MARKET WRAP

A total reversal in sentiment from yesterday as Broadcom’s move lower on earnings dragged down tech and the AI trade, and rising yields did damage elsewhere. The SPX finished off its lows of the day, but its -1% move off yesterday’s record close was enough to have stocks lower on the week. On the day: SPX -1.1%, QQQ -1.9%, and IWM -1.5%.

Elsewhere, it wasn’t a big move in yields, but considering that they had crept higher into this week’s FOMC and settled lower after, today’s move was of note, back to 4.19% in the US10YY. As a reminder, the US10YY was 50bps lower when the Fed began this rate cutting cycle last year. The dollar was fairly quiet today, though lower on the week. Gold with a new high yet again.

The VIX, which saw its lowest level since September yesterday, was higher today, now 15.75, but it got as high as 17.80 this morning when things looked like they could get ugly. That 15.75 close is heavily affected by the weekend, but stocks did finish off the lows.

Notable Moves Today: AVGO dragged a lot lower with it, including NVDA, MU, AMD and even ORCL. Industrials, which had been seeing some good rotations this week gave up some of those gains today. Consumer Staples were the best performing sector today.

Today’s RiskReversal Pod: Guy is joined by Luke Gromen, of Forest for the Trees, to talk the state of US equities, debt and inflation risks, global bond dynamics, and why moves in places like Japan, gold, and even stablecoins matter for the future of the dollar and markets.

WHAT’S NEXT?

The Week That Was

This week was all about the Fed until today. With the initial reaction after Wednesday’s meeting one of calm in both equities and bonds. However, the market seemed to get a little caught off guard by a couple of things today, starting with the broader impact of AVGO’s post-earnings gap lower across tech. Broadcom is one of the largest market-cap companies in the world, and it had been showing notable relative strength versus peers like NVDA, which has essentially gone nowhere since the summer. But today, AVGO’s losses weren’t NVDA’s gains—instead they weighed on the entire AI complex, reminding investors just how crowded that trade still is into year end.

Treasury yields were the other big storyline today. The US 10-year, which had been creeping higher into this week’s Fed meeting and then initially acted well afterward, gave back that entire post-Fed move in one shot today. That reversal added pressure to equities and pushed rates back to the forefront, especially in light of the Fed’s new buying program announced on Wednesday. Overall, not a big move this week, with the SPX down just slightly, but today’s action certainly changed the storyline for the week.

Looking Ahead

Looking ahead, next week is packed on the macro front, with both a delayed Payrolls (Oct) and CPI (Nov) here as well as the BOJ rate decision overseas. On the equities front, with earnings season now behind us and the calendar turning toward year-end, not much has fundamentally changed—except for today’s uptick in volatility. Yesterday felt like the market collectively throwing in the towel on the idea of any real volatility into the holidays, but today put at least a little fear back into the tape. The VIX moved higher, though it’s still coming off yesterday’s very low sub-15 close. Seasonally you’d typically expect further vol compression as we head towards the holidays but next week’s calendar and today’s action likely changes things. Monthly options expiration adds another variable as we head toward Friday.

We’ll be back this weekend with more on what to watch heading into next week.

TODAY’S EPISODES

Watch RiskReversal Podcast’s newest episode: The Truth About The Weak Dollar

Guy is joined by Luke Gromen, founder and president of Forest for the Trees, to discuss the US equity market, economic conditions, and various global financial dynamics. Gromen analyzes the impact of fiscal policies, the Federal Reserve’s actions, and geopolitical events on market behavior. He highlights the risks associated with high debt-to-GDP ratios, inflation, and the implications of Japan's bond market situation on the US economy. The conversation covers topics such as reserve scarcity, the role of stablecoins, and the strategic moves by global central banks, particularly their increasing gold reserves, reflecting a shift in reserve currency dynamics.

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