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Welcome to the week.
- There is an election on Tuesday with many reports/polls indicating it is too close to call.
- Iran has threatened a strong and complex attack against Israel, according to The Wall Street Journal.
- The Federal Open Market Committee is expected to cut the target range by 25 basis points to 4.50-4.75% at Thursday's FOMC meeting.
- China's National People's Congress will take place November 4-8 amid hope Chinese officials will announce new stimulus measures.
- There will be a $58 billion 3-yr note auction today, a $42 billion 10-yr note auction Tuesday, and a $25 billion 30-yr bond auction Wednesday.
- OPEC announced an agreement to extend the 2.2 mbd voluntary adjustments until the end of December 2024.
- Berkshire Hathaway (BRK.B) reported its Q3 results, showing a whopping $325.2 billion cash position and a sizable reduction in its stake in Apple (AAPL).
- NVIDIA (NVDA) and Sherwin-Williams (SHW) will be replacing Intel (INTC) and Dow Inc. (DOW) in the Dow Jones Industrial Average prior to the open November 8.
- The Boeing (BA) machinists union will be voting today on a new contract proposal.
- Over 100 S&P 500 companies will report earnings results this week.
And.... exhale! There is a lot to take in, and we haven't even hit the opening bell. It is understandable that the equity futures market would be transfixed with so much on tap -- and it is.
Currently, the S&P 500 futures are up four points and are trading roughly in-line with fair value, the Nasdaq 100 futures are down eight points and are trading 0.1% below fair value, and the Dow Jones Industrial Average futures are down 37 points and are trading 0.1% below fair value.
While there isn't much early movement in the equity market, there has been some notable movement in the Treasury market that is garnering some extra attention.
Consider: Iran is threatening a strong attack on Israel, OPEC is sticking with output cuts longer than expected, there is looming new supply with a $58 billion 3-yr note auction... and yields are lower?
The 2-yr note yield is down six basis points to 4.14% and the 10-yr note yield is down eight basis points to 4.28%. The drop in yields is counter-intuitive for the headlines just mentioned, yet it comes into focus amid reports that traders are tempering their expectations for an election sweep.
Both candidates have put forward plans that will increase the national debt by trillions of dollars over the next 10 years if they are enacted, according to the Committee for a Responsible Federal Budget, but the implementation of those plans won't be easy without either presidential candidate having a mandate in Congress.
Treasuries have been traded in a volatile manner of late, with an upward bias in yields. While yields are lower now, that may not be the case by the end of the session; nonetheless, the election view seems to be the only one that fits at the moment as an explanation for the early gains.
In any case, volatility is on tap this week for all capital markets.
