Just Another ... Manic Monday in the Market
Also, the 'animal spirits are back,' and a look at SoFi, Palantir and Rocket Lab.
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You might have thought that Monday would be quiet, given that it was a bank holiday and U.S. bond markets were closed. The reduced liquidity was modestly evident early, as there were some large moves appearing across our equity marketplace. But once a good number of those dislocations held, volume built, and by day's end, someone studying the day's trading volume at arm's length would not be able to tell it was a federal holiday.
Did the "Trump Bump" continue on? In a way, yes, but there was clearly some rotation. Cyclicals still led, but at the headline level, the major equity indexes marked time while the mid-majors, primarily the smaller caps and the transports, carried the football without the help of the semiconductors. Profit taking across the semis? It sure felt like it. Is the Trump Bump tired? It certainly is starting to feel like that, as well. My two cents worth: It would not be unhealthy in the least for equity markets to base or consolidate for a little bit after spiking higher over the past week as they have.
Manic Monday
The S&P 500 gained just 0.1% on Monday, while the Nasdaq Composite gained 0.06%. For both of our major indexes, Monday was good enough to post a fifth consecutive green daily candle and fourth consecutive record close. The Nasdaq 100 slid just slightly into the red on Monday, though, giving up just a smidgen (-0.05%), as the Nasdaq's largest stocks were held down by the Philadelphia Semiconductor Index that was down 2.54%. Downside leaders across the group included Intel INTC and Arm Holdings ARM as those two backed up 4.4% and 3.7% respectively.
The flow of capital propped up the Russell 2000 (+1.47%) and the S&P Small-Cap 600 (+1.53%), as the latter made new all-time highs and the former moved within striking distance of its three-year-old all-time high. The Dow Transports also made a three-year closing high, gaining 1.22% on the day.
Breadth & Volume
Six of the 11 S&P sector SPDR exchange-traded funds shaded into the green on Monday, as the top four slots on the daily performance tables appeared to be reserved for the sectors more cyclical in nature. The Discretionaries led the way at +2.02%, followed by the Financials XLF at +1.47%. No other fund among the 11 moved 1% on the session. The REITs XLRE and Health Care XLV were the day's underperformers.
Winners beat losers by a rough 4-to-3 margin at both of New York's stock exchanges. Advancing volume took a commanding 70.8% share of composite Nasdaq-listed trade as smaller cap names found buyers, but just a 61.6% share of composite NYSE-listed trade as the larger caps mostly tread water.
Very interestingly, aggregate trade across Nasdaq-listings was up 10.5% day over day, despite the holiday, while aggregate trade across NYSE-listings was down 7.1% day over day. Was that drop in activity across NYSE-domiciled names the first sign of pause in the post-election rally? Quite possibly. We'll have to see what Tuesday brings.
The dollar has been strong, which has hurt many commodities including precious metals. Bitcoin has been on fire, despite the strength in the greenback as there appears to be a Trump-inspired increase in demand for the best-known cryptocurrency across both institutional and individual accounts. This allowed Coinbase Global COIN to surge 19.9% on Monday.
On that note, Treasury markets have traded lower overnight, forcing yields higher. This has prompted traders to take profits on some of the names that performed best on Monday.
Where To for the S&P?
The S&P 500 closed on Monday up 25.8% year to date. This came on the heels of a 24% rally for the full year 2023. According to research published by Deutsche Bank on Monday, if the S&P 500 holds onto at least a 20% full year gain for 2024, it would only mark the third time ever, really since the conception of the S&P 500's ancestor that the most focused upon U.S. equity index was able to post back-to-back 20%+ years.
The usually bullish and very bright Ed Yardeni also published a note on Monday. Yardeni lifted his year-end S&P 500 target for 2024 to 6,100, while also lifting his year-end targets for 2025 to 7,000 and his year-end target for 2026 to 8,000. He also sees 10,000 for the S&P 500 by the end of the 2020s.
Yardeni wrote, "Stock investors are also thrilled by the regime change to a more pro-business administration promoting tax cuts and deregulation." He added that he does not expect a bear market this decade, but there would undoubtedly be a number of corrections over these next few years. To put Yardeni's note succinctly, he wrote "Animal spirits are back."
Trading
Readers likely noticed that Rocket Lab USA RKLB traded as high as $15.24 on Monday. We had a $14 target price. RKLB will report tonight. SoFi Technologies SOFI traded as high as $14.44 on Monday. We had a $13.25 target price. I took off a smidgen of both positions, because why? Because disciplined traders always take something off when targets are breached. We can always put the sold portion back on later. Right now, Tuesday is starting to look like it may present a weak opening. I have not yet changed my targets as I am dragging my feet to see where this "Trump Bump" bases. That will be where the next technical pattern will form.
Our dear friend Palantir Technologies PLTR traded as high as $62.08 on Monday. No actions were taken as late last week, regular readers well know we went to a $70 target on this name to get out of the way as it kept knocking down my targets since reporting.
Economics (All Times Eastern)
06:00 - ADP NFIB Small Biz Optimism Index (Oct): Expecting 91.9, Last 91.6.
The Fed (All Times Eastern)
10:00 - Speaker: Reserve Board Gov. Christopher Waller.
10:15 - Speaker: Richmond Fed Pres. Tom Barkin.
2:00 p.m. - Speaker: Minneapolis Fed Pres. Neel Kashkari.
5:00 - Speaker: Philadelphia Fed Pres. Patrick Harker.
5:30 - Speaker: Richmond Fed Pres. Tom Barkin.
Today's Earnings Highlights (Consensus EPS Expectations)
Before the Open: AZN (2.04), HD (3.65), LYV (1.65), NVAX (-.77), TSN (.69)
After the Close: RKLB (-.08), SWKS (1.52), SPOT (1.67)
At the time of publication, Guilfoyle was long RKLB, INTC, SOFI and PLTR equity.
