Market Gains on Amazon Rally; 7-Year and 3-Year Yields Signal Uncertainty

Market Gains on Amazon Rally; 7-Year and 3-Year Yields Signal Uncertainty

Stay Informed and Stay Ahead: Market Watch, November 1st, 2024

Late-Week Wall Street Markets

Highlights

• Market Gains: The NASDAQ, DOW, and S&P 500 experienced overall gains, driven by strong performance in the Broadline Retail sector, despite mixed results across other sectors.
• Economic Insights: October saw slight contraction in U.S. manufacturing and minimal job growth, while inflation pressures remained, indicating a cautious outlook for investors.

In-Depth Analysis

• Market Performance: The NASDAQ, DOW, and S&P 500 posted gains, despite six of eleven sectors declining. Broadline Retail showed strong performance.
• Economic Insights: In October, U.S. manufacturing contracted slightly, job growth was minimal, and inflation pressures persisted. Investors should focus on stable demand sectors as economic uncertainties loom.
• Yields & Commodities: The 7-Year and 3-Year Notes highlight market uncertainty. The 10-2 Year Treasury yield spread remains positive at 0.17, while the 10-3 Month spread is inverted at -0.12, indicating caution. Commodities, Crude oil futures gained slightly, indicating steady demand, while Brent crude fell on supply concerns. Gold and silver declined, and natural gas dropped significantly, reflecting weak demand. Corn prices increased due to supply challenges.
• Crypto & ETFs: Cryptocurrency markets experienced slight declines today, with Bitcoin at $69,028 and Ethereum at $2,496.28. This pattern across major coins suggests a cautious investor sentiment amid subdued trading activity. The standout performer in high-volume ETF movements was the GraniteShares 2x Long AMZN Daily ETF, gaining over 12%, reflecting strong bullish sentiment in Amazon stock.
• Market Strategy: Maintain long-duration bonds and consider leading mortgage refinancing firms like Rocket and SOFI, anticipating Q4/Q1 ’25 rate cuts. Long positions in AI are prudent; diversify with Russell 2000 ETFs.
• Rate Cut Outlook: Inflation trends suggest disinflation, with September's CPI at 2.4%. The Federal Reserve remains cautious yet not overly concerned with inflationary fluctuations, suggesting a continued easing path.

Market Summary

Indices & Sector Performance:

• The NASDAQ, DOW and S&P 500 gained. Six of eleven sectors declined, with a notable performance in Broadline Retail, Life Sciences Tools & Services and Textiles Apparel & Luxury Goods.

Technical Analysis:

• Dow Jones Industrial Average (DOWI): The DOWI shows positive mid- and long-term growth despite minor recent dips. The 5-day and 20-day averages are slightly down at -0.15% and -0.71%, respectively, but longer-term averages remain robust with the 50-day up +3.29%, the 100-day up +8.53%, and the 200-day at +12.23%, contributing to an 11.58% year-to-date gain. Stochastic indicators near overbought levels indicate potential for further upward movement, and the RSI values from 42.17% to 55.28% suggest recovery potential. While short-term MACD readings signal slight bearishness, the strong 100-day MACD underscores long-term positive momentum, with overall growth likely but caution warranted amid high volatility.

• S&P 500 (SPX): The SPX index shows a solid upward trend despite minor short-term declines. The 5-day moving average is down -1.37% and the 20-day down -0.39%, while the longer-term 50-, 100-, and 200-day averages are up +2.84%, +6.58%, and +19.83%, respectively, supporting a strong bullish outlook with a year-to-date gain of +20.10%. Stochastic indicators, with the 100-day %K at 83.17%, signal overbought conditions, while the RSI between 37.80% (9-day) and 55.80% (100-day) suggests potential for continued growth. Volatility remains moderate, though the MACD indicates short-term caution with negative readings for the 9- and 20-day oscillators, countered by a strong positive 100-day MACD, underscoring sustained long-term momentum.

