*Performance since 7/1/2022. For more details on the performance calculation and methodology of Alpha Picks, click here. |
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*Performance since 7/1/2022. For more details on the performance calculation and methodology of Alpha Picks, click here. |
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► The Dow Jones surged 300 points to a session high following Tuesday's sell-off. The Nasdaq and S&P 500 advanced, although the Nasdaq 100 continues to lag behind its peers.
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► Retail earnings season kicked off after a surprisingly positive earnings season from banks, setting the stage for upcoming tech sector earnings that are expected to bolster U.S. indices.
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► Geopolitical tensions continue to create uncertainty in global energy markets, and although oil remains resilient, markets have mitigated immediate price impacts.
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► Bitcoin surged to a two-month high following significant ETF inflows. Meanwhile, Tesla's transfer of $760 million worth of Bitcoin to unidentified wallets raised speculation regarding its crypto holdings strategy.
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► Treasury yields fluctuated, with the 10-year yield dropping slightly to 4.01%, amidst continued market consolidation and anticipation of Federal Reserve rate decisions, which are likely to include a 25-basis-point cut.
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Global Chip Stocks Fall: ASML Forecast Impacts Market Dynamics
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The Nasdaq slid 1% on Tuesday, and the S&P 500 halted a two-day rally after Dutch semiconductor giant ASML Holding N.V. (ASML) reported disappointing earnings and fell 14%. Wall Street closed in the red Tuesday, with global chip stocks losing over $420B in market value following ASML's forecast for 2025, which came in below expectations. ASML's unexpected revision of its net sales forecast for 2025 and disappointing third quarter bookings sent shockwaves through the semiconductor industry, with Asian and European chip stocks continuing their slide Wednesday. Japan's Tokyo Electron was one of Wednesday's biggest losers, falling nearly 10%, with ASML down another 4%. ASML's focus on AI is strong, yet challenges in other segments, including logic and memory, have slowed recovery efforts. These developments raise concerns about the semiconductor supply chain and the impact of export restrictions. ASML's unfavorable outlook for 2025 isn't the only headwind facing the semiconductor industry. Recent export restrictions imposed by the U.S. and Dutch governments have adversely impacted ASML's business in China, reducing its revenue from the region. China's past robust demand for semiconductor technology has been a significant growth driver for companies like ASML, which now anticipates China to account for only 20% of its total revenue next year, a sharp decline from previous quarters. Additionally, the semiconductor market's volatility was exacerbated by ASML's report, which showed a substantial shortfall in third quarter net orders. This has created ripple effects, causing a noteworthy $420 billion drop in market value across global semiconductor stocks, including those of giants like NVIDIA Corporation (NVDA), Advanced Micro Devices, Inc. (AMD), and Taiwan Semiconductor Manufacturing Company Limited (TSM). The longer recovery timelines for market segments such as logic and memory further pressure the industry outlook. |
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Markets are constantly influenced by global economic and geopolitical events. If you're looking for a tool that simplifies stock picking by analyzing financial data to highlight stocks with the strongest investment fundamentals, Alpha Picks offers a more efficient approach to smarter investing. This service leverages Seeking Alpha's powerful quantitative stock-picking system, delivering two data-driven stock picks each month, helping investors save time and focus on high-quality opportunities. |
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The geopolitical landscape remains tense as Israel's offensive into Lebanon and Iran's countermeasures have heightened the risk of conflict escalation in the Middle East. The potential impact on global oil supply adds to the complexity, though analysts suggest the focus will likely remain on Iran's military rather than energy infrastructure. Nevertheless, the threat of rising tensions persists over oil markets, which now rely more on production from non-OPEC nations to weather geopolitical storms. |
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Despite global tensions, modern-day oil markets remain resilient.
