Anniversary jitters anyone? Thursday marks 36 years since Black Monday KO’d global markets, with some sharing it-could-happen-again charts, as rising bond yields keep pulling the stock market off balance.
A cautious day is setting up, amid some further crumbling of the Magnificent Seven fortress, with shares of Tesla down on Cybertruck expectations. That’s as shares of another of the Seven — AI stalwart Nvidia NVDA, -3.96% — has seen a bit of a rough patch lately. A rally from Netflix could save the tech day.
Tesla could be a big determiner for how stocks perform from here, says Simon Ree, founder of Tao of Trading, on X. “If we see aggressive dip-buying in TSLA Thursday, that would be a bullish tell. Conversely, if the market fades the pop in NFLX, that would signal overriding bearish sentiment.”
And get that third eye cranking as Chairman Jerome Powell gathers the Economic Club of New York for a fireside chat on Thursday.
Watch MarketWatch’s live coverage of Powell’s speech
On that note and in the thick of earnings season, it’s worth reflecting on what widely followed investor and hedge-fund manager Stanley Druckenmiller has said about why central banks factor importantly in your investments. (h/t to quant researcher Wifey on X for the reminder).
“Earnings don’t move the overall market; it’s the Fed, focus on the central banks, and focus on the movement of liquidity, most people in the market are looking for earnings and conventional measures. It’s liquidity that moves markets,” Druckenmiller said at the Lost Tree Club in 2015. Note, he’s expressed wariness on stocks this year, as well as predicting a hard economic landing.
Our call of the day from Macro Tourist newsletter editor, Kevin Muir would tend to agree, as he says Powell’s comments have important bearing on markets for the next two months.
Muir believes some investors way too caught up in recent data that shows a strong economy. “I will not disagree with the analysis that the U.S. economy appears to be running at full steam with no signs of slowing,” Muir writes in his latest blog.
“However, I think they are mistakenly looking solely at the economic data and not considering financial conditions,” and given post-FOMC meeting moves in asset prices, it’s easy to see that the Fed sees the market doing its tightening work for it, he says.
What investors tend to forget, crucially, is that the Fed is a “supertanker that takes a long time to start and stop,” says Muir. And it doesn’t shift direction due to a couple of data points, but rather looks at the whole enchilada and figures out “gradual starts and stops.”
The big debate right now? As economic data has been a little too hot, the bond market thinks the Fed will leave chances of a December hike on the table. Muir says nope, the Fed has paused and it will take some seriously strong economic data to get that hiking campaign restarted.
On Thursday, Muir expects Powell will be more dovish than many investors expect, and confirm what other members have been saying over the past week, suggesting he will echo what Fed Vice Chair Philip Jefferson said recently.
Jefferson: “I will remain cognizant of the tightening in financial conditions through higher bond yields and will keep that in mind as I assess the future path of policy. I will be taking financial market developments into account along with the totality of incoming data in assessing the economic outlook and the risks surrounding the outlook and in judging the appropriate future course of policy.”
A more dovish Fed may not be a green light to buy stocks, said Muir, though he’s considering buying some inflation protected bonds and gold and selling the dollar, and he’s also not sure how bond yields will react due to so many variables. “However, I don’t think betting on a hawkish Powell is the correct play.”
The markets
Stock futures ES00, +0.20% NQ00, +0.51% are struggling as bond yields BX:TMUBMUSD10Y BX:TMUBMUSD02Y climb. Gold GC00, -0.12% and the dollar DXY are slipping and oil CL.1, -1.10% BRN00, -1.13% is also falling after the U.S. relaxed Venezuela sanctions. The Israeli shekel ILSUSD, -0.18% hit fresh lows on fears of a protracted war.
For more market updates plus actionable trade ideas for stocks, options and crypto, subscribe to MarketDiem by Investor’s Business Daily.
The buzz
Weekly jobless claims fell to a nine-month low of 198,000, while a Philly Fed manufacturing survey showed a modest October recovery. Still to come are existing home sales and leading economic indicators. Fed Chair Powell will speak at noon, with Chicago Fed President Austan Goolsbee at 1:20 p.m., Fed Vice Chair for Supervision Michael Barr at 1:30 p.m., Atlanta Fed President Raphael Bostic at 4 p.m. and Dallas Fed President Lorie Logan at 6:40 p.m.
Tesla shares TSLA, -4.78% are down 6% as investors shook off earnings disappointment, then got gloomy after CEO Elon Musk said the Cybertruck would take 18 months to turn into a “cash-flow contributor.” Some analysts still see silver linings in those results.
Opinion: Tesla’s Cybertruck has Elon Musk sounding unusually cautious
Netflix shares NFLX, -2.68% are headed toward the biggest gain in nearly three years after a big jump in subscribers and price hikes. Disney DIS, -1.76% offered a peek at its ESPN financials, and analysts were relieved by what they saw.
American Airlines AAL, -4.86% stock is slipping as revenue fell short, AT&% T, -1.78% is up lifting its free cashflow outlook. Union Pacific stock is up after stronger-than-forecast profit.
Nokia shares NOK, -2.87% are down after the telecom equipment maker said up to 14,000 jobs would go as profit dropped 69%.
Elsewhere, Las Vegas Sands shares LVS, -1.59% are up after the casino group said it would buy back $ 2 billion in stock. Equifax EFX, -3.15% is sinking after the credit-score agency cut its outlook.
Best of the web
Want to beat your return-to-office mandate? Try ‘coffee badging’ at your own risk
How hundreds of U.S. government employees became gun industry sales reps
A U.S. State Department official resigned over what called “blind support for one side,” in the Israel-Hamas war.
The chart
The best of the stock relief rally may be over and it’s time to buy fear, says trader Tom, who writes the Lines On A Chart substack:
@tomthetrader1
The tickers
These were the top-searched tickers on MarketWatch as of 6 a.m.:
| Ticker | Security name |
| TSLA, -4.78% | Tesla |
| NFLX, -2.68% | Netflix |
| AMC, -7.10% | AMC Entertainment |
| NVDA, -3.96% | Nvidia |
| AAPL, -0.74% | Apple |
| TSM, -1.54% | Taiwan Semiconductor Manufacturing |
| GME, -1.91% | GameStop |
| AMZN, -2.54% | Amazon.com |
| NIO, -7.27% | Nio |
| MSFT, -0.59% | Microsoft |
Random reads
Citadel’s Ken Griffin is building the most expensive home on the planet.
Costco — which announced a CEO change — has a bargain $ 4,500, 157-piece Le Creuset set.
Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.
Listen to the Best New Ideas in Money podcast with MarketWatch financial columnist James Rogers and economist Stephanie Kelton.