[Chart courtesy of MarketWatch.com]

1. Moving the markets

The bulls dominated again and managed to score another winning session and, in the process, pushed the Dow and S&P 500 to new intra-day highs. This move came ahead of a major week of earnings from the big tech heavyweights in anticipation of positive surprises. As a result, the Nasdaq lead the pack with a gain of +0.90%.

Tesla was on fire today with the stock gaining more than 9% and pushing the market cap to over $1 trillion, a move that was supported by Morgan Stanley hiking its price target from $900 to $1,200. Also lending an assist was rental car company Hertz’s announcement that it would order 100k Tesla vehicles.

And as very often is the case, a well-timed short squeeze added support to the bullish theme thereby insuring a green close all the way around.

The US Dollar first dumped and then pumped to close modestly higher, thereby keeping its recent zig-zag pattern intact. Bond yields bounced below and above their respective unchanged lines and hugged them into the close.

As a result of only immaterial movements in the dollar and bond yields, gold continued its march higher by not only gaining +0.65% but in the process also reclaiming its $1,800 level by a small margin.

One analyst saw the current conditions this way:

“Rising tide of earnings is lifting all the boats and adding fuel to the bull market fire,” said Anu Gaggar, global investment strategist at Commonwealth Financial Network. “The 3Q earnings season is off to a strong start despite concerns about supply bottlenecks and labor shortages.”

Let’s see if it continues, because as of right now, October has been a good month for the major indexes.

[Chart courtesy of MarketWatch.com]

1. Moving the markets

With the bulls continuing their ascent to take out all-time highs, they succeeded by pushing the Dow into record territory, while S&P 500 “only” registered its sixth consecutive day of gains. The Nasdaq lagged by bouncing around its unchanged line while giving up early advances.

MarketWatch was correct with its analysis that the markets have climbed a wall of worries over the past two months. Fears over the delta Covid surge, supply chain hiccups, a China property crisis, the Fed signaling the removal of stimulus and surging inflation, rattled nerves on Wall Street but did not threaten the end of this bullish period.

Combining weaker-than-expected producer prices with better-than-expected bank earnings has so far been a winning combination, but it remains to be seen whether the former can be maintained, or if inflation indeed will rear its ugly head in the future, a view that I share.

Dumping and jumping played out in different arenas. The US Dollar continued to dump, which Gold took advantage of by jumping 0.75% and again approaching its $1,800 level. Even gently rising bond yields could not take the starch out of gold’s rebound, with the ever-worsening inflationary background lending support to the precious metal.

I’ll be out tomorrow but will post the weekly StatSheet by 6:30 pm PST.

[Chart courtesy of MarketWatch.com]

1. Moving the markets

Positive earnings reports kept bullish momentum alive, with major companies showing strong report cards, which helped alleviate fears that Covid cases and rising costs might undermine corporate profit margins. So far, this has not happened.

It was “go time” right after the opening bell, and the major indexes followed the path of least resistance, which was up, with all three of them closing solidly in the green. The S&P 500 reclaimed its closely watched 4,500 level without hesitation or skipping a beat, and it is now positioned less than 1% from its all-time high.

Economically speaking, we learned that US Housing Starts and Building Permits plummeted in September, which was preceded by a surprise gain in August. The correction was worse than expected with Building Permits sinking 7.7% MoM vs. an expected drop of 2.4%. Housing Starts tumbled 1.6% vs. no expected change.

It remains to be seen, if this is an indication of an upcoming broad economic slowdown, because the Atlanta Fed came out today saying the economy teeters on the verge of contraction. Translated, it means growth is falling and inflation is soaring thereby bringing dreaded “S” word, as in Stagflation, back to the front burner.  

Added ZeroHedge:

In its latest GDPNow forecast published moments ago, the Atlanta Fed slashed its estimate for real GDP growth in the third quarter of 2021 to just 0.5%, down from 1.2% on October 15, from 6% about two months ago, and down from 14% back in May.

However, looking at market behavior you would not notice any underlying issues, because those concerns are simply overlooked when inconvenient.

The US Dollar slipped and broke October support to the downside. Bond yields climbed again with the 10-year closing at 1.638%. Gold managed to hang tight and gained slightly, but it was not enough to get over its $1,800 glass ceiling.  

Looking at the comparison chart to 1987, it looks like we may have reached a moment of truth with ZeroHedge quipping “Happy 34^th Black Monday Anniversary.”