Nasdaq Composite Index (NASX): The NASX shows strong mid- to long-term growth with the 5-day average slightly down (-1.50%), but steady gains in the 20-day (+0.56%), 50-day (+3.52%), and 200-day averages (+21.15%). Year-to-date, it’s up +21.51%, highlighting sustained upward momentum. Stochastic indicators reveal strong buying pressure, though some signs of overbought conditions are emerging. The RSI is steady around 54.54%, supporting ongoing demand. Despite recent short-term bearish signals in the MACD, long-term trends remain positive. Higher volatility suggests potential for minor corrections, though overall optimism remains for continued growth.

?

Sector Performance:

• Over the past month, the Financials sector led with a gain of 2.88%, followed by Communication Services at 2.60% and Energy at 1.54%. The Information Technology sector saw a modest decline of -0.43%. Meanwhile, Health Care and Materials had the largest declines at -4.15% and -4.13%, respectively, with Real Estate also down -2.67%.

Economic Highlights

• October S&P Global US Manufacturing PMI Summary and Market Impact: The US manufacturing PMI in October rose to 48.5 from 47.3 in September, indicating ongoing contraction. Production fell for the third month as new orders and exports declined, driven by pre-election uncertainty. Input cost inflation eased, though supply chain delays persisted due to weather and capacity issues. Business sentiment showed slight improvement with hopes for post-election recovery, though employment and purchasing continued to decline.? Market Impact: Reduced inflation pressures may lead to a more favorable interest rate environment, yet fragile demand and pre-election uncertainty could drive market volatility, especially in manufacturing and exports. Investors might focus on resilient companies poised for potential economic recovery post-election.

• October Jobs Report Highlights: Total nonfarm payrolls increased by +12,000 in October, with the unemployment rate steady at 4.1%. Gains in health care (+52,000) and government (+40,000) were offset by declines in temporary help services and manufacturing (-46,000), the latter impacted by strikes. Revisions to August and September data revealed 112,000 fewer jobs than initially reported. Average hourly earnings rose 0.4%, with the average workweek unchanged. Investor Takeaway: Persistent wage pressures and softer employment may encourage Fed caution on rate hikes. This dynamic could favor interest-sensitive stocks while pressuring sectors affected by labor volatility.

• U.S. Personal Income and Outlays Analysis and Implications ("PCE"): U.S. personal income rose by 0.3% in September, with similar gains in disposable income and spending, bolstered by non-durable goods and services. Core inflation climbed 0.3%, with service prices, particularly in housing and healthcare, increasing more sharply than goods. The personal saving rate remained at 4.6%, indicating limited savings amid high expenditures. Investor Insights: Ongoing service-based inflation may lead the Fed to consider rate adjustments. Investors may find opportunities in sectors like healthcare, housing, and essential non-durables that exhibit steady demand, while monitoring interest-sensitive assets and consumer credit due to persistent inflation risks in services.

?

NASDAQ Global Market Update

• Trading Volume: 5.56 billion shares traded, with ProShares UltraPro Short ^SQQQ and NVIDIA ^NVDA leading in volume.

US Treasuries & Bond Markets

• Yield Movements: Recent increases in the yields of the 7-Year and 3-Year Notes indicate ongoing market uncertainty. The 10-2 Year Treasury yield spread is positive at 0.17, while the 10-3 Month spread is inverted at -0.12, signaling caution regarding near-term economic risks.

• U.S. 10-year bond yields rose to 4.397%, signaling higher interest rate expectations, while U.K. and Australian yields increased amid inflation concerns. Germany and Japan’s yields edged up slightly, with China’s remaining stable.

Market Factors

• Mega Cap Growth and Large Cap Growth both gained 0.4%, while Mega Cap Value and Large Cap Value fell by 0.7%. Small Cap sectors showed slight declines, with Momentum and High Dividend experiencing larger losses. The data indicates a preference for large growth stocks while value and small-cap stocks lag, reflecting cautious investor sentiment amid economic uncertainty.

