NASDAQ Rallies on Tesla's Performance; Economic Indicators Raise Concerns as DOW Retreats

Stay Informed and Stay Ahead: Market Watch, October 25th, 2024

Late-Week Wall Street Markets

Highlights

• NASDAQ Gains on Tesla Rally: The NASDAQ rises, driven by strong performance from Tesla.
• DOW Declines Amid Economic Uncertainty: Economic indicators show mixed signals, leading to a decline in the DOW.
• VIX Futures Rise: Increased market volatility prompts investor caution.

In-Depth Analysis

• Market Performance: The NASDAQ is up, buoyed by Tesla's rally, while the S&P 500 and DOW decline. Seven of eleven sectors were down, Communication Services Outperforms, Utilities underperforming. Notable gainers include the Automobile sector (+2.75%).
• Economic Insights: September's durable goods orders fell 0.8%, largely due to a 3.1% drop in transportation; however, orders excluding transportation rose by 0.4%. Consumer sentiment improved to 70.5 in October, reflecting better buying conditions and shifting political expectations.
• Yields & Commodities: In the Treasury market, the 7-Year Note increased by 0.030 points to 4.155%. Investor caution is evident, reflected in the inverted 10-3 Month spread. Commodities saw crude oil futures rise 2.14% to $71.69, while gold futures gained 0.43% to $2,760.80 suggesting safe-haven appeal amid uncertainty.
• Crypto & ETFs: The crypto market remains bearish with declines across major assets; however, the market seems to be consolidating following recent volatility. The 2x Long VIX Futures ETF up 9.06%, signaling heightened investor interest amid uncertainty.
• 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 gained, while the DOW and S&P 500 retreated. Ten of eleven sectors declined, with a notable performance in Automobiles, Textiles & Luxury Goods, and Energy Equipment & Services.

Technical Analysis:

Dow Jones Industrial Average (DOWI):

The DOWI shows a generally positive trend in mid- and long-term periods, despite short-term fluctuations. The 5-day moving average is down -2.68%, and the 20-day is down -0.47%. However, the 50-day (+3.82%), 100-day (+8.79%), and 200-day (+11.72%) averages indicate solid growth, contributing to a +11.74% year-to-date gain. Stochastic indicators signal strong momentum, nearing overbought levels, while the RSI ranges from 37.89% (9-day) to 55.74% (100-day), suggesting recovery potential. Despite short-term bearish momentum in the 9-day and 20-day MACD Oscillator readings, the 100-day shows substantial upward movement at 1,641.79. This suggests a foundation for continued growth, though caution is advised amid volatility.

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S&P 500 (SPX):

The S&P 500 maintains an upward trend, even with a recent pullback. The 5-day average is down -0.96%, yet the index has gained over 21% year-to-date. All major moving averages reflect significant appreciation, reinforcing a bullish sentiment. Momentum indicators like the Stochastic Oscillator indicate overbought conditions, while the RSI trends positively and Williams %R shows easing oversold conditions. Volatility remains moderate, and the MACD Oscillator hints at a short-term pullback but sustained long-term momentum.

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Nasdaq Composite Index (NASX):

The NASX displays strong mid- to long-term growth, with a 5-day average up +0.16%, and notable gains in the 20-day (+2.20%) and 50-day (+5.25%) averages. The 200-day average is up +23.71%, contributing to a year-to-date gain of 23.36%. Stochastic indicators reflect high momentum, especially in overbought conditions, while RSI readings around 60% suggest steady buying pressure. Although the MACD Oscillator shows short-term bearishness, it indicates strong long-term bullish momentum, peaking at 672.56 over 100 days. Elevated volatility and short-term corrections may necessitate strategic caution despite overall optimism.

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Sector Performance:

• Over the past month, the Information Technology sector led with a 4.00% gain, while Real Estate, Materials, and Health Care faced declines.

Economic Highlights

• Durable Goods Orders: September orders fell 0.8%, reflecting cautious economic sentiment that may affect manufacturing and equities.

