(Justin Vaughn, Editor, Options Trading Report)
Last week’s market finished up again after several days of churning higher with the S&P 500 and the Dow Jones Industrial Average cresting to record new highs. The Magnificent 7 and big techs soared to new highs also, finishing the week strong. The earning parade continued with a majority of companies’ releases beating year-over-year numbers. Oil was weaker, closing down $1.45 a barrel. Gold moved steadily up hitting $2,713.70 a troy ounce, beating all commodities and indexes up 32% for the year. The ‘safe-haven’ tag on gold is gaining references now as a bonafide investment sector as the shiny metal has awakened. Central banks are continuing to accumulate gold, with heavy purchases. Bonds were weaker as the 10-year Treasury yield dipped down from 4.095 to settle at 4.074 at Friday’s close, reacting to the market trending upward.
Monday’s market opened with heavy investor and trader’s worries of the upcoming earnings releases coming this week and the Fed’s concerns that a possible rate cut might be in ‘cards’ for November. The Dow Jones Industrial Average led the indexes lower dropping 344 points. So far this has been a banner 3rd quarter for earnings releases with 80% of S&P 500 company’s reporting beating expectations. This is the 5th consecutive quarter of earnings reporting of continued increases. “A majority of companies are beating earnings expectations and generally speaking it’s in the ballpark of a normal beat rate,” said Jason Pride, chief of investment strategy and research at Wealth Manager Glenmede. As the election draws nearer and the polls give hints of a possible winner, Wall Street’s worries are amplified with concerns over several market sectors, including financial, banking and energy. Recent polls are showing Trump narrowly leading Harris as the election nears.
The sell-off in the bond market took the attention of investors on Tuesday, as the market slump hit two days. Earning reports, again, took center stage as third quarter results flooded the news. Both the Dow Jones Industrial Average and the S&P 500 were soft as the many positive earnings were not ‘good enough’ to move indexes. Mr. Powell reiterated again “that a careful analysis of labor and economic data would be used to make rate cut decisions, referring to previous discussions on a November assessment. The bond market strengthened as the 10-year Treasury yield reached 4.2%, while equities looked for direction. Gold continued to be bullish, rising to $2.744.00 a troy ounce six days in a row, up for the year 33%.
Techs tanked at opening on Wednesday as rate-cut worries intensified the market, (No other news took pressure off). The earnings ‘train’ continued with some major Mag 7 companies revealing outstanding 3rd quarters. Oil was unsteady Wednesday as new data confirmed that surplus inventories are growing and that tensions are easing a bit as cease-fire talks show ‘some’ promise. Stocks opened mixed on Thursday, after three days of peaks and valleys with no direction. As the day continued, many good earrings reports drove the Nasdaq Composite higher.
Billions of dollars (and juan) have been quietly moved out of China by residents over the past 12 months. The Wall Street Journal has estimated that a possible $254 Billion has left China illegally. Fears of massive property devaluations, deterioration of the economy, lack of investment opportunity, a declining currency and poor equity valuations have given every reason to move capital out of China. The recent stimulus packages unveiled by Premier Xi Jinping have failed. Residents have used every possible method to exit the capital out of China. Crypto currencies, foreign money exchanges, setting up shell companies, dealing of and smuggling Art. With the second largest economy in the world China is beset with a faltering economy begging to be….fixed.
RUMBLINGS ON THE STREET
Randall W. Forsyth, Writer for Barron’s, – “UP AND DOWN WALL STREET” “Notwithstanding, all the bullishness about financial conditions and the economy, gold, the so-called barbarous relic, also continues to make new highs. While the yellow metal could see a potential pull-back in a no-landing scenario with fewer Fed cuts, Michael Widmer (BofA commodity strategist) sees it climbing as high as $#,000 an ounce.”
JB Taylor, CEO , Wasatch Global Investors, Barron’s – “While it’s hard to bet against the Mag Seven in terms of their fundamentals…even redwoods don’t grow to the sky. Small-caps haven’t been this cheap in 25 years.”
Matt Muenster, chief economist at transport management technology firm Breakthrough. WSJ – “In the near term I don’t see either party’s policies being particularly impactful on gasoline or diesel prices. I think market fundamentals will really drive it the next calendar year.”