October 9th Market Overview

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Happy Wednesday everyone.

Floridians are in a scramble, this storm prep is serious with the storm making landfall here today on the west coast.

Still plenty of power to get out the market brief for today :-)

We are seeing another strong day in the markets.
Lets dig in…

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Executive Summary

• S&P 500 right at new record at 5,790, breaking a long term term technical trend line ▲

• Tech sector leads gains, pushing the Nasdaq above 18,290 ▲

• $GOOGL faces potential breakup as DOJ considers antitrust action ▼

• Liquidity expected to surge into year-end, potentially marking a bullish environment

Market Overview

We’re seeing strong performance across major indices today:

S&P 500: ▲ 42.70 (+0.74%)
Nasdaq: ▲ 110.46 (+0.61%)
Dow Jones: ▲ 450.43 (+1.07%)

The S&P 500 is right near a new record high. Strong institutional money flowing into tech stocks are driving these gains, with large-cap stocks leading the charge.

Smaller companies see more tempered gains. The decrease in the VIX today indicates reduced market anxiety.

Key Market Drivers

1. Liquidity Surge: Contrary to misconceptions about tightening conditions, we’re anticipating a significant influx of liquidity towards year-end.
   Contributing factors:

   • Treasury General Account (TGA) drawdown

   • Reverse Repo (RRP) facility usage decline

   • Quantitative Tightening slowdown

   • Seasonal factors improving year-end liquidity

2. Geopolitical De-escalation: Reports of potential secret ceasefire talks between the US and Arab states have eased Middle East tensions, impacting oil prices.

3. Earnings Expectations: HSBC and Goldman Sachs suggest room for earnings beats due to low Q3 forecasts, with expected YoY growth of 4%, down from 12% last quarter.

4. ECB Rate Cut: Market has largely priced in an October rate cut, with ECB’s Patsalides and Stournaras supporting this view.

Stock Spotlight

1. $GOOGL: ▼ 1% as DOJ considers breaking up the company in antitrust case. Bernstein rates as market perform with $180 PT.

2. $META: ▲ KeyBanc raises PT to $655 from $560, citing solid Q3 ad market and favorable currency movements.

3. $TSLA: Offering 0% APR loans for up to 72 months on new Model 3 and Model Y. China-made EV sales grew 20% YoY in September.

4. $RIO: Acquiring $ALTM for $6.7B in all-cash deal at $5.85 per share, expected to close by mid-2025.

5. $BA: Union talks break down, contract offer withdrawn. S&P puts Boeing on credit watch negative, citing potential cash shortfall.

Other Magnificent 7 Updates

• $MSFT: OpenAI reducing reliance on Microsoft data centers, potentially bearish

• $AMZN: Evercore maintains outperform rating, $240 PT, citing Project Kuiper opportunities

Other Notable Company News

• $TSM: Reports 39% increase in quarterly revenue to NT$759.7 billion, beating estimates

• $RDDT: Jefferies initiates as Buy, $90 PT, projecting EBITDA to double in next 2 years

• $AMD: Potential volatility ahead of AI event on October 10

• $DIS: Phased park closures on October 9-10 due to Hurricane Milton

Sector Watch

Bond Market

Bank of America’s technical analysis suggests the steepening yield curve could signal increased risk for stocks. Ten out of the last 12 steepening cycles coincided with U.S. recessions.

Policy Watch

1. FOMC - “The minutes from the Federal Reserve’s September meeting showed central bank officials were split on whether to cut rates by a half percentage point”

2. Multiple Fed speakers scheduled, including Goolsbee, Barkin, Logan, Williams, and Jefferson

3. China’s Finance Ministry to hold briefing on fiscal policy adjustments, following recent market volatility

What to Watch

1. FOMC Minutes: Pay close attention to the rationale behind the September rate cut and any dissenting views among committee members. This could provide clues about future policy direction.

2. Fed Speakers: Monitor statements from scheduled Fed officials for any divergence in views on rate policy. Conflicting opinions could lead to market volatility.

3. $TSLA and $AMD Events: Both companies have significant events on October 10. Tesla’s event could impact its stock price, while AMD’s AI event might influence the broader semiconductor sector.

4. Hurricane Milton Impact: Watch for updates on the hurricane’s impact on $DIS parks and potential effects on other businesses in the affected areas.

5. China’s Fiscal Policy: The upcoming briefing from China’s Finance Ministry could signal new stimulus measures, potentially impacting global markets and commodity prices.

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Note: This newsletter is intended for informational purposes only.