Volatility Overview

• The current VIX level of 21.88 indicates increased market volatility and uncertainty, suggesting that investors are anticipating potential price fluctuations. The significant rise in the VIX over the past month and year reflects growing concerns about market stability, often linked to economic events or geopolitical risks. A 52-week high of 65.73 indicates extreme fear in the markets at some point over the past year, while the low of 10.62 shows there have been periods of relative calm.

• The Fear & Greed Index currently registers “Neutral,” while the Volatility Index remains “Neutral.”

Commodities & ETFs

• Crude oil futures showed slight gains, indicating steady demand, while Brent crude declined, suggesting supply concerns. Gold and silver fell, reflecting reduced safe-haven interest. Natural gas dropped significantly, signaling weak demand, while copper rose, indicating stable industrial use. Corn prices increased due to supply challenges, while wheat declined, highlighting a complex landscape of challenges and opportunities across commodities.

• Notable high-volume ETF movements included the GraniteShares 2x Long AMZN Daily ETF and Direxion Daily AMZN Bull 2X Shares, both gaining over 12%, indicating strong bullish sentiment in Amazon stocks.

Crypto’s & Currency Markets

• Cryptocurrency markets faced slight declines today, reflecting overall market stability. Bitcoin dipped to $69,028, while Ethereum fell to $2,496.28, indicating subdued trading activity. This pattern, with minor losses across major coins like Ripple and Litecoin, suggests a cautious sentiment among investors, maintaining a steady focus on potential future movements.

Stocks to Watch

• ChromaDex Corp. (CDXC) rose 67.91% on a volume of 37.7 million shares, indicating strong investor interest. MicroCloud Hologram Inc. (HOLO) increased 27.71% with 29.3 million shares traded. Nexalin Technology Inc. (NXL) gained 26.91% on a volume of 6.2 million shares.

Earnings

• Market Trends: As of November 1, 2024, approximately 51% of S&P 500 companies have reported their third-quarter earnings, with 72.6% exceeding Wall Street profit expectations. This figure is slightly below the five-year average of 76.8%.
• Despite this positive trend, the earnings landscape remains mixed, with notable downward revisions affecting eight sectors, particularly the Energy sector, which is expected to report the largest year-over-year earnings decline.
• On a revenue basis, the S&P 500 is expected to see a 4.8% year-over-year growth in Q3 2024.

Global Markets Summary

• Asia: The Nikkei 225 saw a significant decline of 2.63%, while the Hang Seng Index experienced a modest increase of 0.93%, indicating mixed performance in Asian markets.
• Europe: European indices showed positive movement, with the CAC 40 up by 0.80%, the DAX rising by 0.93%, and the FTSE 100 increasing by 0.83%, reflecting a generally bullish sentiment across the region.

Historical Patterns and Market Impact

• The last quarter of 2024 suggests net positive performance from November through December, positioning the market for a strong year-end finish.

Investor Resources

• Strategic Investment Approaches
• US Treasury Long Bond Opportunity
• Small Cap Opportunities Fall 2024
• Top 10 Fastest-Growing Technology Sectors Through 2028

?

Strategic Investment Adjustments

• Focus on long-duration bonds using leveraged ETFs like ZROZ (PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF) and EDV (Vanguard Extended Duration Treasury Index ETF) to capitalize on continued rate cuts through 2025.
• Strong long-term potential in Nasdaq, tech, AI, and semiconductors. Consider diversification with Russell 2000 ETFs and bank index ETFs; election years typically enhance market performance.

Investor Resources

• Strategic Investment Approaches
• US Treasury Long Bond Opportunity
• Small Cap Opportunities Fall 2024
• Top 10 Fastest-Growing Technology Sectors Through 2028

In the News

Central Banking, Monetary Policy & Economics

• U.S. Treasury Yields Fall After Jobs Data - WSJ
• US Economy Is Slowing But Solid in Final Run-Up to Election - Bloomberg

Business

• Exxon and Chevron Feel Brunt of Cheaper Oil - WSJ
• Traders Amp Up Bullish Bets on Dollar Before Pivotal US Election - Bloomberg

China

• Xi Jinping wants ‘high-quality jobs’ for China’s struggling youth - SCMP