The Pre-Game Report | October 30, 2024

Wednesday, October 30, 2024

The markets are poised for a volatile session today as investors grapple with a confluence of macroeconomic and geopolitical uncertainties. The latest economic data points to a resilient US economy, with robust consumer spending and a tight labor market, but inflationary pressures remain a key concern. The Federal Reserve’s hawkish stance on interest rates, aimed at curbing inflation, continues to weigh on sentiment, particularly in the technology and growth sectors. 

Geopolitical tensions remain elevated, with the ongoing conflict in the Middle East and the escalating trade war between the US and China adding to market jitters. The upcoming US presidential election is also casting a long shadow, with uncertainty surrounding policy direction and potential economic shifts adding to market volatility. 

Looking ahead, the next seven days are devoid of any US holidays, ensuring a consistent market flow. 

Today’s economic calendar is packed with high-impact data releases, with particular focus on the US labor market and inflation indicators.

• ADP Employment Change (Oct):
  The ADP report, released at 12:15 PM EDT, is expected to show a moderate increase in private sector employment, with an estimate of 115,000 jobs added. This data point will offer a preview of the official nonfarm payrolls report due out next week. A strong reading could further solidify expectations of continued rate hikes by the Fed, while a weak reading could offer some respite to the markets.

• GDP Growth Rate QoQ (Q3):
  The preliminary estimate for Q3 GDP growth, released at 12:30 PM EDT, is expected to show a modest 3% increase. This data point will provide insights into the underlying strength of the US economy and its resilience to ongoing challenges.

• Initial Jobless Claims (Oct/26):
  The weekly jobless claims report, released at 12:30 PM EDT, is expected to show a slight increase to 230,000. This data point will provide insights into the health of the labor market and potential shifts in hiring trends.

• Personal Income MoM (Sep):
  This data point, released at 12:30 PM EDT, is expected to show a modest increase of 0.3%. A strong reading would signal continued consumer confidence and spending, supporting economic growth.

• Core PCE Price Index MoM (Sep):
  The core PCE price index, the Fed’s preferred inflation gauge, is expected to show a slight increase to 0.3% in September. A higher-than-expected reading would likely reinforce concerns about persistent inflation and increase pressure on the Fed to maintain its aggressive monetary policy.

The COT data reveals a mixed sentiment across various asset classes. The US Dollar Index (DX) shows a significant increase in bullish sentiment, suggesting a potential strengthening of the dollar. However, several commodities, including crude oil (CL) and natural gas (NG), display increased bearish sentiment, indicating potential price weakness.

The equity markets, as represented by the Nasdaq (NQ) and S&P 500 (ES), show contrasting trends, with the Nasdaq exhibiting rising bullish sentiment and the S&P 500 showing increasing bearish sentiment.

The sector performance data indicates a mixed outlook, with communication services and technology leading the gains, while energy and real estate are lagging.

• Communication Services: 1.67%

• Technology: 1.11%

• Consumer Cyclical: 0.59%

• Industrials: 0.51%

• Financial Services: 0.5%

• Utilities: -0.65%

• Real Estate: -0.68%

• Energy: -1.45%

The index most active list is dominated by technology and semiconductor stocks, highlighting the sector’s influence on market sentiment.

• SNPS (Synopsys): +6.66%

• SMTC (Semtech): +6.20%

• KSCP (Kinsale Capital Group): +5.99%

• MPWR (Monolithic Power Systems): +4.80%

• LDGYY (LendingClub): +4.52%

• AVGO (Broadcom): +4.20%

• IBDRY (iShares Core U.S. Aggregate Bond ETF): -0.97%

• TSLA (Tesla): -1.14%

• ENB (Enbridge): -1.15%

• MTZ (Mettler Toledo): -1.32%

• ETR (Entergy): -1.61%

Analyst actions are primarily focused on technology and energy stocks, highlighting the sector-specific focus in the market.

• Alphabet (GOOGL): Multiple price target increases from leading investment banks, reflecting positive sentiment towards the company’s growth prospects.

• First Solar (FSLR): Mixed signals, with Goldman Sachs reiterating a Buy rating while other analysts lower price targets.

• Teledyne (TDY): Price target increase from Jefferies, reflecting confidence in the company’s performance.

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The upcoming week promises to be a pivotal one for the markets, with a flurry of economic data releases poised to shape investor sentiment and potentially influence the Fed’s monetary policy stance. The ADP Employment Change and GDP Growth Rate QoQ reports will be closely watched for signs of a slowing economy, which could impact the Fed’s future decisions. 

The COT data points towards a mixed sentiment across various markets, with the US Dollar showing strength while energy markets remain under pressure. Sector performance suggests a positive outlook for communication services, technology, consumer cyclical, and industrials, while utilities and real estate are showing weakness. 

Overall, the markets appear poised for a volatile week, driven by a combination of economic data releases, geopolitical uncertainties, and ongoing investor concerns about inflation and interest rate hikes.

This report is for informational purposes only and should not be considered financial advice. The author is not a financial advisor and does not provide investment recommendations.