Inflation Concerns And Volatility Mark End Of October Trading

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[Chart courtesy of MarketWatch.com]

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The major indexes faced early declines as disappointing quarterly reports from two tech giants dampened any bullish sentiment. Microsoft’s shares fell over 5%, while Meta slipped 2.2% due to missed user growth expectations and a warning of significantly increased expenditures next year.

Throughout the week, mega-cap earnings painted a mixed picture. Alphabet saw a nearly 3% rise on Wednesday, but AMD plummeted over 10% following disappointing guidance. Investors are now eagerly awaiting reports from Apple and Amazon, which are due after the market closes today.

The Federal Reserve’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) index, came in slightly hotter than expected for September at 2.7% versus the anticipated 2.6%. The headline PCE rose 0.2% month-over-month, bringing the year-over-year PCE down to 2.1%, its lowest since February 2021. Overall, these figures were in line with estimates.

Increased volatility was evident on this last day of October, a month historically known for significant downside surprises. Today’s sell-off pushed the S&P 500 into the red for the month, albeit by a modest 1%, with all major indexes experiencing losses.

Inflation concerns were prominent, as the Bloomberg Economic Inflation Data Surprise index accelerated after a September downturn, leading to a slower pace of rate cuts.

The Nasdaq led today’s downturn, with all Mag7 stocks slipping. For the month, the basket surrendered nearly all gains, unsurprising given the spike in bond yields, with the 10-year yield up 0.6%, contrary to the Fed’s expectations following a 0.5% rate cut.

This anomaly extended to the mortgage market, where rates soared above the critical 7% level in October, despite the Fed’s rate cut.

The dollar also surged higher, and interestingly, gold followed suit, gaining for the eighth month out of the last nine and setting several record highs. This suggests that inflation fears remain significant, and the Fed’s aggressive cut may have been a policy misstep.

Despite today’s weakness, Bitcoin had its best month since May, rallying close to its record highs near $74,000 yesterday, supported by record BTC ETF inflows during October. Oil prices, after an early October rally, lost momentum but managed to close in the green over the past two days.

With the aggressive Fed cut leading to various unintended consequences, the USA’s sovereign risk of default has surged, unsettling traders as we move into November.

Do we need to brace for impact?

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Gold And Bitcoin Show Resilience Amid Market Turbulence

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

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Early in the trading session, bullish sentiment dominated despite a flood of mixed earnings results, with more reports expected from major tech companies.

However, this optimism was short-lived, as the major indexes eventually succumbed to bearish pressures, relinquishing their gains, and closing in the red.

Alphabet set a positive tone by surpassing expectations, boosting its share price by approximately 6%. In contrast, chipmaker AMD disappointed investors, leading to a 10% drop in its stock. Super Micro had an even worse day, with its stock plummeting by 32%, while Caterpillar also underperformed, losing 4% of its value.

As the market closed, anticipation grew for the earnings reports from tech giants Meta and Microsoft, with Apple and Amazon scheduled to release their results the following afternoon.

On the economic front, the latest third-quarter GDP figure showed a 2.8% annualized increase, falling short of economists’ expectations of a 3.1% rise.

However, the ADP payroll report provided a silver lining, revealing the highest level of private job creation in a year. Additionally, pending home sales surged by 7.4% month-over-month, marking the largest jump since June 2020.

Despite the mixed market environment, gold remained resilient, briefly touching the $2,800 level before retreating. Bond yields experienced another turbulent session, with some traders viewing the Fed’s 0.5% rate cut as a potential policy misstep.

The dollar had a volatile day, ultimately closing lower, while Bitcoin, despite coming off its highs, found solid support around $72,000. Oil prices rebounded but continued to drift below recent highs.

It was a volatile session, and I expect to see more of that as we approach election time.

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Choppy Markets Expected With Election Approaching; Gold And Bitcoin Soar

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

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As we approach a series of major corporate earnings releases in the coming days, bond yields continued their upward trajectory, reaching their highest levels since July.

Despite this, the major indexes showed little movement early this morning. With only five trading days remaining before the US presidential election, market volatility could increase, potentially leading to more choppiness. Today, the Dow slipped into the red, while the S&P 500 and Nasdaq managed to close in the green.

Bond yields showed significant fluctuations, with the 10-year yield pulling back slightly by the close, yet still rebounding to its July highs.

