Stocks Rise On October 25, With The Dollar Not Far Behind

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October 25, 2021

Stocks – FB,

Macro – SPY, DXY, DJT

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Stocks finished higher, with Tesla responsible for a good portion of the day’s gains, probably about half of the day’s gains on the S&P 500. So can Tesla rise another 12% tomorrow and put a bid in the market? I guess anything is possible. But there was a massive gamma squeeze in Tesla. The S&P 500 finished the day rising by 47 bps and is still respecting the trend line.

The advance/decline managed to push higher after months of nothing happening. It does confirm the recent high, and it is worth watching to see if it holds.

Dollar Index

The dollar index managed to push higher today, rising by around 20 bps to trade up to 93.80. It looks like the dollar index is trying to break out and move higher. This period of dollar consolidation has helped to push the S&P 500 higher. That may change later this week, especially with an ECB meeting on Thursday. It seems unlikely the ECB will be too eager to end QE or begin the process of raising rates anytime soon. With a Fed that is about ready to taper and likely to start raising rates in 2022, it seems the dollar index should continue to push.

Dow Transports

The Dow Transports went from being worst to first really quickly. The move higher seems to be an inflationary bet on transportation prices rising, I guess. I really couldn’t find a good reason for this move higher. It doesn’t seem to be tied to a resurgence in the US economy, that’s for sure. Interestingly, the increase in the DJT is coming as the Baltic Dry Index and the Nikkei fall. Now, the Transports and the Nikkei seem to have a lot in common, with the Nikkei leading the Transports by a couple of weeks. If the transports top out here, I would not be surprised one bit. I guess we will find out tomorrow with UPS.

Facebook (FB)

Facebook’s results weren’t stunning, missing on the top and beating on the bottom. Meanwhile, at the mid-point of the range, fourth-quarter revenue guidance was $32.75 billion, or 6% below the consensus of $34.9 billion. The company also noted investments in its AR/VR business would reduce 2021 operating profit by $10 billion. Surprisingly, the stock is trading up around 2%; I couldn’t explain why. It sounds like the changes to Apple’s iOS are hitting their business too, and a 6% miss on guidance is pretty big. Maybe it fills the gap up to $337 before resuming lower; I’m not sure. It sounds like dead money to me.

That’s all for today.

Mike

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