Once Again Tech Leads the Way

October 13, 2020 08:05 AM
Tech's breather is over
JP Morgan and Citigroup beat earnings estimates
Johnson & Johnson halts its Covid-19 vaccine trial
Equity Index futures


Monday's Close

E-mini S&P 500 Futures (December): Settled at 3532.75, up 59.50

E-mini Nasdaq-100 Futures (December): Settled at 12,098.25, up 373.50

U.S. benchmarks melted higher yesterday, with the Nasdaq-100 index up 3.19% and S&P 500 Index  climbing by 1.7%. We began to see a small divergence last night. Ahead of today’s bell the Nasdaq-100 was up nearly 1.0% and the Russell 2000 index is down an equal amount.

We’ve noted here over the last couple weeks that tech’s breather was only that; the market was gathering support and building a constructive base while small caps rallied. Furthermore, this wasn’t the long called for rebalance out of growth and into value; the accustomed leadership will remain. We aren’t calling victory just yet but when behemoths Apple and Amazon surge higher on event headlines it certainly dictates who controls market narratives. Amazon’s 2-day Prime Day begins today, and Apple launches its 5G iPhone 12.

On the economic calendar, we had September inflation data via U.S. CPI at 7:30 a.m. CT. The core read, excluding food and energy, is expected to come in at +1.8% YoY. Inflation is inching closer and closer to the Federal Reserve’s 2% target. In fact, their preferred gauge, the Core PCE index, came in at +1.6% for August. Yes, they plan to symmetrically let it run hot, but by how much? We aren’t concerned the Fed will tighten policy, but they could certainly exude less dovishness in the 1st quarter next year. One way to play the rising inflation is by selling Treasuries.

Elsewhere, the banks kicked off 3rd quarter earnings season. JP Morgan and Citigroup are both up by at least 1% after beating estimates. Johnson & Johnson also reported this morning. Although they beat expectations, the stock is down more than 1% after the company temporarily halted the stage 3 trial of their Covid-19 vaccine

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