, look for a test of price support levels that are unfortunately painfully lower.

Asian markets close the day mixed as Apple supplier stocks suffered losses after earnings.  European markets trade red across the board this morning, with inflation hitting the highest level since 2008.  U.S. futures point to modest declines this morning ahead of earnings data and a reading on Personal incomes and Consumer Sentiment. 

Economic Calendar

Earnings Calendar

We get a little break in the rapid pace of earnings this week with 100 companies listed on the calendar.  Notable reports include ABBV, AON, B, BAH, CHTR, CVX, FTS, LHX, LYB, NWL, PSX, RCL, SJR, WPC, GWW, WY, & WETF.

News and Technicals’

Treasury Secretary Janet Yellen told CNBC on Friday that the administration’s infrastructure spending proposal will lower inflation when it is increasing rapidly.  Speaking from Rome, she insisted that “what this package will do is lower some of the most important costs, what they pay for health care, for child care. So it’s anti-inflationary in that sense as well.”  Her remarks come with growth slowing and inflation rising, mainly due to major supply chain issues that she expects to be resolved.  However, President Joe Biden unveiled a $1.75 trillion framework for his signature climate and social spending bill.  Initial signs indicate that neither progressives in the House nor three key senators are ready to commit to backing the plan in its current form. Initial signs indicate that neither progressives in the House nor three key senators are ready to commit to backing the plan in its current form.  The name change, which was announced at the Facebook Connect augmented and virtual reality conference, reflects the company’s growing ambitions beyond social media.  The name change, which was announced at the Facebook Connect augmented and virtual reality conference, reflects the company’s growing ambitions beyond social media.  Headline inflation on Friday came in at 4.1% for this month, according to preliminary data from Europe’s statistics office Eurostat. This was the highest level since July 2008, according to Reuters data, and was ahead of a consensus forecast of 3.7%. September’s figure had come in at 3.4%.

The 10-year Treasury yield surged three basis points to 1.6049%, and the 30-year jumped more than four basis points to 2.0076% in early Friday trading.  Disappointing results from AMZN and APPL seem to have dampened the earnings session euphoria slightly, but with today being the last trading day of October, I would not expect the bulls to give up this bull run easily.  I would not be surprised to see a little end-of-month window dressing to close the month strong.  However, should the bears gain the upper hand, selling could come in strong with price support levels painfully lower.  Next week we will turn our attention to inflation and what the FOMC plans to combat the impacts.  To taper or not to taper is the question and how the market might react to that news.  With the Eurozone facing its highest inflationary rate since 2008 and the Chinese economy struggling, clues are developing a global market slowdown. Again, I’m not predicting a selloff is coming, but we should prepare for the possibility after the extreme rally.

Trade Wisely,

Doug