October 28th Market Overview

Happy Monday everyone.

Did you catch yesterdays special write up on how congress keeps outperforming Wall Street? It’s a bit of a nutty story but was fun to write up.

Today the combination of easing geopolitical tensions and big earnings hype this week is providing a positive backdrop for the markets.

Historically when oil goes down like this we can see inflation concerns ease (through lower energy and transportation costs).

Anyways here’s wonderwall,

Let's dig in...

Executive Summary

• Major indices advance as falling oil prices ease inflation concerns

• Small-cap stocks outperform, with Russell 2000 surging ▲1.6%

• Key tech earnings in focus with $10 trillion in market cap reporting this week

• Treasury auctions take center stage amid elevated yield environment

Market Overview

Trading volume is up today as investors position ahead of a crucial earnings week featuring the five “Magnificent Seven” companies.

Key Market Drivers

1. Oil Price Plunge: Crude oil ▼6.13% to $67.38 per barrel, marking its biggest decline in two years after Israel’s strikes spare Iranian oil facilities

2. Earnings Anticipation: $AAPL, $MSFT, $GOOGL, $META, and $AMZN prepare to report this week, representing over $10 trillion in market value

3. Economic Data Focus: PCE inflation data and October jobs report ahead, with economists expecting 110,000 new positions

4. Small Cap Rally: Russell 2000’s ▲1.6% surge signals improved risk appetite despite year-to-date underperformance

Stock Spotlight

• $TSM: ▼3% after halting chip shipments to Chinese designer Sophgo amid Huawei compliance concerns
  

• $ON: ▲5% following strong Q3 earnings beat and positive guidance
  

• $DAL: ▲4% on lawsuit against $CRWD over July system outage
  

• $SPOT: ▲2% after Wells Fargo names it top pick, citing improving margins and label relationships
  

• $BA: ▼2% on plans for $19 billion stock offering to strengthen finances

Big Tech Updates

• $AAPL: ▲0.9% as JPMorgan reports iPhone 15 demand remains resilient based on lead time analysis
  

• $MSFT: Truist reiterates buy rating with $600 target, expects outperformance in enterprise segments
  

• $GOOGL: ▲0.8% ahead of earnings, analysts optimistic on AI monetization
  

• $META: Momentum builds as market anticipates strong Q3 results

Other Notable Company News

• $MCD: ▲1.5% as Quarter Pounder returns to 900 locations following E. coli containment
  

• $HOOD: Launches presidential election betting contracts after regulatory approval
  

• $LLY: Gains approval to sell Mounjaro in Hong Kong, beating competitor $NVO to market
  

• $INTC: Expanding Chengdu facility to boost server chip packaging capabilities

Sector Watch

Bond Market

Treasury yields remain elevated ahead of key auctions for 2-year, 3-month, 5-year, and 6-month notes.

Markets anticipate potential easing in yields following the sharp decline in oil prices, which historically correlates with lower yields after significant rate actions.

Policy Watch

• Fed’s preferred inflation gauge - the personal-consumption-expenditures (PCE) price index expected at ▲2.1% year-over-year
  

• October employment report forecasted to show moderation in job growth
  

• Treasury auctions this week could influence near-term rate expectations

What to Watch Out For

1. Big Tech Earnings Impact:

• Combined $10 trillion market cap reporting could drive market direction

• Focus on AI monetization progress and forward guidance

• Watch for impact on broader tech sector sentiment

2. Economic Data Releases:

• PCE inflation reading critical for Fed rate cut timeline

• Job report could influence December Fed meeting expectations

• Treasury auction demand may signal yield trajectory

3. Geopolitical Developments:

• Middle East tensions’ impact on oil markets

• Further Israeli-Iranian developments

• Impact on global supply chains and energy prices

P.S. 
Thanks for reading 🙂

- John