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Globally, the resilience of the Middle East conflict's influence on oil prices illustrates modern-day market tenacity. Despite initial surges driven by uncertainties, prices have shown quick retractions post-conflict, echoing the responses of the post-Russian invasion of Ukraine and recent escalations in Israel. |
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This week, Financials was the top-performing sector boosted by positive earnings surprises for big banks and the potential for another rate cut in November. Utilities reclaimed higher positioning, which is consistent with their performance year-to-date. Utilities have outperformed in 2024 due to a confluence of factors, including the sector's defensive attributes in a volatile year, as well as AI-related power demand. This week, Amazon.com, Inc. (AMZN) announced agreements to develop nuclear projects to fuel their data centers, boosting expectations for the Utilities sector yet again. |
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Industrials is the best-performing sector over the last month
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The Energy sector finished as the worst-performing sector for the week, erasing much of the gains it had made in the wake of Iran's October 1st missile attack on Israel. |
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Crude Oil and Chinese Economic Stimulus |
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There is one corner of the world that may offer some upside pressure to energy prices - China. The country is the world's largest crude oil importer. With the nation recently announcing stimulus measures, this could drive demand for imports and the commodity - see chart below. Seeking Alpha's Quant team already identified top Q4 energy stocks that may benefit from these developments. |
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Growth stocks continue to outpace their value counterparts amidst declining interest rates, spurred by anticipation of the Federal Reserve's easing monetary policy. The Technology and Financial sectors spearhead this growth, capitalizing on increased innovation and positive earnings revisions. However, broader macroeconomic uncertainties provide a backdrop of caution. Large-cap growth (IWF) continued to outperform Large-Cap Value (IWD) over the last month, but the latter has slightly outperformed over the last week as traders consider the potential shift from growth to value stocks. |
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Heightened optimism and hefty valuations have prompted some rotation, despite Big Tech reaping the benefits of the AI and ChatGPT-fueled frenzies that added $8.2T to six of the Magnificent Seven stocks. As highlighted last week, ongoing pressures from antitrust scrutiny and uncertain demand for tech hardware weigh on growth stocks' outlook, prompting increasingly favorable sentiment toward value stocks as investors navigate the markets more cautiously. |
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Over the last month, Growth outperformed Value across all segments
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Declining interest rates typically bolster value stocks by enhancing their relative appeal versus growth stocks with elevated P/E ratios. The U.S. economy remains resilient, despite economic forecasts indicating a GDP deceleration and climbing recession odds. Value stocks in slowing economies tend to become more attractive as they offer dividends and stability – a potential shift to support a rotation toward value equities. |
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Cryptocurrency markets experienced a surge, with Bitcoin leading digital assets to a two-month high following significant ETF inflows. Meanwhile, Tesla's transfer of $760 million worth of Bitcoin to unidentified wallets raised speculation regarding its crypto holdings strategy and its ongoing influence on crypto sentiments and broader market interpretation. |
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Cryptocurrencies Update: Bitcoin Benefits from Upbeat Financial Market Sentiment
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Regulatory challenges continue to pose headwinds for the crypto market by increasing uncertainty. Yet, Bitcoin's resilience remains tested. Increased pressure from legal obstacles exacerbates existing volatility linked to geopolitical tensions, factors contributing to a challenging landscape for cryptocurrencies. |
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The U.S. dollar experienced broadly positive movements for the week, making further gains against the yen and most major currencies. The European Central Bank (ECB) cut interest rates by 0.25% on Thursday, the third time this year, edging up the dollar's gains against the euro for the month. The dollar has been aided by U.S. economic resilience, with strengthening employment and cooling inflation. Sterling fell on Wednesday, following the release of economic data that showed British inflation slowed more than expected in September, making room for another potential rate cut by the Bank of England. |
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Geopolitical tensions and global economic conditions continue to influence investor sentiment. Heightened yields on U.S. Treasuries further exacerbated this trend, making the dollar a more attractive safe haven. |
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Chart of the Week - Are Stocks Focusing on Presidential Betting Markets?
