Morning Minutes 10/24/2018

Tesla Turnaround; Earnings Keep Stocks Active; Bank of Canada Preview

October 24, 2018
9:00 am EDT

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Market Commentary By:
Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

After an afternoon turnaround attempt in US markets failed to claw back all of its earlier losses, overseas markets have been more successful in their kick at the rebound can with the FTSE up 0.9%, the Dax up 0.4% and the Nikkei up 0.3% overnight. Chinese markets were mixed with Hong Kong down 0.4% and Shanghai up 0.2%.

US index futures started out lower but are now in positive territory with Dow Futures now up 0.3%. In contrast to yesterday’s headline 7.5% plunge from Caterpillar, positive results from Boeing* this morning appear to be shoring up support. Boeing* reported adjusted EPS of $3.58, above the $3.47 street estimate. Sales of $25.1B were above the $23.9B street estimate as well plus, the aircraft producer raised its full year EPS guidance to $14.90-$15.10 from $14.30-$14.50.

US stocks continue to move through a phase of abrupt adjustments of expectations as hype meets reality and investors consider whether strong past results are sustainable into the future. Yesterday also 3M drop 4.4% off of disappointing results. Perhaps more important, however, we also saw a ray of light as McDonalds rallied 6.3% and broke out to a new all-time high as investors cheered strong results.

The biggest turnaround story from yesterday, and one that looks likely to continue through today, was Tesla Motors. TSLA shares soared 12.75% on two intriguing developments. First, long-time bear on the stock Citron Research threw in the towel yesterday and went bullish.  Second, the company moved up its earnings report by a week or two from usual to this afternoon. This move suggests that the company may have good news for the markets. In the wake of the takeover tweet fiasco and other summer incidents involving CEO Musk, the company would seem to have more of a motive to get good news out quickly, neutral or bad news could wait. A number of other significant reports are due after the close today including: Ford Motor, Microsoft, Whirlpool, and Visa.

This morning the Bank of Canada is widely expected to announce a 0.25% rate hike, and take the overnight rate up to 1.75%. The successful resolution of trade talks with the US and more strong Canadian employment numbers since the last Bank of Canada meeting support the case for a hike this time around. On the other hand, the very weak Canadian domestic oil price, global market volatility, the recent easing of inflation pressures and soft retail sales are among the reasons that Governor Poloz could potentially opt to hold off until December or longer. The loonie has slumped back a couple of cents from its Oct 1st rally peak, but it appears to be carving out another higher low. It’s possible a rate hike could boost the Loonie a bit, but the bigger surprise would be if the Bank were to hold off to December.

*Shares of Boeing are held in some portfolios managed by SIA Wealth Management.

SIA Wealth In The News:

Chief Market Strategist Colin Cieszynski appeared on BNN Bloomberg Tuesday afternoon, talking about market volatility and earnings season. A link to the replay is below.

Stocks post rally after big drop at the open

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