October 8th Market Overview

October 8th Market Overview (no fluff)

Author

J.L. Bernstein
October 08, 2024

In partnership with

Happy Tuesday everyone.

Tuesday is busy in my house, we are right in the path of Hurricane Milton’s eye. A great market day nonetheless as we are seeing green across the board with tech leading the charge. The bond market is also making waves, with yields hitting highs.

Lets dig in…

Executive Summary

  • S&P 500 ▲ 0.9%, Nasdaq ▲ 1.4% as markets rebound amid easing oil prices

  • Technology sector leads gains, up 2.14%, driven by strong AI chip demand

  • Energy sector ▼ 2.59% as WTI crude futures drop nearly 5%

  • 10-year Treasury yield reaches highest level since August 1, 2024

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Market Overview

Today’s session is seeing a rebound from yesterday’s decline, with the S&P 500 gaining 0.9% and the Nasdaq Composite rising 1.4%. The Dow Jones added 130 points (0.3%). This recovery comes as West Texas Intermediate oil futures dropped nearly 5%, pressuring energy stocks but easing overall market tensions.

Investors continue to monitor the situation in the Middle East and the potential impact of Hurricane Milton on Florida’s west-central coast.

Key Market Drivers

  1. Oil Price Volatility: WTI crude futures fell almost 5%, significantly impacting energy stocks and reflecting ongoing geopolitical uncertainties.

  2. Consumer Spending Concerns: $PEP’s revised outlook highlights persistent inflationary pressures affecting consumer behavior.

  3. Labor Market Resilience: Strong employment data is tempering expectations for aggressive Fed rate cuts, pushing bond yields higher.

  4. Geopolitical Tensions: Ongoing monitoring of potential Israeli retaliation to Iranian missile attacks continues to influence market sentiment.

Stock Spotlight

  1. $NVDA ▲: Morgan Stanley reports “insane” demand for next-gen AI chips, projecting Blackwell chip volumes to reach 750k-800k units, nearly tripling Q4 2024 estimates.

  2. $PEP ▼ 1%: Cut full-year revenue guidance, citing softer demand in North America and cautious consumer spending.

  3. $DOCU ▲ 8%: Shares climb on news of joining the S&P MidCap 400 index.

  4. $AXP ▼: BTIG downgrades to “Sell”, warning of deteriorating fundamentals against high growth expectations.

  5. $HUM ▲: Upgraded by Bernstein to outperform, though price target lowered to $308 from $405, citing priced-in risks.

Other Magnificent 7 Updates

  • $MSFT: Oppenheimer downgrades to perform from outperform, citing concerns over projected $2-3B OpenAI losses in FY25.

  • $GOOGL: Barclays estimates $7B impact from Epic Games ruling; announces 10-year partnership with Vodafone.

  • $TSLA: RBC Capital maintains outperform rating ahead of 10/10 event, projecting $1.7T in potential Robotaxi revenue by 2040.

  • $NFLX: JPMorgan maintains overweight rating with $750 price target, citing mid-teens revenue growth potential.

Other Notable Company News

  • $HON: Plans to spin off advanced materials unit, potentially worth $10B.

  • $UBER: Launching AI chatbot to assist drivers in transitioning to electric vehicles, part of $800M EV adoption push.

  • $MCD: Filed lawsuit against major US beef producers, alleging price inflation conspiracy.

  • $RBLX: Shares decline as Hindenburg Research announces short position.

  • $SMCI: Continues strong run, driven by potential short squeeze and strong order flow.

Sector Watch

Sector

Symbol

% Change

Technology

XLK

+2.14%

Energy

XLE

-2.59%

Consumer Discretionary

XLY

+0.98%

Communication Services

XLC

+0.76%

Financials

XLF

+0.67%

Healthcare

XLV

+0.53%

Consumer Staples

XLP

+0.48%

Materials

XLB

-0.44%

Industrials

XLI

+0.28%

Real Estate

XLR

+0.25%

Utilities

XLU

+0.20%

Bond Market

The 10-year Treasury yield touched its highest level since August 1, 2024, continuing to weigh on the market. This surge reflects persistent economic resilience and recalibrated expectations for Fed rate cuts.

Policy Watch

Federal Reserve Governor Adriana Kugler emphasized monitoring economic impacts from geopolitical tensions and natural disasters like Hurricane Milton. She stated, “If downside risks to employment escalate, it may be appropriate to move policy more quickly to a neutral stance.” Meanwhile, Fed Williams stressed the importance of maintaining economic strength and a robust labor market.

What to Watch

  1. Hurricane Milton’s Impact: Monitor potential economic disruptions and insurance sector implications as the storm approaches Florida.

  2. Middle East Developments: Keep an eye on Israeli responses to Iranian missile attacks and their effect on oil prices and global markets.

  3. Consumer Spending Data: With $PEP’s outlook cut, watch for similar signals from other consumer-focused companies as Q3 earnings season approaches.

  4. AI Chip Demand: Follow $NVDA and other semiconductor stocks for indications of sustained AI-driven growth in the tech sector.

  5. Fed Speakers: Pay attention to upcoming Fed commentary for clues on monetary policy direction amid conflicting economic signals.

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Thank you for reading,

- JB

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Note: This newsletter is intended for informational purposes only.