Here are the top stories to read during Wednesday trading:
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(City Index)
Here’s the key consideration for short-term stock traders after Tuesday’s modest pullback, Fawad Razaqzada, analyst at City Index and Forex.com, said in a Wednesday morning note: “Betting against the market has proved to be very costly this year, with all sorts of dips being bought fairly quickly. But is this another such scenario or is it different this time around — especially with the U.S. presidential election now just three weeks away?”
The stock market has been remarkably resilient in recent weeks, shaking off developments that seemingly should have sparked a selloff, such as hotter U.S. inflation data, rising bond yields, geopolitical tensions, recession fears and a slowing Chinese economy, Razaqzada argued. Instead, the S&P 500 has continued to hit record highs. The Nasdaq-100 has failed to follow suit but moved closer to its July peak before Tuesday’s chip-led pullback.
“For bearish traders, what is important is follow-though now. If we see further weakness in the coming days, causing the breakdown of some key short-term support levels, only then will traders have a solid reason to start selling,” he wrote. “The bulls, meanwhile, should tread extra carefully, tightening stop losses and watching for any sudden shifts, especially as we get closer to the election date.”
For the Nasdaq 100, key support is between 20,000 and 20,120, the analyst said, while a push past resistance at 20,210 and 20,325 would set up the next upside target at 20,500, followed by the July high at 20,759. But if support at 20,000 gives way, the index could fall back to the 19,635-19,715 range, which would justify a more cautious stance.
U.S. stocks were mostly flat on Wednesday morning as the Nasdaq Composite and the S&P 500 attempted to bounce back from their worst day in over a week.
The Dow Jones Industrial Average was rising 0.1%, at around 42,772 as of 9:30 a.m. Eastern time, according to FactSet data.
The S&P 500 was flat, to trade at around 5,815.
The Nasdaq Composite was losing less than 0.1%, to around 18,307.
Novavax Inc.’s stock tumbled 19% early Wednesday after the company said the Food and Drug Administration has placed a clinical hold on its COVID-19-and-flu combination and stand-alone flu vaccine candidates, following a case of motor neuropathy in a participant in a mid-stage trial.
Motor neuropathy is a nerve condition that can cause weakness in the hands and arms and prevent patients from performing simple everyday tasks, according to the National Library of Medicine.
The single case occurred in a Phase 2 trial being conducted outside of the U.S. in a patient who was given the vaccine in January 2023. The trial was completed in July of that year and the participant reported the serious adverse event in September of 2024. The clinical hold has been placed on the company’s Investigational New Drug applications for the vaccines.
The dollar’s upward October ascent continues, helped by the potential for a victory by former President Donald Trump in the November election and a gradual rate-cutting cycle from the Federal Reserve, said strategist Matthew Ryan of financial-services firm Ebury.
The ICE U.S. Dollar Index was up less than 0.1% at just above 103 as of Wednesday morning, but it has been steadily climbing throughout most of this month.
“While we still think that the Fed is highly likely to cut, clearly there is now a greater risk of a more gradual easing cycle, and the dollar is receiving plenty in the way of upside as a result,” Ryan wrote in an email.” Meanwhile, prediction-market odds are tilting toward a victory by the former president, and “this could potentially be helping the dollar on its way upwards as markets are of the general opinion that a Trump presidency would be a positive outcome for the US dollar.”
Investor optimism has jumped the most since June 2020 on the Federal Reserve’s interest-rate-cut cycle, expectations for a soft landing for the U.S. economy and China’s stimulus, according to BofA Global Research’s global fund manager survey in October.
Allocations to stocks surged, while bonds saw a record drop in allocations, BofA said in an Oct. 15 note on the survey. Cash levels fell to 3.9% from 4.2%, the survey found.
(BOFA GLOBAL RESEARCH NOTE DATED OCT. 15, 2024)
While BofA’s bull and bear indicator indicates “froth” is rising, it’s “not yet the big ‘sell signal,’” according to the report. The fund manager survey found bond allocations dropped to 15% underweight from 11% overweight, while global equity allocations jumped to 31% overweight.
(RENMAC)
Major U.S. stock indexes like the S&P 500 may have finished lower on Tuesday, but underneath the hood, signs of strength persisted.
While selling was mostly concentrated in the semiconductor sector, stocks in other areas of the market continued to climb. As a result, the percentage of S&P 500 members whose shares hit fresh 20-day highs hit 37%, the highest reading in months, according to Renaissance Macro’s Jeff deGraaf.
The percentage of stocks hitting new 52-week highs surged to over 20%, an indication of broad leadership in the index. That should be encouraging, given that milestones like this typically haven’t occurred near major market tops like those seen in 2000, 2008 or 2022. However, others say the market is looking dangerously frothy.
Nervousness in the bond market continues to creep higher.
The ICE BofAML MOVE Index measures expected volatility for Treasuries over a 30-day period.
That now encompasses the November 5th election and so the MOVE is spiking higher as traders bet the outcome could trigger some febrile action in the market.
The volatility barometer is now sits at its highest of the year having jumped about 36% since the start of October.
“Shorter expiry vol [volatility] on longer term yields has richened on the surface since the start of the month, likely reflecting a combination of uncertainty shifting away from the very near-term Fed path towards terminal rate considerations, as well as a greater focus on post-election risks,” says a team of strategists at Goldman Sachs led by George Cole.
ICE BofAML MOVE Index (TradingView)
Greenlight Capital’s shareholder letter was released, and the fund led by David Einhorn talks about why Berkshire Hathaway has been aggressively selling top holdings, notably Apple and Bank of America.
“Our sense is that Mr. Buffett’s portfolio adjustments are not a prediction that the market will fall next week, next month or even next quarter,” the letter says.
“Rather, these stock sales more likely express a long-term view that right now is not a great time to have a lot of equity exposure, and that the opportunity set is expected to be better at some point in the not-to-distant future,” the firm says.
Citizen’s Financial Group Inc.’s stock fell 1.1% early Wednesday, after the regional bank’s third-quarter revenue fell short of estimates as net interest income fell due to the impact of forward starting swaps.
Fees were down 2.7% due to seasonally lower capital markets activity, which offset better results in card and wealth. The bank set aside $172 million in loan-loss provisions, matching the year-earlier total and down from $182 million in the second quarter.
“While Q3 was impacted by the drag from forward starting swaps that commenced in July, as well as some fees that pushed out to Q4, we project a strong fourth quarter and launch into 2025,” CEO Bruce Van Saun said in prepared remarks.
Stocks making notable moves in Wednesday’s premarket action:
