GM, 3M Raise Outlook in a Busy Day for Earnings

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Tuesday, Oct. 22. The Bottom Line segment of today’s podcast starts at (4:04) for listeners who want to skip ahead. Today’s Stocks on the Contrarian Radar©️ feat homebuilders and homebuilding suppliers. Read about that at the bottom of the page.

State of Play

As we eye our board of indicators for signs of direction at 0645, a mixed bag awaits:

• Stock index futures are pointing to a drop at the open, led by small caps. The Russell 2000 is down 0.8% with Nasdaq futures down 0.6% and the S&P 500 right behind (-0.5%);

• Commodities are continuing to rebound. WTI crude oil is up another 1% to trade close to $71/barrel. Copper is up 0.8%. Silver continues its rally, up 1%. Gold continues to set all-time highs, up another 0.5% this morning;

• Bonds are dropping a bit. The 2-year yield is up 2 basis points to 4.04% whilst the 10-year is up 2bps to 4.21% (yields move inversely to prices):

• Cryptos are dropping a bit with Bitcoin down close to 2% to trade around $67,000.

Today’s Known Events

It’s earnings season!

• 3M (MMM 0.00%↑) beat estimates and importantly raised guidance and that stock is up in the pre-market, by ~2% at the time of this writing;

• General Motors (GM 0.00%↑) also produced good news, with the company beating estimates and raising guidance. That stock is rallying in the pre-market, up >2%;

• GE Aerospace (GE 0.00%↑) revenues fell short of estimates and that stock is moving lower in the pre-market, down by ~2%;

• Bad news also from Kimberly-Clark (KMB 0.00%↑) which reported mixed results and is dropping in the pre-market;

• Verizon Communications (VZ 0.00%↑) missed estimates and that stock is also down;

• Lockheed Martin (LMT 0.00%↑), Freeport McMoran (FCX 0.00%↑), and Philip Morris (PM 0.00%↑) are also due to report out before the open at 0930.

Several companies report after the close at 1600. Highlights include Texas Instruments (TXN 0.00%↑) and Seagate Technology (STX 0.00%↑).

The Bottom Line

So sone good news from earnings. An automaker raising guidance is certainly a good thing where the state of the US consumer is concerned. You figure that should help risk assets.

Still, you get the sense we’re in a bit of a holding pattern until the election. One suspects it’s not so much whether we get Trump or Harris but how quickly it is decided and if the losing candidate agrees to go away quietly or raise a ruckus.

Coming podcast guests should supply more information about this:

• Flip Pidot of the American Civics Exchange records today;

• Marc Chandler, a political economist, joins early next week;

• Mike Blyth of S7risk late next week.

So a lot of content coming your way. Remember that you (premium subscriber) get it first — several days before free subscribers — and without annoying ads or announcements. Because premium membership has its privileges.

Stocks on the Contrarian Radar©️

Homebuilders and home building suppliers were among some of the worst-performing stocks yesterday:

• Builders FirstSource (BLDR 0.00%↑) was in fact the worst-performing S&P 500 stock yesterday, dropping 5%, followed closely by Lennar Corp (LEN 0.00%↑);

• TopBuild (BLD 0.00%↑), like BLDR a building materials supplier, was one of the worst-performing midcaps, down 5%+;

• Homebuilders D. R. Horton (DHI 0.00%↑) and KB Home (KBH 0.00%↑) also dropped multiple percentage points.

As you can see, these stocks have started to diverge from the S&P 500 benchmark in recent weeks:

As these are one of the most economically-sensitive areas of the market, it will make The Contrarian take notice. It’s not entirely clear what caused this. Most of these stocks are still at or near multi-year highs.

So probably not a buying opportunity. But again: why the sell-off? Does it portend something worse for the economy at large?

Something to keep an eye on, for sure…

Housekeeping

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