Tech giants report today
Oct 29, 2020
–Yesterday the market got a taste of what might happen without a significant new stimulus package to counteract covid lockdowns. DJIA was -3.4%, SPX -3.5% and Naz -3.7%. Fixed income initially rallied as stocks fell, but the move fizzled with yields ending unch’d to a shade higher. Tens ended +0.3bp to 78.1 at the futures settlement. Not much of a reaction to the 5yr auction; today brings $53 billion in sevens. However, treasury vol was better bid, especially in the long end. USF 175 straddle settled on Tuesday at 5’32 vs 175-14, yesterday it settled 5’50 with futures close to unchanged at 175-12. (10.4 vol). A stark reminder that bonds may do nothing to save your stock portfolio.
–Tech giants AAPL, AMZN, GOOGL and FB report earnings after the close today. For economic releases, Jobless Claims expected 770k and GDP expected +32%.
–Possible boost to SOFR futures and ERIS SOFR swaps as a large asset manager reportedly swapped the floating leg on a massive number of swaps from libor to SOFR.
–On Oct 20, I mentioned the reversal pattern in DJ Transports, which on the 19th had made a new all-time high 12000.19 and then closed significantly lower. I thought it was a clear reversal signal, but the very next day it made a new higher all-time high at 12013.69. Since then it has traded lower, with a plunge of 4.25% yesterday to 10945.62, outpacing other indices. Initial target just below 10000.
