The Federal Reserve cut interest rates by a quarter percentage point at its October meeting, and this was its second reduction this year, bringing the benchmark rate to a range of 3.75% to 4%.
Now the move came as the 10-year treasury yield edged back above 4% even after falling nearly 2 points over the past month, about 11% since the start of the year.
So joining me as a new month gets underway is Katie Stockton, founder of Managing partner at Fair Lead Strategies.
Good morning, Katie.
Thank you so much for joining me.
Well, first, diversification may be top of mind as equities gold seeing double digit percentage gains year to date.
So let's start out with a look at the S&P 500.
So this morning we are looking at that index covering right around the 6876 level.
So what is your outlook in both the short and long term for the index?
Well, that level that you just cited is actually pretty important in our work in that it was the objective essentially from the June breakout by the S&P 500.
It allowed for a measured move projection of 6880.
So we have a market that now has reached that objective.
It doesn't mean that's where the bull market ends, but it is a natural place for a pause to develop sort of a.
A loose resistance area if you will.
And yet the the long term momentum is still very strong behind the S&P.
It still also has short term momentum it's fallen off a little bit.
We saw a couple of gaps higher uh towards the end of October.
And those gaps, if anything, look maybe more exhaustive than not, we do expect them to ultimately be filled.
That would only take a move down to about 6750 for the S&P, so we're not looking for a major pullback at this point, but we are watching closely those momentum gauges to suggest that we are in store for any kind of, you know, significant pullback that would suggest that we should be hedged or wait at least to add exposure.
And Katie, can you give us a sector breakdown within the S&P 500, especially on the heels of the latest earnings reports, as well as sectors, especially given what we've been seeing with trade developments and geopolitical shifts this year.
Well, the sector performance has still really come from technology.
Technology tends to exhibit upside leadership in strong tapes and during bull market cycles that have that good steep slope to them.
So indeed that's what we've seen.
So the relative performance has been quite strong, and it has certainly been concentrated amongst large caps, amongst semiconductor stocks, but we are also seeing it in small caps as well.
So it's been really all about tech, and tech has the biggest footprint in the S&P 500.
So that would be the key sector or place to watch for any kind of loss of momentum or relative performance because it is essential.
I think to the uptrend in the S&P 500, there's been some really interesting rotation of late.
So even as the tech sector has moved higher, it's lost some upside momentum in relative terms and at the same time we've seen some of the down trending sectors like healthcare, like energy for two, that sort of assume better relative momentum.
Looking at the comparison between sector benchmarks and the S&P, so it's kind of interesting.
It could be the start of something that's more meaningful, but there is certainly some underlying rotation that has occurred to the benefit of some other sectors, but not as meaningfully as what we've already seen from the technology sector.
So we'll keep an eye on it.
Yeah, and Katie, speaking of tech, we're coming off a big week of mega cap tech earnings.
Last week.
Amazon rallied at the end of the week, and Apple got a boost as well on the heels of earnings.
So can you give us a technical breakdown of these two Mag 7 names?
Yeah, so the Mach 7 has been very contributive to the bull market cycle, and yet I'd say of late we've seen more dispersion there, you know, momentum to the upside for some, to the downside for others.
I think the most obvious example, well now, especially on the back of their earnings, we have a breakout in Amazon and we have a pullback underway in Microsoft and a breakdown in Meta.
So we do have some dispersion now, especially.
After the earnings reports, Apple's remained firm and Nvidia also has remained firm, uh, so we're respecting their up trends and their upside leadership.
In fact, Nvidia has the shape of a bullish flag pattern on the chart, so there's some bullish sort of setups to highlight.
Alphabet as well has been very strong, doesn't really have any big cell signals to highlight from a technical perspective.
But we, we have seen, you know, some, I'd say, uh, you know, differences in terms of the relative momentum there, and that's different than what we saw earlier in this bull market cycle.
So I think investors are now really scrutinizing the fundamentals of these companies, and that goes not only for the mag 7, but I'd say also within AI we'll probably see more of that as that theme becomes more and more overextended.
Then, you know, folks are gonna probably prioritize the best companies and you'll start to see some of the lesser companies lose that relative strength just that has been more industry or thematic driven.
OK, Katie, well, we will have to leave it there for today, but as always, thank you so much for joining us and thank you so much for sharing all of your insights.
Thank you.
