October 2nd Market Overview

Happy Friday

Wall Street got the jobs report it wanted, and tech stocks ran with it. Bonds were athe tough crowd today.

In general though I liked what was under the hood: factories added jobs for a fourth straight month, and the trades that build data centers kept hiring

Lets dig in….

P.S. Brazil votes Sunday.
Here's what each outcome changes for Brazilian stocks.

Today's Big Picture

1. Nasdaq Touches A Record As Tech Leads

Nvidia hit its first all-time high since May, and AMD, CrowdStrike and Palo Alto Networks set records too. The Nasdaq is headed for its third straight winning week. The Dow is on pace for its fourth losing week in five, so tech is still doing most of the heavy lifting.

2. G7 Deal Heads Off A U.S. Diesel Export Ban

The White House pushed Europe to open its fuel reserves or face a U.S. ban on diesel exports. The G7 agreed today: 100 million barrels of crude and fuel over four months, diesel first. Members also promised not to restrict fuel exports to each other, which takes the ban off the table for now. U.S. diesel sits near $6.39 a gallon, just under last week's record.

3. Paychecks Are Falling Behind Prices

Wage growth slowed to its weakest pace since May 2021. Prices have outrun paychecks since the spring, as gas, diesel and airfares climbed after the Iran war started. That squeeze helps explain why consumer confidence sits near historic lows a month before the midterms. For the Fed, slower pay means the job market isn't adding to inflation.

Market Overview

Index Performance

Stock Spotlight

Tesla $TSLA ( ▲ 5.21% )  
delivered 486,532 vehicles last quarter, beating the roughly 461,000 Wall Street expected in a tough U.S. market. It also started volume production of its Semi truck and pushed back the Roadster.

MicroSectors™ Brazil BRZL
options drew a crowd ahead of Sunday's presidential vote. In mid-September, traders held more than three calls for every put, and open interest ran well above its average.

Seagate Technology $STX ( ▼ 10.22% )  
fell after Nikkei reported Toshiba will spend $380 million to double its data center hard drive capacity. Western Digital fell too. The three dominate the market, and this is Toshiba's first major investment in it in about five years.

Blue Owl $OWL ( ▲ 1.4% )  
capped withdrawals again after investors asked for $4.2 billion back from two private credit funds. Requests in the bigger fund fell for a second straight quarter, and Blue Owl thinks the worst is behind it.

Big Name Updates

Nvidia $NVDA ( ▲ 1.49% )  
is back on top of Morgan Stanley's chip list, with a $300 price target. The bank thinks the faster-growing half of Nvidia's business is customers beyond the cloud giants, like AI model makers, smaller cloud providers and governments.

Meta Platforms $META ( ▲ 0.33% )  
could owe up to $40 billion in penalties after a data privacy trial.

Paramount Skydance $PSKY will call itself Skydance once its Warner Bros. Discovery merger closes next week. CEO David Ellison said both studios keep their own names and brands.

Other Notable Company News

Twilio $TWLO ( ▼ 1.99% )  
joins the S&P 500 on Oct. 6, taking Warner Bros. Discovery's spot.

Lululemon $LULU ( ▼ 1.46% )  
slipped early after Nike's CEO signaled the sportswear slowdown will drag on, which could mean more discounting industry-wide.

Royal Caribbean $RCL ( ▲ 3.22% )  
rose early with other economy-sensitive stocks as rate-hike fears eased.

Grayscale Zcash ETF $ZCSH ( ▼ 3.1% )  
has more than tripled this year as privacy coins came back into favor. Bitcoin is flat on the year.

Today’s Sponsor

Brazil votes for president on October 4, with a runoff on October 25 if no candidate clears 50%.

Brazil ran its policy rate to 15% to break an inflation problem. BRZL and BRZD are the only US-listed exchange-traded products built to give +3X and -3X of the daily move in EWZ, the iShares MSCI Brazil ETF.

Daily trading tools for sophisticated investors. Subject to BMO credit risk.

Read the Full Piece

Sector Watch

Bond Market

The 10-year yield dropped right after the jobs report, then reversed and closed higher, still near Wednesday's 24-year high. Traders had already priced out an October hike, so many took profits on the early rally.

Policy Watch

Fed

Fed officials said this week they want more time to watch inflation after last month's hike. Today's report gives them that time.

• Mohamed El-Erian says the report puts the Fed "definitely on hold for October." The next meeting is Oct. 27-28.

• Chris Phelan, the White House's top economist, doesn't expect another hike this year.

• The Justice Department said it won't reopen its criminal probe into former Fed Chair Jerome Powell.

International

France is still the bond market's soft spot. The gap between French and German borrowing costs kept widening today after hitting its widest since 2012 on Thursday. RBC BlueBay's Mike Bell thinks it has more room to run if Marine Le Pen wins next spring's election.

• Eurozone inflation hit a three-year high in September, driven by energy.

What to Watch

Brazil Votes Sunday

President Lula and Sen. Flávio Bolsonaro are nearly tied heading into the first round. Bolsonaro wants closer ties with Washington and a smaller state, while Lula leans on Brazilian independence and more social spending.

For stocks, the question is rates. Brazil's central bank has cut from 15 percent to 13.75, and how much further it goes depends on the next government's budget. This breaks down what each outcome changes for Brazilian stocks.

Earnings Season

Nuveen's Saira Malik expects a strong season and thinks today could be "the start of the Santa Claus rally." UBS says faster-than-expected earnings growth has powered this bull market, which turns four this month. Strong numbers would give the rally something sturdier than rate hopes.

Thanks for reading - you are now the more informed 🙂

- John

Today’s Sponsor

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