Gold surged, gaining 1.05% and setting a record, while Bitcoin also reached a new all-time high. The MAG7 stocks closed higher ahead of their earnings reports, whereas the most shorted stocks declined after three consecutive days of gains. The dollar remained unchanged.

The global money supply appears to be supporting Bitcoin’s potential for further gains, as indicated by recent charts.

Could we be on the verge of seeing Bitcoin reach the much-anticipated $100,000 mark?

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Bitcoin Surges Towards $70,000 Amid Market Volatility And Election Uncertainty

Ulli Market Commentary Contact

[Chart courtesy of MarketWatch.com]

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This morning, crude oil prices plummeted by over 5% following an Israeli airstrike on Iran that notably avoided sensitive oil and nuclear facilities.

This unexpected development contributed to a jump in the major indexes, buoyed by the easing geopolitical tensions and the anticipation of upcoming mega-cap technology earnings. These earnings, coupled with the steadily improving Citi Economic Surprise Index, are expected to sustain the market’s upward momentum.

Traders are gearing up for the busiest week of the third-quarter earnings season, which coincides with the Presidential election on November 5. Five of the MAG7 companies—Alphabet, Microsoft, Meta, Apple, and Amazon—are set to release their earnings reports. Given their high valuations, these companies must meet expectations to prevent a potential sell-off.

On the economic front, this week is packed with significant events, including the PCE index release on Thursday, a preliminary reading of the third-quarter GDP, and the potentially market-moving jobs report on Friday.

Last week’s short squeeze continued to drive Small Caps higher, although the MAG7 basket saw minimal gains. Bond yields experienced volatility, with the 10-year yield surpassing the 4.27% mark.

Meanwhile, the dollar and gold ended the session unchanged, but Bitcoin found support and raced towards the $70,000 mark.

Despite the prevailing uncertainty surrounding the election, bond yields appear to have settled on an outcome, as indicated by the latest charts.

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ETFs On The Cutline – Updated Through 10/25/2024

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Do you want to know which ETFs are hot and which ones are not? Then you need my High-Volume ETF Cutline report. It tells you how close or far each of the 311 ETFs I follow is from its long-term trend line (39-week SMA). These are the ETFs that trade more than $5 million a day, so they are not some obscure funds that nobody cares about.

The report is split into two parts: The winners that are above their trend line (%M/A), and the losers that are below it. The yellow line is the line of shame that separates them. You can see how many ETFs are in each group and how they have changed since the last report (256 vs. 237 current).

Take a peek:

The HV ETF Master Cutline Report

If you are confused by some of the terms we use, don’t panic. I have a helpful Glossary of Terms for you.

If you want to learn more about the Cutline method and how it can make you rich (or at least less poor), read my original post here.

ETF Tracker Newsletter For October 25, 2024

Ulli ETF Tracker Contact

ETF Tracker StatSheet          

You can view the latest version here.

ELECTION UNCERTAINTY LOOMS OVER MARKETS AS BOND YIELDS CLIMB

[Chart courtesy of MarketWatch.com]

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Building on yesterday’s gains, which ended a three-day losing streak for the S&P 500, the index tried to secure a slight weekly advance.

However, this effort was thwarted as the markets sold off towards the close. The Nasdaq, on the other hand, finished Thursday on a positive note, buoyed by Tesla’s remarkable comeback rally. The EV manufacturer had its best day in over a decade, driven by stronger-than-expected profits and optimistic expectations for future vehicle growth.

Early in the session, a decline in bond yields provided upward momentum for the indexes, a trend that persisted throughout the day.

However, yields reversed course late in the session, with the 10-year yield rallying and closing at 4.24%. This shift clearly shows the dependency of the S&P 500 and Nasdaq on the direction of interest rates, as higher yields can undermine bullish sentiment.

This week, economic macro data exceeded expectations, contributing to the rise in bond yields and raising doubts about whether the Federal Reserve will continue its easing cycle as anticipated.

The MAG7 basket underwent a rollercoaster week but ended higher, thanks to gains from Nvidia and Tesla. While rising bond yields kept pressure on equities, they also helped the dollar achieve its highest weekly close since June.

Gold maintained its upward momentum, hitting a new intraday record on Wednesday. Meanwhile, Bitcoin’s advance was halted at the $69.5k level, causing the cryptocurrency to retreat and relinquish its early gains.

As we approach the upcoming election, it remains the primary focus for traders. Prediction markets currently favor Trump, but as the saying goes, “it’s never over ’till the fat lady sings.”

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