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Earnings, GM Buybacks, Fed Speakers Boost Sentiment
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-7:23

Earnings, GM Buybacks, Fed Speakers Boost Sentiment

Stock futures are moving higher as forces seem to be aligning for that ‘Santa rally’…
Transcript

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Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets in the day ahead. Today is Wednesday, Nov. 29. The Bottom Line segment of today’s podcast starts at (4:43) for listeners who want to skip ahead.

State of Play

Yesterday was another quiet day, with major indexes not really moving from the break-even point. We just had General Motors (GM 0.00%↑) initiate a stock buyback and dividend boost and that stock is moving higher in the pre-market. As we look at our board of indicators at 0650, risk-on appears to be emerging:

  • Stock index futures are moving higher, with the Nasdaq up 0.4% and S&P 500 up 0.3%;

  • Commodities are gaining ground as well, with WTI crude oil up 1.5% to trade around $77.50/barrel. Copper is up 0.3%;

  • Bonds are also seeing bids, with the 2-year yield down 3 basis points to 4.70% and the 10-year down 5bps to 4.29%. This follows dovish comments from Fed speakers yesterday;

  • Cryptos are rallying, with Bitcoin up 2% to trade north of $38,000 again.

Known Events

It’s a big day for earnings. Dollar Tree (DLTR 0.00%↑) just reported a miss on top- and bottom-line estimates but basically confirmed guidance and that stock is moving a bit higher this morning.

Hormel Foods (HRL 0.00%↑) just missed estimates as well. We’ll also hear from Foot Locker (FL 0.00%↑) and Petco Health and Wellness (WOOF 0.00%↑) before the open at 0930.

After the close we’ll get Snowflake (SNOW 0.00%↑), Synopsis (SNPS 0.00%↑) Salesforce (CRM 0.00%↑), Okta (OKTA 0.00%↑), Five Below (FIVE 0.00%↑), and Victoria’s Secret (VSCO 0.00%↑), among others.

Not much going on today in terms of economic data. We get another reading on third-quarter GDP at 0830, the second, with a 4.9% quarter-over-quarter print anticipated. That’s identical to what it was in the first estimate. In fact, this whole exercise is basically pointless for that reason. We already had a reading of GDP and there is no reason to suspect this second take will deviate much from the first.

The Bottom Line©️

GM’s buyback seems to have reawakened animal spirits a bit. Otherwise earnings will likely be the driver. Fed Governor Chris Waller’s comments yesterday appear to have removed any ‘higher for longer’ fears, with the rally in bonds the logical result.

Stands to reason, then, that stocks will follow? Tomorrow we get another reading of the Fed’s preferred inflation gauge and Fed Chair Powell is due to speak on Friday. He’s managed to kill rallies before, so maybe don’t get too bullish quite yet.

If the PCE Deflator tomorrow continues to show slowing inflation and Powell doesn’t say anything on Friday to upset the whole apple cart, then it will probably be all systems go for the Santa rally. But again, let’s not get ahead of ourselves quite yet.

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The daily podcast discusses the major market activity and economic data release schedule for the day ahead, with a contrarian bent. Also includes regular podcast episodes a day (or more) early and without ads or announcements.