Weak start to the week 22/10/2022

HOT stories for today

XMAG on the trading floor:

• A new ETF, XMAG, started trading yesterday. It exposes the entire S&P 500—excluding the "Magnificent Seven" tech giants (Alphabet, Apple, Amazon, Meta, Microsoft, Nvidia, and Tesla). These seven stocks have driven much of the market's recent growth, accounting for nearly 33% of the S&P 500’s value, raising concerns about overexposure.
• Sylvia Jablonski, CEO of Defiance ETFs, says XMAG offers investors a way to diversify by focusing on the 495 other S&P 500 stocks. While the Mag Seven have performed well, Jablonski believes it's time to look beyond them as their dominance fades.  Another ETF, MAGS, focuses on the Magnificent Seven, but XMAG is aimed at those seeking more diversified portfolios.

Stocks on the move:

• Nike – Shares rose nearly 1% after the company renewed its exclusive uniform partnership with the NBA and WNBA for another 12 years.
• Zions Bancorporation—The stock gained 3% following better-than-expected third-quarter results. The company reported earnings of $1.37 per share on $792 million in revenue, surpassing analysts' estimates of $1.17 per share and $779 million in revenue.
• Nucor – Despite beating expectations for adjusted earnings and revenue in the third quarter, shares fell 3% as the company forecast a decline in GAAP earnings per share for the upcoming quarter.
• Nvidia – Nvidia's stock surged more than 4% on Monday, hitting a new record and milestone with a market cap of $3.5 trillion, a level previously only reached by Apple.

Watchlist for today: NVDA, GE, DHR, VZ, TXN, LMT, RTX, PM

Markets & today's action:

• Asia and Europe markets were lower after major US indexes declined. China’s central bank is lowering borrowing costs to boost growth after weak demand. Monday's rate cut was expected, with more reductions, including the reserve requirement ratio, on the way. However, analysts warn that these measures may not be enough without significant government spending. Attention is now focused on China’s top legislature meeting, where a hoped-for stimulus plan could encourage consumer spending and revive the economy.
• Stock futures remained unchanged overnight after the Dow Jones Industrial Average ended a three-day winning streak. Dow futures dipped by 37 points, while S&P 500 and Nasdaq-100 futures saw slight declines of less than 0.1%. 
• Earnings season continues on Tuesday, with reports expected from 3M, Lockheed Martin, General Motors, and Verizon. Later in the week, Tesla, IBM, and Boeing will follow. On the economic front, the Richmond manufacturing index is set to be released at 10:00 AM EST.

Bitcoin

• Bitcoin dropped below $67,000 yesterday, wiping out gains from the previous three days. Analysts suggest this correction may be due to investors reducing their Bitcoin exposure amid fears of contagion from broader market sell-offs. Despite these concerns, Bitcoin derivatives metrics stayed stable, indicating that demand for hedging remained steady. Typically, increased volatility in derivatives would signal expectations of further declines. Still, the lack of such movement suggests that significant traders, such as whales or arbitrage desks, are not anticipating substantial downside.
  Watchlist: Bitcoin: 66,500-69,780, Ethereum: 2540-2760, Solana: 160.00-172.50

Forex

• The EUR/USD pair entered a bearish consolidation phase during the Asian session on Tuesday, fluctuating around 1.0820, just above its lowest point since early August. The short-term outlook favors bearish traders, indicating that the downward trend for spot prices may continue.
• Meanwhile, the Japanese Yen (JPY) struggled to maintain a modest intraday gain and fell to its lowest level since late July against the US dollar. Market sentiment is increasingly convinced that the Bank of Japan (BoJ) will not raise interest rates this year, given the uncertainty around the new political leadership's stance on monetary policy. Additionally, the recent rise in US Treasury yields to their highest level in nearly three months has further pressured the lower-yielding JPY ahead of Japan's general election on October 27.
  Whatchlits: EUR/USD: 1.0810-1.0900, USD/JPY: 147-151.50

Basic Materials

• Gold prices (XAU/USD) attracted dip-buying during the Asian session on Tuesday, keeping the metal close to its recent record high around the $2,740-2,741 range reached the previous day. Ongoing uncertainty around the upcoming U.S. Presidential election on November 5, heightened risks of a broader conflict in the Middle East, and anticipated interest rate cuts by major central banks continue to bolster demand for the safe-haven asset, supporting gold prices.
• Oil prices rose as Chinese banks introduced additional stimulus measures to boost economic growth. Brent crude climbed 2.01% to $74.53 per barrel, while WTI crude rose 2.61% to $71.03. The People's Bank of China had previously cut reserve requirements and the reverse repo rate, and on Monday, Chinese banks further reduced their lending rates by 25 basis points, exceeding expectations. This is expected to boost energy demand in China, the world’s largest oil importer.
  Watchlist: GOLD 2680-2740, US Oil: 68.80-72.50

The TEFS Analyst team wishes you a successful day!