Looking to the Futures
Tech Stocks lead Monday's Rally
Equity markets pushed higher to start the week, keeping Friday's momentum alive. Technology stocks were able to rebound following Nvidia's earnings last Wednesday. Markets also saw support from higher expectations of a rate cut during the December FOMC meeting. US economic news this week will provide a pulse check on the economy after a long delay during the government shutdown. Q3 earnings reports are nearly over, with the vast majority of stocks in the S&P 500 beating expectations. Global bond yields were lower on Monday.
Tech stocks slumped last Thursday despite a strong earnings announcement from Nvidia on Wednesday night. NVDA announced earnings per share of $1.30 against estimates of $1.25 with revenue at $57 billion against estimates of $55 billion. Chip makers and AI infrastructure stocks bounced back yesterday on support from the broader market but many have not regained losses from last week.
Equities are receiving support from an increased likelihood for a rate cut at the December FOMC meeting. The CME FedWatch tool shows an 80.9% chance of a rate cut on December 10th, nearly doubling the likelihood from last week.
We will see plenty of US economic announcements today with Sep retail sales expected to rise +0.4% m/m and +0.3% m/m ex-autos. Sep PPI is expected to go unchanged from August at +2.6% y/y, with Sep core PPI expected to decrease -0.1% y/y from August to +2.7% y/y. Oct pending home sales are expected to rise +0.1% m/m. On Wednesday, initial unemployment claims are expected to rise +6,000 to 226,000. Sep capital goods new orders non-defense ex-aircraft & parts are expected to increase +0.3% m/m, and the Nov MNI Chicago PMI is expected to increase +0.2 to 44.0.
Q3 corporate earnings announcements are wrapping up with 466 of the companies in the S&P 500 already releasing results. 83% of the S&P 500 companies have exceeded their forecasts according to Bloomberg Intelligence. Earnings in the third quarter increased +14.6%, well above expectations of +7.2% y/y.
Global bond yields were lower to start the week with the 10-year US Treasury note yield falling -2.1 bp to 4.042%. The 10-year German bund yield is -0.2 bp lower at 2.701% and the 10-year UK gilt yield fell -0.5 bp to 4.541%.
Technicals
Looking at the daily chart for the E Mini S&P 500 December (/ESZ25) contract we can see the spike in volatility on heavy volume during the end of last week’s trading. The contract tested the 50-Day Simple Moving Average last Thursday but was met with heavy resistance. Yesterday we looked to recover from the losses seen last week and the 50-Day SMA price point will be an important level to watch.
The Daily Technical Summary from Hightower Research has support levels at 6547.25 and 6459.88 with resistance levels at 6699.75 and 6764.87.
According to the CFTC Commitment of Traders released October 7th, asset managers increased their long position by +4,281 contracts and decreased their short position by -9,030 contracts. Asset managers were net long 949,105 contracts.
The 14-Day Relative Strength Index at 48.83% indicates a fairly equal number of buyers and sellers at this point.
20-Day SMA 6,780.20
50-Day SMA 6,751.89
200-Day SMA 6,260.95
14-Day RSI 48.83%
Implied Volatility 19.03%
Contract Specifications
Economic Calendar
Consumer Confidence 10:00 AM ET
Core PPI 8:30 AM ET
FHFA Housing Price Index 9:00 AM ET
Pending Home Sales 10:00 AM ET
PPI 8:30 AM ET
Retail Sales 8:30 AM ET
Retail Sales ex-auto 8:30 AM ET
S&P Case-Shiller Home Price Index 9:00 AM ET
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