October 20th Market Overview

Happy Monday

About a fifth of the S&P 500 reports this week.

Markets rallied hard on China trade hope, but I'm not buying it yet. Trump said "we can lower" tariffs but China has to "do things for us too" that's really a negotiating position, not a deal.

We're pricing in optimism that could evaporate with one tweet.

More interesting to me: Cleveland-Cliffs announces rare earth mining plans the same day Trump warns China not to play the rare earth game. China controls 70-80% of global rare earth production and has weaponized that before. The timing here isn't random, this looks coordinated. I'm going into rare earth plays after hours tonight.

Let's dig in...

Today's Big Picture

Markets Rally on Trade and Shutdown Hopes 
Stocks climbed toward October highs. Kevin Hassett said the government shutdown could end this week. Trump said he's confident about a China trade deal ahead of his meeting with Xi. The U.S. is rolling back tariffs on products that can't be made domestically. Markets are rallying on hope, not results.

Apple Hits New High on iPhone Demand Apple 
$AAPL hit a record high. The iPhone 17 outsold the iPhone 16 by 14% in its first 10 days across China and the U.S. Loop Capital upgraded to Buy with a $315 price target, expecting strong sales through 2027.

Rare Earths Become US-China Flashpoint 
Trump warned China not to play the rare earth game with the U.S. the same day Cleveland-Cliffs $CLF ( ▲ 20.87% ) announced plans to explore rare-earth mining domestically. The timing signals a broader push to reduce dependence on Chinese-controlled minerals critical to defense and tech manufacturing. Cleveland-Cliffs beat earnings expectations at $143 million.

Market Overview

Index Performance

Extreme broad participation in today’s rally indicated by our market health dashboard. Available to anyone who wants to be a premium member.

Upgrade to premium and get → Market Health dashboard

P.S.
Rolling out a new tool for Premium members - the Company Credit Score.

Each day I'll link one company (usually the most talked-about ticker) with its fundamental health broken down in 5 bullet points. Testing it this way first, then you'll be able to run it on any ticker whenever.

As always, premium members get grandfather in at no extra cost.

Stock Spotlight

Amazon $AMZN ( ▲ 1.53% ) 
had an AWS outage affecting Coinbase, Robinhood, Reddit , and Snap. Separately, many Amazon delivery contractors are quitting as profits shrink.

Cooper Cos. $COO ( ▲ 4.17% ) 
rose after activist investor Jana Partners disclosed a stake. Jana wants to combine its contact-lens unit with rival Bausch + Lomb $BLCO.

Alibaba $BABA ( ▲ 4.54% ) 
jumped after claiming its new pooling system cut Nvidia GPU needs by 82% for its AI models.

Micron Technology $MU ( ▲ 2.16% ) 
Chief Business Officer said the DRAM shortage will deepen through 2026 with supply staying extremely tight. Micron can’t meet demand due to limited capacity.

Big Name Updates

Alphabet $GOOGL ( ▲ 1.24% ) 
hit a record. Bank of America raised its target to $280, seeing strong ad spend and search momentum ahead of earnings.

Nvidia $NVDA ( ▼ 0.12% ) 
CEO Jensen Huang said the company is hundreds of billions into building AI infrastructure but has trillions left to build over the next decade. He confirmed involvement in xAI’s financing.

Tesla $TSLA ( ▲ 1.37% ) 
got pushback from Glass Lewis, which told investors to reject Elon Musk’s pay package. Earnings come later this week.

Other Notable Company News

Zions Bancorp $ZION ( ▲ 4.66% ) 
rose ahead of earnings tonight. Regional banks have been under pressure after Zions disclosed a large loss and alleged fraud last week.

Merck $MRK ( ▲ 1.9% ) 
began construction on a new $3 billion manufacturing facility in Virginia.

Molson Coors $TAP ( ▼ 1.29% ) 
will cut hundreds of salaried positions in its Americas business.

WeightWatchers $WW ( ▲ 9.74% ) 
partnered with Amazon $AMZN Pharmacy to deliver weight management medications to members.

Reddit $RDDT ( ▲ 3.21% ) 
got a $250 target at Raymond James. The firm sees growth from higher ad loads and AI search.

CAVA $CAVA ( ▼ 0.41% ) 
got Neutral coverage from Goldman Sachs at $74. Goldman likes the long-term story but sees near-term pressure.

Sector Watch

Bond Market

The ten-year yield broke below four for the first time since mid-September as banking worries drove money into Treasuries. The two-year yield hit three point four one, lowest since September 2022. Tomorrow's $22 billion thirty-year auction will test whether this flight to safety has legs.

Policy Watch

Fed
Investors expect another rate cut at the Fed’s meeting later this month. No Fed commentary today with officials in their blackout period.

Government Shutdown
Kevin Hassett said there’s a “shot that this week things will come together” to end the shutdown. He said moderate Democrats could move a deal forward and the White House is ready to take stronger measures if needed. Day 20 of the shutdown.

Fiscal & Trade
Trump said he’s confident about a China trade deal. He said “we can lower” what China pays in tariffs but China has to “do things for us too.” Treasury Secretary Bessent meets his Chinese counterpart this week while Trump plans to meet Xi soon.

Key moves:

• U.S. rolling back tariffs on products that can’t be made domestically

• Trump confident on a soybean deal with China

• Trump warned China not to play the rare earth game

• U.S. signed an agreement with Australia on critical minerals

International
French bonds fell after S&P cut the country’s rating to A+ from AA-, citing political turmoil.

China’s GDP grew 5.2% in Q3 with high-tech manufacturing up 9.6%. China says its 5% annual target is still within reach despite weakest growth in a year.

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What To Watch

Key Earnings Reports 
Nearly one-fifth of the S&P 500 reports this week. Netflix $NFLX and Coca-Cola $KO report Tuesday. Tesla $TSLA and IBM $IBM on Wednesday. Intel $INTC and Ford $F on Thursday. Procter & Gamble $PG closes it out Friday.

Inflation Data 
September CPI drops Friday. The Fed needs this before its late October meeting. Any surprise shifts rate cut expectations.

Zions Bancorp Earnings Zions 
$ZION reports after the close tonight. The sector got hit last week after Zions disclosed a large loss and alleged fraud. Investors want to know if this is isolated or systemic.

China Trade Developments 
Bessent meets his Chinese counterpart this week. Watch for concrete progress on tariffs ahead of Trump's meeting with Xi.

Thanks for reading 🙂

- John