Commenting on today’s trading with core durable goods in focus, Gorilla Trades strategist Ken Berman said:
While the choppy, directionless days might be frustrating for some, today’s late-day strength could be foreshadowing a broad rally. The key risk measures all supported the bullish case today, with Treasury yields rallying together with stocks again, and since the Volatility Index (VIX) fell substantially, bulls have all the reasons to be optimistic even considering the Brexit-related uncertainty.
Q3 2019 hedge fund letters, conferences and more
The major indices all finished higher today, quickly recovering from yesterday’s dip, as global risk assets rallied thanks to the upbeat reports regarding the ceasefire in Syria. The Dow was up 46, or 0.2%, to 26,834, the Nasdaq gained 16, or 0.2%, to 8,120, while the S&P 500 rose by 9, or 0.3%, to 3,005. Advancing issues outnumbered decliners by an almost 3-to-2 ratio on the NYSE, where volume was in line with the average.
Core durable goods in focus
While the major indices only finished in the green thanks to the rally in the last hour of trading, all of the key sectors gained ground today. That's especially impressive in light of this morning's mixed earnings reports, as it confirms the broad strength that we saw over the past week. Materials lead the way higher thanks to the new almost one-month high in the price of oil, but consumer goods and financials were also among the strongest issues. Small-caps held up well in the face of yesterday’s sell-off, and their relative strength could support a year-end rally.
Microsoft (MSFT) reported earnings after the bell, and the tech giant beat estimates across the board, thanks to its still booming cloud-based business. Even though Apple (AAPL) once again took over the crown of the most valuable public company, Microsoft’s strong results could propel the whole sector higher. The firm’s revenues increased by double-digits on a yearly basis, despite the global economic slowdown, and that could mean that the sectors with the highest growth rates could weather the soft patch without losing momentum.
Earnings
We have another huge day of earnings ahead of us, and besides the tech sector, industrials will be at the center of attention. Two crucial players of the e-commerce space, Amazon (AMZN) and Visa (V) will both be under scrutiny following two lackluster months from their stocks, while the numbers of Intel (INTC), Comcast (CMCSA), Danaher (DHR), and 3M (MMM) could also affect the broader market. Besides earnings, the Brexit process could provide further surprises, but according to today’s reports the European Union (EU) will only decide on a possible new deadline on Friday.
Following a few quiet days, we will have a tumultuous morning session with regards to economic numbers tomorrow. The durable goods report will be the most important report of the day, but the Markit Manufacturing and Services PMIs and the Eurozone PMIs might also have a large impact on financial markets. Analysts expect core durable goods orders to drop for the second time in three months so even a small increase could boost industrials. New home sales will also be out just after the opening bell, and following today's weak existing home sales data, the sector could use a reassuring print. Stay tuned!