• Consumer Sentiment: A 10.5% year-over-year increase signals an improved consumer outlook, with inflation expectations stabilizing.

NASDAQ Global Market Update

• Trading Volume: 5.45 billion shares traded, with ProShares UltraPro Short ^SQQQ and NVIDIA ^NVDA leading in volume.

US Treasuries & Bond Markets

• Yield Movements: Notable increases in the 7-Year and 3-Year Notes indicate persistent market uncertainty. The 10-2 Year Treasury spread remains positive at 0.12, while the 10-3 Month spread is still inverted at -0.38, signaling continued investor caution over near-term economic risks.

• The U.S. 10-Year Treasury yield rose to 4.246%, reflecting relative strength against global bonds.

Market Factors

• Growth vs. Value Stocks: Continued investor preference for growth stocks is evident, with Mega Cap Growth outperforming value counterparts.

Volatility Overview

• The CBOE Volatility Index (VIX) has increased 12.76% over the past five days, signaling rising market uncertainty. The 20-day average is up 19.87%, while the 50-day and 100-day averages have risen 33.49% and 54.48%, respectively. This trend suggests that investors are anticipating greater market fluctuations due to economic and geopolitical concerns. With a year-to-date rise of 63.29%, the VIX highlights heightened anxiety as traders factor in potential risks. Stochastic indicators show elevated short-term sentiment, hinting at overbought conditions. This increased volatility may prompt a more cautious investment approach, impacting equity performance as participants seek to hedge against risk.

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

Commodities & ETFs

• Crude Oil & Gold: Crude oil futures have increased, signaling strong demand, while gold has strengthened as a safe-haven asset. Additionally, ETFs related to volatility are attracting growing investor interest.

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Crypto’s & Currency Markets

• Crypto bearish; Dollar strengthens as major cryptocurrencies decline while consolidating. Euro down 0.29% and Pound 0.11% against the USD; Yen up 0.31%. U.S. Dollar Index rises 0.25%.

Stocks to Watch

• Upexi Inc. (UPXI) up by 170% on high volume, showcasing strong investor interest BM Technologies Inc. (BMTX) also made notable gains, climbing 47.20%.

Notable Weekly Earnings

• Beats: Philip Morris (PM), Alexandria RE (ARE), Equity Lifestyle (ELS), Texas Instruments (TXN), Danaher (DHR), RTX Corp (RTX), Lam Research (LRCX), S&P Global (SPGI), United Parcel Service (UPS), Capital One Financial (COF), Colgate-Palmolive (CL), Aon (AON), Centene (CNC).
• Winner: Tesla (TSLA) EPS: 0.72 vs. 0.60 expected.
• Misses: GE Aerospace (GE), SAP ADR (SAP), Nucor (NUE), Sandvik AB ADR (SDVKY), WR Berkley (WRB), Medpace Holdings (MEDP), Verizon (VZ), Starbucks (SBUX), IBM (IBM), Union Pacific (UNP), Sanofi ADR (SNY), Mercedes Benz Group (MBGAF).
• Market Trends: Over one-third of S&P 500 companies have reported third-quarter results, with 73.6% surpassing Wall Street profit expectations, below the five-year average of 76.8%.

Global Markets Summary

• Asian markets showed resilience, contrasting with minor European declines, indicating cautious investor sentiment.

Historical Patterns and Market Impact

• Historical S&P 500 data forecasts an -0.8% decline for October due to election-related volatility. However, the past decade shows an average gain of 1.6%, with 2.4% returns in the last five years. The last quarter of 2024 suggests net positive performance from November through December, positioning the market for a strong year-end finish.

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.

• 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

• ECB’s Lagarde Says Trade Barriers Could Revive Inflation - WSJ
• Xi’s Stimulus Package Met With Wall of Skepticism in Washington - Bloomberg

Business

• Delta Sues CrowdStrike Over July Operations Meltdown - WSJ
• Hedge Funds, Asset Managers Turn Dollar Bulls on Election Risks - Bloomberg

China

• Beijing offers private firms more access to national projects and research - SCMP