Indices: Regional Banking Fears Throw a Wrench Into What Was a Positive Earnings Season Start
– US equity index futures are in retreat and follows a session of losses for the (-0.6% to 6,629), (-0.4% to 24,657), Dow 30 (-0.7% to 45,952), and more so the small-cap (-2.1% to 2,467) hit by regional banking fears (see Stocks below) combined with an ongoing government shutdown as bills fail to pass and trade woes yet to be resolved; Treasury yields continue their descent with the breaking below 4% and at lows unseen since April, and market pricing (CME’s FedWatch) starts to flirt with larger 50bp reductions and via significant majority sees three by the conclusion of the FOMC’s January meeting
– Asia this morning sees Japan’s (-1.2%) track Wall Street lower
Stocks: Tech Sector the Only One to Avoid a Red Finish While Financials Get Hit…Real Hard
– Shares of Nvidia (NASDAQ:) close 1.1% higher in a session where only the tech sector avoided a red finish with far healthier gains for chipmaker Micron Technology (NASDAQ:) (+5.5%) thanks to a price target hike out of UBS; Arm (NASDAQ:) (+0.3%) up slightly after it seals a multiyear deal with Meta Platforms (NASDAQ:) (-0.8%) to “scale AI efficiency”
– Nasty session for regional bank shares over bad loan exposure and sees Jeffries plunging 10.6% and most of its peers down including Western Alliance Bancorp (NYSE:) (-10.8%) alleging a borrowing committed fraud, and Zions Bancorporation (NASDAQ:) (-13.1%) taking a big charge due to bad loans
– Shares of Nio recover off lows reached due to Singapore’s sovereign wealth fund suing them for inflating its revenues
– Kenvue shares suffer clear retreat down over 13% by the close as it faces UK talc lawsuit
– Meme stock movers: Kohl’s (+2.8%), GoPro (-3%), Opendoor (-3.7%), Nokia (+2.5%), GameStop (-1.9%)
– Crypto stocks track cryptocurrencies lower: Coinbase (-1.8%), MicroStrategy (-4.4%), Mara Holdings (-11.3%), Gemini Space Station (-8.2%), Bullish (-1.9%)
– Earnings:
o Charles Schwab (NYSE:): beats on both earnings and revenue and sees client assets reach a record; but shares close 1% lower due to financial sector woes
o Travelers (NYSE:): beats on earnings but misses on revenue; shares drop 2.9%
o JB Hunt (NASDAQ:): clear beat on earnings and slightly on revenue; shares surge 22.1%
o United Airlines (NASDAQ:): beats on earnings but misses on revenue; shares close 5.6% lower
Commodities: More Early Volatility for Gold Setting a Record High, Another Dip for WTI
– Yet another record high for nearly touching $4,380 before witnessing a bit of early volatility as another factor is added to the uncertainty list and the weakens on the FX front, and outperforming against its precious metal cousin
– (WTI) suffer a decline and not far off a long-term support level as brief boost built on news regarding India potentially cutting imports of Russian oil lacks confirmation while US President Trump optimistic after a call with Russian President Putin with both agreeing to meet in Hungary in ‘two weeks or so’; EIA’s weekly energy inventory estimates show a surplus for oil (+3.5m barrels) but drawdowns for gasoline (-0.3m) and distillate (-4.5m)
FX/Central Banks/Crypto: Dollar Weighed by Another Negative Factor
– nearly reaches a mid-term support level before partially recovering to 109K as risk appetite fails to improve with most altcoins suffering larger percentage losses yesterday while relatively contained for even as it broke beneath $4K
– slides below 98 as a fresh negative catalyst emerges with regional banks, lowering yields and raising likelihoods; breaches 1.17 as French PM Lecornu survives no confidence motions and greenback retreats, while briefly crossed below 150 this morning
– Federal Reserve’s Waller that a 25bp cut in the October meeting is justified based on current data, Miran doesn’t see a recession from US-China tensions nor that tariffs will be passed onto consumers and sees monetary policy as too tight, Kashkari that it’s to soon to know the effects of tariffs on , and Barkin on the noticeable shift in the job market
– European Central Bank’s President Lagarde on the balanced growth and inflation risks, Dolenc that they ought to be steady on rates with inflation risks balanced and growth on a solid path, Muller on the good case to keep rates unchanged as they aren’t holding back investment nor activity, Scicluna that they shouldn’t rush on interest rate action given tariff impact on prices unclear, Kocher that there’s no reason to hike at the moment, and Wunsch that the economy has been resilient
– Bank of England’s Mann that the labor market is loosening but not falling off a cliff
– Bank of Japan’s Governor Ueda on the resilient global economy but that uncertainty remains high and they’ll continue normalizing policy, with Shimzu saying that they ought to normalize carefully and that the uncertainty every country is facing could adversely impact sentiment for households and corporations
Capital.com Client Sentiment: Long Bias Rises in Both Indices and Commodities but for Different Reasons
– Indices: Reaches extreme buy in the S&P (80% from 77% yesterday) as pullback sees some fresh shorts exit and some longs enter, with a similar story playing out in the (78% from 73%), Nasdaq (70% from 64%) and especially the Russell (77% from 66%)
– Commodities: Gold’s spike fails to see longs close out as they prefer to pile in reaching extreme buy (78%) and a similar story for silver as they push further into extreme buy territory (83% from 81% yesterday) while WTI’s pullback sees sentiment a notch higher (to 91% highest of all markets in the report)
– FX: More longs unwind as EUR/USD’s price climbs taking majority buy sentiment a bit lower (58% from 60%) and so too in (58% from 61%) while USD/JPY’s pullback below 150 shifts sentiment (from a slight sell 52% to a slight buy 53%)
Data:
– US Philly Fed’s manufacturing survey for October clearly disappoints worsening from 23.2 to -12.8
– UK for the month of August up 0.1% as expected, goods trade deficit widens and construction output contracts while production m/m emerges from contraction
Today:
– Mostly low-impacting items in terms of data with several central bank members speaking again
– Earnings from American Express (NYSE:) and some regional banks