News 61
Gains are widening in the stock market as yields stop rising and earnings season begins. The S&P 500 rose 1.2 percent between Friday, October 2, and Friday, October 9. The index made a new all-time high as conditions changed beneath the surface: Breadth improved sharply (71 percent of index members climbed), after a period of narrow megacap dominance.
Fourteen index members rose at least 10 percent, compared with only four double-digit losers. Technology lagged the broader market for the first time in seven weeks and the Nasdaq-100 underperformed for the first time in six weeks. Utilities led the broader market for the first time since May and consumer staples rose the most since February -- more signs of widening participation.
The yield on the 10-year Treasury note dropped for the first time in six weeks, retreating from its highest level since April 2002. Major financials like JPMorgan Chase (JPM) and Goldman Sachs (GS) report quarterly results this week. That could keep shifting attention away from growth stocks and technology.
Treasuries and Diesel Rising Treasury yields have hurt sentiment for more than a month, reducing the appeal of interest-rate sensitive stocks. Last week's broadening price action may reflect a belief that the move has peaked or is starting to reverse. Strong auctions for 10- and 30-year Treasuries further suggested that bond investors are buying again. (Yields move inversely to price, so demand for Treasuries lowers overall borrowing costs.) The White House took steps to lower the price of diesel, which has become a prime driver of inflation.
On Monday, President Trump signed an executive order allowing the sale of reduced-tax red-dyed fuel. He's also tried to increase supplies of Russian diesel in a bid to lower prices. Investors get more news on inflation this week, with the consumer price index (CPI) due on Wednesday and producer price index (PPI) on Thursday.
"The real yields are really, really high by any historical standards," Treasury adviser David Zervos told CNBC on Thursday. "We have some room to come down." Zervos, previously a market strategist at Jefferies, added "that's important for the interest-rate sensitive sectors that are being crowded out." Software Surges Last week also featured a split in technology companies. Software stocks jumped about 4 percent while semiconductors dropped 4 percent.
It was the biggest divergence in favor of software since late July. Biggest Decliners in the S&P 500 Last Week Intel (INTC) -12% Mosaic (MOS) -11% Teradyne (TER) -10% Skyworks Solutions (SWKS) -10% CH Robinson Worldwide (CHRW) -9.8% Source: TradeStation data One major trigger was an FT report that raised questions about OpenAI's revenue growth. That hurt stocks associated with the AI datacenter buildout -- especially hardware-related names like Intel (INTC), Teradyne (TER) and Skyworks Solutions (SWKS).
Firmus Grid, a neocloud provider backed by Nvidia (NVDA), also abandoned a planned $5 billion IPO, according to Bloomberg. Gains in software, on the other hand, were more broad-based as investors looked for continued growth in cybersecurity and cloud computing. Palantir Technologies (PLTR) closed at a new record high for the first time since November amid positive notes from Goldman Sachs and Barclays.
Microsoft (MSFT) launched its first major decision-making AI model (Microsoft-Decision-1). JPMorgan also forecast more upside in the industry group following a big decline earlier this year. PTC (PTC), whose software helps design and produce manufactured products, rallied after being acquired by French industrial company Schneider Electric.
Brazilian stocks jumped after Flavio Bolsonaro outperformed Luiz Inacio Lula in the first round of presidential polling. Energy and healthcare also outperformed. SpaceX and Wireless Towers Starlink Mobile shook up the cell-phone market by agreeing to buy spectrum in the 800 MHz band, which could help the company become "a major mobile carrier in the US." Starlink is a subsidiary of Elon Musk's Space Exploration Technologies (SPCX), popularly known as SpaceX.
That news hammered traditional carriers like Verizon Wireless (VZ), T-Mobile USA (TMUS) and AT&T (T). But it triggered rallies in wireless-tower companies like Crown Castle (CCI), American Tower (AMT) and SBA Communications (SBAC). Two other noteworthy gainers last week were Constellation Energy (CEG) and Vistra (VST).
The electricity generators climbed after Alphabet (GOOGL) signed a nuclear-power agreement with CEG. Agriculture-related companies like Mosaic (MOS) and Deere (DE) fell after the U.S. Department of Agriculture unexpectedly increased its forecast for corn production.
There was also a government probe into farm-machinery companies. Biggest Gainers in the S&P 500 Last Week PTC (PTC) +35% Crown Castle (CCI) +20% Moderna (MRNA) +18% Constellation Energy (CEG) +16% Vistra (VST) +15% Source: TradeStation data Charting the Market Chart watchers may see bullish patterns on the S&P 500. First, the index established a new weekly closing high for the first time since mid-August.
Second, oscillators like moving average convergence/divergence (MACD) and 9-day rate of change (ROC) have been grinding upward after a long period of sideways movement. Third, the recent neutral period narrowed Bollinger Band Width. Could that volatility compression give rise to expanded price action?
Next, sentiment could also benefit if yields moderate. S&P 500, daily chart, with select patterns and indicators. The Week Ahead This week's big events are the arrival of corporate earnings and CPI inflation data on Wednesday.
Today is relatively quiet. Tomorrow is the first big day for results: Citi (C), JPMorgan Chase (JPM), Johnson & Johnson (JNJ), UnitedHealth (UNH) and Wells Fargo (WFC) report quarterly numbers. The chip industry's three-day Semicon conference begins.
Other items include existing home sales and some speeches by Federal Reserve officials. CPI is due at 8:30 a.m. ET on Wednesday.
Bank of America (BAC), Morgan Stanley (MS) and ASML (ASML) announce earnings. Crude-oil inventories follow after the opening bell. Thursday features the PPI inflation report, initial jobless claims and retail sales.
Tesla (TSLA) will unveil its new Roadster in the evening. Friday brings import and export prices, along with industrial production data.
Source: TradeStation
