Market Insights

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Sizing Up the S&P 500

• S&P 500 rises 7 straight sessions, longest positive streak since November 2021
  • Nasdaq-100 up 8 straight sessions, longest positive streak since October 2021
• S&P 500 holds monthly channel similar to mid-1990s soft landing.
• Resistance near October high of 4393 and 50-day MA
• Potential for consolidation into CPI on 11/14
• Potential support at 4330, low from late June, mid-August
• Intermarket: Potential support from weakening U.S. Dollar

Sector Watch

• Growth stocks outperform value more than 2:1 in the last 5 sessions.
• Housing jumps in past week as rates fall
• Energy leads to the downside as demand worries hit crude
• Materials, Industrials lag amid economic worries
• Latin American stocks outperform as U.S. dollar weakens
• Transports under pressure as weaker economy hits shipping rates

Potential Takeaways

• Conditions more like 2020 as economy and inflation slow.
• Recent data suggest a final “return to normal” post-Covid, with labor and energy shortages easing.
• A “soft landing” is potentially at hand.
• High-beta growth stocks and housing could benefit.

Key News

• Apple (AAPL): Bloomberg reports tech executives to meet with Xi of China in effort to smooth tensions.
• Deutsche Bank: Loan officer survey shows tighter lending standards and weaker demand potentially indicates a recession in the next 12 months.
• FedSpeak:
  • Chris Waller: Labor Supply normalizing to pre-pandemic levels.
  • Austan Goolsbee: Fed might slow inflation without a recession.
• Last week’s “Goldilocks” news mix:
  • Q3 productivity beats as wage growth misses
  • Unemployment and wages lower than expected
  • Initial jobless claims ticking higher, surpassing estimates
  • October ISM Services show faster deliveries as demand slows.
  • Powell “now asking” whether to hike more.
• FactSet: Analysts cutting earnings forecasts at fastest pace since Q2 of 2020.

Housing in Focus

• D.R. Horton (DHI) jumps after earnings, revenue and guidance beat.
  • CEO Donald Horton: “The supply of both new and existing homes at affordable price points remains limited and demographics supporting housing demand remain favorable.”
• Upcoming catalysts:
  • 11/14: Home Depot (HD) earnings
  • 11/16: NAHB homebuilder sentiment
  • 11/17: Housing starts & building permits
  • 11/21: Lowe’s (LOW) earnings, existing home sales

Cyclicals Reveal Slowdown

• Emerson Electric (EMR): Biggest drop since the pandemic after earnings, revenue and revenue guidance miss.
• Air Products (APD): Biggest drop since the pandemic as revenue misses.
• Expeditors of Washington (EXPD): Earnings, revenue miss.
  • CEO Jefferey Musser: “Deceleration of demand continues… rates generally remained soft while capacity exceeded demand in most lanes. The shipping industry has been undergoing a great unwinding of so many of the drivers that led up to the massive mismatch of supply and demand that occurred during the pandemic.”
  • CNH Industrial (CNHI) hits 3-year low after earnings, revenue miss.
• This is the opposite of conditions in early 2022 when cyclicals rallied and inflation spiked.

High Beta Growth Rallies

• Datadog (DDOG) earnings, revenue beat
  • MongoDB (MDB), Snowflake (SNOW) follow MDB higher
• Snap (SNAP) inching toward July price gap after results beat.
• Palantir (PLTR) holds gains after results beat.
• Arista Networks (ANET), Palo Alto (PANW): Smaller tech stocks in S&P 500 that may gain prominence.
• Dell Technologies (DELL), Intel (INTC): 1990s comebacks amid PC recovery.
• CrowdStrike (CRWD), Synopsys (SNPS) and Cadence Design (CDNS) may have yearend momentum.

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