Here are the top stories to read ahead of Thursday’s trading:
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Utilities stocks have had an incredible run in 2024. But has Wall Street’s hottest trade come too far, too fast?
A growing number of financial professionals are starting to suspect that it has. And judging by recent price action, many investors appear to agree, as an ETF that tracks utilities stocks in the S&P 500 has retreated from a record high reached earlier this month.
As of Wednesday, the Utilities Select Sector SPDR ETF was off by nearly 2.5% from its Oct. 2 record close of $81.47 a share, according to FactSet data. Flows into XLU and other utilities-focused funds have dried up, although the fund remains up 24.4% since the start of 2024, compared with a 21.4% gain for the S&P 500.
If it finishes the year at or above its current level, the utilities sector would clinch its best calendar-year gain this century, FactSet data show.
Performance over the past three months has been particularly robust, with the XLU ETF rising nearly 18.6% through September for its biggest quarterly gain since 2003, per FactSet.
But rockier times could lie ahead.
Nervousness in the Treasury market has been building ahead of Thursday’s consumer price index inflation report.
That’s according to the ICE Bank of America MOVE index, which measures the implied volatility of a constant one-month U.S. government bond option. It’s like a VIX for fixed income, tending to rise when Treasury investors start to fret.
The MOVE is dipping a fraction today, but has jumped more than 20% this week, according to the chart below from Yahoo! Finance.
That leaves the MOVE at its highest since the start of the year.
However, it may be that the MOVE’s jump is not related to the inflation report at all.
Harley Bassman, who is managing partner at Simplify Asset Management, and who invented the MOVE, reckons the spike is due to anxiety over the approaching election on November 5.
In a Thursday message on X under his pseudonym ComplexityMaven, Bassman notes that Monday saw the election day fall into the MOVE’s 30-day window.
At current levels he says the MOVE is suggesting the market is braced for an “18 basis point rate change on the day(s) after the election.”
“Similar Equity options jumped by 20%, but have since given back most of that increase to only 9% higher. As has been the case since mid-2022, financial risk is all concentrated in bonds, not stocks,” says Bassman.
(Yahoo! Finance)
Domino’s Pizza Inc.’s stock fell slightly early Thursday, after the chain’s fiscal third-quarter profit beat was not enough to offset a slight revenue miss in a still challenging consumer environment and small downward revision to sales guidance.
The Ann Arbor, Michigan-based company had net income of $146.9 million, or $4.19 a share, for the quarter to Sept. 8, up from $175.6 million, or $4.18 a share, in the year-earlier period.
Revenue rose to $1.080 billion from $1.027 billion a year ago.
The FactSet consensus was for EPS of $3.64 and revenue of $1.099 billion.
Stocks making notable moves in Thursday’s premarket action:
Tesla shares are up nearly 1.5% in heavy volume as investors hope for positive news from the electric vehicle company’s robotaxi event later on Thursday.
Shares of 10x Genomics are plunging more than 20% after the life-sciences technology company said it expects third-quarter revenue of about $151.7 million, below analysts’ estimates of $162.2 million.
Toronto-Dominion Bank stock fell about 3% after a report said the Canadian bank may pay a $3 billion fine and get hit with an asset cap to settle charges from the U.S. government.
Skyworks Solutions shares are down 2.5% after the semiconductor company’s stock was downgraded by Barclays with its price target cut to $87 from $115.
Here are some of the potential market catalysts due Thursday for traders to consider:
Companies reporting earnings before the opening bell include Delta Air Lines and Domino’s Pizza.
8:30 a.m. Eastern. U.S. consumer price index for September.
8:30 a.m. U.S. weekly initial jobless claims.
9:15 a.m. Federal Reserve Governor Lisa Cook speaks on innovation and entrepreneurship.
10:00 a.m. Chicago Fed President Austan Goolsbee will do a TV interview.
10:30 a.m. Richmond Fed President Tom Barkin speaks on the economic outlook.
11:00 a.m. New York Fed President John Williams speaks at Binghamton University.
1:00 p.m. Treasury announces result of $22 billion auction of 30-year bonds.
10:00 pm. Tesla will shine the spotlight on its robotaxi technology at the Warner Bros. studio in Burbank, Calif.
How are stock-index futures trading:
S&P 500 futures are down 0.2%.
Dow Jones Industrial Average futures are falling 0.1%.
Nasdaq 100 futures are retreating 0.2%.
On Wednesday, the Dow Jones Industrial Average rose 432 points, or 1.03%, to 42,512, the S&P 500 increased 41 points, or 0.71%, to 5,792, and the Nasdaq Composite gained 109 points, or 0.6%, to 18,292.
Futures indicate a slightly lower open for U.S. stock barometers, though that may all change depending on the consumer price index report for September, due for release at 8:30 a.m.
The S&P 500 and Dow Jones Industrial Average finished the previous day at their respective 44th and 35th record closing highs, helped partly by investors assuming that the ongoing disinflation trend will allow the Federal Reserve to continue cutting borrowing costs.
That likely means traders will be rattled should CPI inflation come in hotter than expected, concerned “that the Fed may have declared victory over inflation prematurely,” says Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
“Therefore, if today’s data isn’t soft enough, we could see the U.S. yields and the dollar extend gains, and the major U.S. indices refuse to [hit a new] record,” she adds.
Meanwhile, investors will also be eyeing bank earnings on Friday, hoping for evidence the recent rally can be justified.
“The end of the week will herald the onset of the quarterly reporting season, where expectations are that corporates will have seen the benefit of what is proving to be a robust and growing economy despite the handcuffs of higher interest rates over the last few years,” says Richard Hunter, head of markets at Interactive Investor.
