The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Feeling better.
Tesla results last night weren’t blowouts and the shares were punished some initially. The Mag 7 member didn’t affect the S&P futures market much however. Overnight futures were flat. The index opened positive a few points while TSLA opened down 4.3%. Over the course of the day, TSLA rallied consistently, as did the broader market. TSLA went positive during lunch and the earnings season narrative improved intraday. Encouraging news from the White House supported the equity rally as well. President Trump confirmed he will meet Xi Jinping on October 30th and optimistic equity feelings took the wheel.
Whether Tesla’s future is lucrative enough or not, remains a topic of debate for the valuation of that stock. However for the broader market, what they did and said was *good enough.* The US equity market continues to roll and it seems that as long as a Mag 7 stock doesn’t force a rethinking and revaluation of the entire market, the longs are going to benefit.
This suggests good things for next week. On Wednesday afternoon, the FOMC should deliver a 25 bip cut (99% market implied probability). After the close that day, three Mag 7 stocks announce (Alphabet, Meta, Microsoft). After the close Thursday, two Mag 7 stocks announce (Apple and Amazon).
Those are quite important days ahead.
If the Fed Chair’s press conference is anything but hawkish and the stock results are encouraging, October is going to finish with a heck of a rally.
It seems like the bar for expectations has been set relatively lower than usual. Tesla just showed us that a Mag 7 stock doesn’t need to bewilder us with beats to keep the party going. The consistent expectations concerning the FOMC, as well as the last meeting, show us that the market doesn’t need dovish surprises to rally. If the Fed does what’s expected, that should be good enough.
Typically there is a run-up ahead of an anticipated easing. Maybe that’s already in motion but the Tuesday before is usually a good day for longs.
See you tomorrow.
-Mike
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