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With earnings season in full swing, the S&P 500 recently had its 46th instance of a record high this year. That is not the only metric hitting new peaks of late. According to PredictIt, U.S. presidential betting markets, Donald Trump has continued to pull ahead of Kamala Harris.
As of October 17, Trump's price stood at 55 cents while Harris traded at 48. The spread stood at +7, the most elevated since the aftermath of the Biden-Trump debate. Furthermore, this spread has increased since hitting a low of -16 in mid-August, along with trading volumes that have been picking up since the start of the month, potentially reflecting conviction - see chart below.
There has been an increasingly positive relationship between the stock market and this probability spread. While multiple factors are driving the S&P 500 - such as a dovish Federal Reserve and soft landing odds - financial markets might also be increasingly pricing in what Trump could mean for looser fiscal policy and financial regulation.
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What is Alpha Picks? In the complex landscape of global financial markets, fluctuating sentiment, macroeconomic and geopolitical events can impact stock prices and short-term market movements. Alpha Picks is a rigorous, data-driven model that offers Strong Buy-rated stocks believed to have the highest probability of capital appreciation based on a proprietary quantitative model. Two 'Strong Buy' rated stocks are selected monthly on the first trading day of the month and the 15th or the closest trading day thereafter. Alpha Picks' portfolio has delivered an incredible total return of 158% vs. the S&P 500's 54% since its launch on July 1, 2022. Nine out of 37 Alpha Picks have returned over 100% to the portfolio. Last quarter, 33 out of 36 Alpha Picks met or beat recent EPS earnings expectations. Historically, Alpha Picks has maintained both revenue and earnings growth rates that are far superior to the S&P 500. |
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Alpha Picks Outpaces S&P 500 In Revenue Growth
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The Alpha Picks portfolio valuation framework is far cheaper than the S&P 500, helping investors potentially achieve stronger growth at a discount. Alpha Picks' 11.75% forward revenue growth from February 2023 through August 2024 is outperforming the S&P 500's 6.67%. |
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Alpha Picks Offers A Significantly Cheaper Valuation than the S&P 500
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Alpha Picks' quantitative, data-driven approach has resulted in the selection of stocks like Modine Manufacturing Company (MOD), which at the time of its pick in 2022 was trading for $20.30 per share, while MOD currently trades for over $132 per share!
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► FOMC - The recent FOMC decision underscores a future outlook inclined towards easing, with market forecasts heavily pricing a 25 bps cut in the next session.
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► Inflation - Inflation remains a contentious topic but shows signs of stabilization, with consumer price data suggesting a tempered approach to protracted inflation fears.
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► U.S. jobs report - Employment figures displayed resilience, as better-than-expected nonfarm payroll data helped reassure investors that the Fed and the economy are trending towards a softer landing. The upcoming November 1st jobs report will further shape labor market narratives.
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| SAP SE (SAP) Nucor Corporation (NUE) |
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| General Electric Corporation (GE) Verizon Communications Inc. (VZ) |
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| | Tesla Inc. (TSLA) The Coca-Cola Company (KO) |
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| S&P Global Inc. (SPGI) Union Pacific Corporation (UNP) United Parcel Service Inc. (UPS) |
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*Performance is as of October 18, 2024. Alpha Picks adds two stocks per month - on the closest business day to the 1st & 15th. Alpha Picks removes stocks based on rating thresholds (i.e., when a rating changes to a sell). Performance is calculated and reported daily using time-weighted returns. For more details on the performance calculation and methodology of Alpha Picks, click here.
Past performance is no guarantee of future results. Alpha Picks does not take account of your objectives or your financial situation and does not offer any personalized investment advice. Any content and tools on the platform are offered for information purposes only. Any views or opinions expressed may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker, U.S. investment adviser, or investment bank. |
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https://email-st.seekingalpha.com/oc/629888ce0c4303264f02dffem45mo.1t3ef/18873b39 |
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