Stock Market Today

Meanwhile in China…

A little under the radar, China’s CSI 300 fell 8.5% in October, its worst month since January 2016 (−21.0%), narrowly beating October 2018 (−8.3%) at the height of the trade war. The index also fell for a record 12 straight weeks through Friday, according to Bloomberg, and is down 15% this year.

That happened despite state-fund buying since July and earlier curbs on share sales, so Beijing went back to the toolbox on Monday. The People’s Bank of China cut the rate on its buyback relending facility to 1% from 1.25% and made it permanent. It also restarted the swap facility that lets brokers, funds and insurers trade assets for liquidity to buy stocks, with 31 firms applying for more than 100 billion yuan of quotas. The China Securities Regulatory Commission will make buybacks easier and is studying looser margin-financing rules. Separately, regulators told banks to pause initial public offerings and suspended large share sales by existing holders, the Financial Times reported.

The market was less than impressed. The tech-heavy Star 50 fell 3.8% on Tuesday, November 3, wiping out Monday’s rally. The CSI 300 was down as much as 1.2% before closing 0.2% lower.

Why? These are the September 2024 tools without the September 2024 punch. Back then, the facilities came with rate cuts, and the CSI 300 jumped about 21% in a single month. This time there is no rate cut, and a Shanghai chief investment officer told Bloomberg the tools have been around for two years and add no new support. History on initial public offering freezes isn’t encouraging either. Beijing halted listings in early July 2015, and the CSI 300 still fell 14.7% that month and another 11.8% in August before finding a floor.

What to watch for according to analysts: whether the People’s Bank of China adds a policy-rate or reserve-requirement cut, how fast the swap quotas are used, and whether state-favored exchange-traded fund volume stays high.

For now, it doesn’t appear policy is sufficient to catalyze a turnaround in China shares.

Just for fun, here are the thoughts from JPMorgan’s trading desk via ZeroHedge:

Blue Wave (Dem House / Dem Senate), 66% odds: S&P 500 ranges from down 0.25% to up 0.50%. The feared AI sell-off on regulation is likely limited because Trump won’t sign bills restricting AI and Dems lack a veto-proof majority. JPM sees any dip as a buying opportunity for AI bulls, with the main risk being de-grossing within the AI theme. There’s also “investigation risk” for Trump-linked donors, including megacap tech. Long-end yields are seen slightly lower on reduced deficit spending.

Split Congress (Dem House / GOP Senate), 26% odds: S&P 500 up 0.50% to 1.00%. Dems control government finances, so JPM expects deficit spending to come down. Impeachment risk is effectively gone, but investigation risk remains. Gridlock points to 2027 budget fights, though shutdowns have had limited economic and market impact. Long-end yields could decline.

Red Wave (GOP House / GOP Senate), 7% odds: S&P 500 up 1.00% to 1.25%. The status quo holds with no new regulatory risks. This outcome may embolden Trump to stay the course in Iran until there’s a US-friendly deal or Iranian capitulation. Long-end yields move higher on continued elevated deficit spending.

The Other Split (GOP House / Dem Senate), 1% odds: S&P 500 up 0.25% to 0.75%. Dems don’t control financing, but a split Congress still means budget fights and possible shutdowns. Investigation risk remains because the Senate has similar powers, while impeachment can only start in the House. JPM makes no call on long-end yields.

The most likely outcome is also the weakest one for stocks. Even so, JPM’s worst case across all four scenarios is only a 0.25% decline

If you didn’t make it down to the end of the Week Ahead this week (The Week Ahead – Apple, Midterms and Jobs Test a Market on Edge), I mentioned that some caution on the post-midterm rally everyone is expecting may be appropriate.

Based on a Truist composite chart of midterm seasonality since 1950, the S&P 500 is normally up only about 1% at the end of October, then finishing up about 5%. This year, though, the S&P 500 was already up 10.7% through October.

Bulls, though, can argue that while equities generally rise from the start of October into the election, in this case they are down approximately 3.5% from the October peak.

It’s Election Day, with Americans voting in the midterm elections (all 435 House seats, 35 Senate seats and 36 governorships are on the ballot).

In US economic data, Tuesday brings us September JOLTS job openings and factory orders (which include final durable goods), and October vehicle sales.

There are no Fed speakers scheduled, although the Global Research Forum on International Macroeconomics and Finance, organized by the Fed, ECB and New York Fed, begins in Washington (through November 4), so there may very well be media interviews.

There are no non-Bill (>1yr in maturity) US Treasury auctions this week.

37 S&P 500 components report, seven of them with market caps over $100bn:

After the close: AMD (AMD), Amgen (AMGN), Arista Networks (ANET), Booking Holdings (BKNG), Block (XYZ), AIG (AIG), Prudential Financial (PRU), International Flavors & Fragrances (IFF), Super Micro Computer (SMCI), Skyworks Solutions (SWKS), Assurant (AIZ), Jack Henry & Associates (JKHY) and Mosaic (MOS)

Before the open: Pfizer (PFE), Eaton (ETN), Marathon Petroleum (MPC), Apollo Global Management (APO), Ametek (AME), Keurig Dr Pepper (KDP), Waters (WAT), Yum! Brands (YUM), Sysco (SYY), Archer-Daniels-Midland (ADM), Fiserv (FISV), Expeditors International (EXPD), Broadridge Financial (BR), Fidelity National Information Services (FIS), DuPont (DD), Leidos (LDOS), Ball (BALL), Revvity (RVTY), Zebra Technologies (ZBRA), Gartner (IT), Pinnacle West (PNW), Henry Schein (HSIC) and Aptiv (APTV)

Time not announced: Bio-Techne (TECH)

Outside the S&P 500, Shopify (SHOP), Energy Transfer (ET), Ferrari (RACE), Bayer (BAYRY) and Intesa Sanpaolo (ISNPY) report.

Ex-US highlights include the Reserve Bank of Australia’s decision (10:30pm ET Monday; Deutsche Bank expects a hold), October CPI from Switzerland, South Korea and Turkey (plus Turkey PPI), New Zealand’s Q3 labor force survey, Japan’s October monetary base and France’s September budget balance. ECB Governing Council members Kocher, Dolenc, Radev, Escriva, Moulin, Nagel and Sleijpen speak, as do the Bank of Canada’s Macklem and Rogers, and UK Chancellor of the Exchequer Healey takes oral questions in the House of Commons.

Japanese markets are closed for Culture Day.

From Christophe Barraud’s international Week Ahead rundown: