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The Latest on AI Bubble Discussions

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What’s in Today’s Report:

  • The Latest on AI Bubble Discussions

Futures are little changed following a generally quiet night of news as there was no progress on resolving the shutdown and as investor attention turns to earnings.

Economically, the only notable report was German exports which declined modestly (down –3.9%).

Today there are no notable economic reports but there are several Fed speakers including, most importantly, Powell (8:30 a.m. ET).  Other Fed speakers today include Bowman (8:35 a.m. & 3:45 p.m. ET), Barr (12:45 p.m. ET), Daly (6:40 p.m. ET).  The key for markets here is clear:  If Powell (and others) reiterate their concern about the labor market and hint at more rate cuts, that should help support stocks amidst this absence of economic data.

Earnings season also kicks off this week, although next week is when results begin in earnest.  Some reports to watch today include: DAL ($1.52), PEP ($2.27), HELE ($0.34), LEVI ($0.31).

October MMT Chart and a Caution Signal From the VIX

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What’s in Today’s Report:

  • October MMT Levels – S&P 500 Chart
  • Technical Observation: VIX vs. SPX Caution Signal

Futures turned higher with Treasuries overnight after the Bank of New Zealand cut policy rates by -50 bp to 2.50% vs. (E) -25 bp, a dovish surprise aimed at spurring growth.

Economically, Taiwan’s CPI remained low at 1.25% y/y while German Industrial Production plunged -4.3% vs. (E) -1.0% but the downbeat data is bolstering dovish central bank policy bets and buoying both bond and equity markets this morning.

Looking ahead to today’s session, the void of government economic data continues and there are no notable private sector releases today which will leave markets continuing to focus on Treasury auctions and Fed speak.

Regarding the first of those two topics, the Treasury will hold a 4-Month Bill auction at 11:30 a.m. ET and a (more important) 10-Yr Note auction at 1:00 p.m. ET.

Regarding the second topic, the Fed’s Musalem (9:20 a.m. ET), Barr (9:30 a.m. & 5:45 p.m. ET), Kashkari (3:15 p.m. & 4:30 p.m. ET), and Goolsbee (7:15 p.m. ET) are all scheduled to speak today.

And finally, the September FOMC meeting minutes will be released at 2:00 p.m. ET, and any evidence that pushes back on the thesis that the Fed will cut two more times in 2025 could send the dollar and yields (potentially sharply) higher and weigh meaningfully on equities.

 

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