On Edge

After a choppy day of trading, the Nasdaq managed to close in the green as investors digested fluctuating Treasury yields and a wave of corporate earnings reports. Meanwhile, the Dow and S&P 500 posted slight losses as market uncertainty surrounding the Federal Reserve’s next move continues to weigh on investor sentiment.

Closing:

• Dow Jones: ⬇️ 0.02% to 42,925.42

• S&P 500: ⬇️ 0.05% to 5,851.09

• Nasdaq: ⬆️ 0.18% to 18,572.38

Steady:
The consumer staples sector posted strong gains, up ⬆️ 0.92%.
Other sectors, especially those sensitive to interest rates like homebuilding and utilities, struggled as yields remained elevated.

Yields Climb, Shorts Drown

📈 10-Year Treasury Yield: 4.204% — highest since July.
The rising yield has investors on edge, recalling the 2023 selloff when the S&P 500 tumbled 10% from August to late October.

⚠️ Short Squeeze in Play
All short positions in S&P 500 and Nasdaq-100 futures are now underwater, setting the stage for a potential short-covering rally. If traders start to cover their losses, the market could get a shot of momentum, propelling stocks higher.

Despite the turbulence, the S&P 500 has held its ground through October but recently logged its first back-to-back daily losses since September 6, raising questions about how long this resilience can last.

Earnings Spotlight

Corporate earnings reports continue to drive market volatility, with several big names making headlines. While some companies exceeded expectations, others fell short, adding to the market’s cautious mood.

Movers to Watch:

➤ Verizon: ⬇️ -2.5% after missing revenue estimates.

➤ General Motors: ⬆️ +9.81% after smashing Q3 estimates and lifting its 2024 earnings outlook.

➤ Starbucks: ⬇️ -3.2% after missing earnings forecasts and suspending guidance. Starbucks reported a profit of 80 cents per share, below expectations of $1.03, on sales of $9.1 billion. Despite the earnings miss, the company raised its dividend by 4 cents to 61 cents per share, signaling confidence in long-term growth.

➤ McDonald’s: ⬇️ -0.06% after the CDC linked an ongoing E. coli outbreak to its Quarter Pounder burgers, with 49 cases reported across 10 states. The CDC confirmed one fatality, with 10 people hospitalized. As a precaution, McDonald’s has pulled slivered onions and beef patties in affected areas while investigators work to pinpoint the contaminated ingredient.

➤ Canadian National Railway: ⬇️ -0.15% after reporting higher revenue but lower profit for Q3. The company posted a profit of C$1.09 billion ($788.1 million), down from C$1.11 billion a year earlier, despite a 3% revenue increase to C$4.11 billion. Gains in petroleum, chemicals, grain, and fertilizers helped offset declines in metals, minerals, and automotive. The company faced challenges due to wildfires and labor disputes, but CEO Tracy Robinson emphasized a quick recovery and the company’s continued focus on growth and alignment with demand.

Get a Serious Trading Platform and a Sweet Bonus.
» Find out more

Upgraded

The International Monetary Fund (IMF) has boosted its 2024 US economic growth forecast, driven by stronger-than-expected consumer spending and nonresidential investment. The IMF also hinted at a potential win in the inflation fight, projecting global headline inflation to drop to 3.5% by Q4 next year.

On the Rise

Commodities saw a bounce back on Tuesday, driven by hopes of economic stimulus from China and geopolitical developments.

• Brent Crude: ⬆️ +2.3% to $76.00 per barrel after a 7% drop last week.

• Gold: ⬆️ 0.2% to $2,735.00 per ounce, maintaining its appeal as a safe haven amidst market uncertainty.

• Silver: ⬆️ +1.8% to $33.85 per ounce, continuing to show strength.

⚠️ Debt Watch:

The chart shows how much money the U.S. government has left to spend before hitting the legal limit on borrowing, called the debt ceiling. This limit controls the total amount of debt the government can accumulate. If Congress doesn’t raise the ceiling in time, the government risks running out of funds to pay for obligations like interest payments and other expenses.

Treasury General Account (TGA)
The government’s “cash balance” is held in the Treasury General Account (TGA), which works like a checking account. To calculate how much the government can still spend, you subtract the current debt from the debt ceiling, then add the balance in the TGA.

⛔ Hitting the Debt Ceiling
When the debt ceiling is reached, the Treasury can’t issue more debt (like T-Bills and bonds). However, when old debt matures and is paid off, it frees up room for the government to issue new debt and keep payments going.

📅 Temporary Suspensions and Extraordinary Measures
In recent years, Congress has temporarily suspended the debt ceiling to avoid financial crises. The Treasury can also use Extraordinary Measures—special accounting tactics—to delay the government from hitting the debt limit.

#TRUTH:

“It’s not about ideas. It’s about making ideas happen.” — Scott Belsky

The stinger

Disclaimer

This letter is not offering investment, trading, or investment advice nor is based on any individual portfolio or business operation. We are are not a registered investment, stock nor commodity advisor. One should consult with their own registered advisor to discuss investment strategies that are appropriate for their business or personal goals, risk tolerance and financial situation. Information in this report and on any website is derived from a variety of source believed to be reliable however no representation is made that the information is accurate, complete or correct. These lessons, newsletter and site content is not intended nor shall not constitute or be construed as an offer or recommendation to “buy”, “sell”, “trade” or invest in any securities, commodities, futures, options or other asset referred to in said lessons, reports or newsletters. Rather, this research is intended to identify situations and circumstances that those in the trading community should be aware of to better help assess and improve their own risk management skills.