Things you need to know.
– ASML surprises (not a good surprise) stock falls 16%
– LVMH down 6% today…they also surprised.
– Bonds rally yesterday but decline today.
– Oil – down another 3.5%, Gold kisses $2700.
– More Earnings…
– Try the Vermont Maple/Bourbon Marinade
ASML offers a disappointing forecast and BOOM…..Tech got whacked…Now ASML is one of the KEY players in the chips space – they are Europe’s MOST VALUABLE tech company….They develop, produce and market semiconductor manufacturing equipment – SPECIFICALLY machines for the production of chips thru lithography – Just fyi – they own the market in that space. The stock lost 16% yesterday and is now down 3.5% ytd…after being up as much as 60% by mid-April…and as you might expect after they announced – Tech came under the gun…..The XLK down 2.2%, The Semi’s – SOXX lost 5.2%….– your favorites NVDA – 4.7%, AMD -5.2%, INTC -3.3%, AVGO – 3.4%, QCOM – 2.2%. And then it spread to names like Big Blue – (IBM) – 1%, CNDNT – 2.2%.
The damage done when ASML announced their quarterly earnings and they reduced 2025 guidance and reported ‘weaker than expected’ quarterly bookings and that caused many investors to lose credibility in the story……but let’s not throw the baby out with the bathwater…AI demand remains very strong – that part of the story has not changed and ASML plays a KEY role….(that has not changed)…. Sara Russo at SC Bernstein says, ‘it looks like we may need to exercise more patience until the cyclical recovery is clearer” and has it as an OUTPERFORM while JPM analyst Sandeep Deshpande sees the pullback as an ‘opportunity to buy’ the stock now ahead of an acceleration in sales in 2026! His thoughts – ‘Investors will start to focus on 2026 as new information about new fabs and expansion of existing capabilities becomes available.’ His rating is OVERWEIGHT.
Either way – it was what it was and in the end it’s because they waited until they announced earnings (yesterday in Europe) to reveal what they knew was going to be an issue….so here is the lesson – they should have pre-announced weeks ago, they should have indicated that guidance was coming into question….because they KNEW it…but because they surprised investors on earnings day – they got doubly whacked…So maybe they learned a lesson….
In any event that did cast a pall over the broader market – in fact Bloomberg blames the whole thing on both ASML and NVDA….
“Stocks halt Rally as NVDA, ASML Get Crushed.”
…the Dow lost 325 pts or 0.75%, the S&P down 45 pts or 0.75%, The Nasdaq choked up 188 pts or 1% (which was not a disaster at all), the Russell gained 2 pts, while the Transports lost 101 pts or 0.3% and the Equal Weight S&P lost 30 pts or 0.4%.
And so maybe that is what the market needed to pull back, maybe it needed a kick in the gut to wake everyone up…. Just maybe everyone got too bullish. Money has poured into equities as investors moved money from bonds to stocks and from money market funds after the FED made it clear that they are taking rates down… (but is that story changing as well????) Look, do not be surprised to finally see investors take some money off the table as earnings season gets underway and investors struggle with stretched valuations…Look – the Dow, the S&P and the Nasdaq were all kissing their upper bands (+70) on their respective RSI (Relative Strength Index) chart…suggesting that stocks were approaching overbot territory….and then you get a company like ASML to make that announcement and BANG…down we go….
Now interestingly enough – we got 15 earnings reports yesterday…names like GS, BAC, UAL, JBHT, C, SCHW, STT, PGR – of the 15 – only 2 of them missed on the bottom line….so 86% of the reports were better than expected….but the markets and traders and algo’s focused on ASML….
Today we will hear from SYF (beat), PLD, CFG, USB, ABT, MS representing Industrial REITS, Banks, Medical Devices and Institutional Brokerage.
Eco data – Mortgage Apps – this morning it is being reported that housing stock in Florida is rising (do you think), Condo assessments are rising, and prices are coming down. People are moving to Tennessee! (but remember- they have lots of tornadoes!). We have those Import/Export prices and the Monthly Budget Statement. My sense is that only the mortgage data point is anything to worry about…
Now – Bonds gained on yesterday stock weakness. The TLT and TLH rose by 1.2% and 1% respectively…. the 2 yr. yield ended the day at 3.94% but is a bit weaker this morning at 3.92% as US stock futures stabilize. The 10 yr. ended the day at 4.02% after trading as high as 4.04%. This morning it is down to 4% – again as futures stabilize.
Remember what we discussed – rising bond yields could mean that investors expect the FED to RAISE rates in response to inflationary pressures or a HOT economy. It could also mean that the gov’t is ready to spend even more money – something that both candidates have promised to do, and this increases the need for Janet to bring MORE bonds to the market to support this spending – more supply will push prices down and yields up. And that once again begs the question – what is the tipping point for the 10 yr. yield to create a pullback in the market?
Oil go whacked again – falling 3.8% or $2.80 to end the day at $71.04 and this morning it is down again – trading at $70.37….now the weakness being credited to the idea that Israel has announced that they will not hit Iranian energy assets – also because OPEC has cut global demand outlook – which I think is ridiculous….I will say, it is curious though that we have seen oil collapse by 11% in the past 2 weeks – just 2 weeks ahead of our Presidential election. I don’t know – it just feels a bit curious, no?
In any event – I have another question…. Why is Israel telling the world exactly what they are thinking? Why are they saying that we won’t hit the oil fields, but we are going to hit military sites and nuclear sites? When did pre-announcing military attacks become ‘in vogue’? I’m just a bit confused…the only thing they didn’t do is send out a ‘save the date’ card – or did I miss that too?
Gold rose $13 or 0.5% to end the day at $2679 and this morning it is up another $13 at $2692 – after kissing $2699 overnight. The story yesterday was that some global central banks are planning on building up their reserves…. Capisce? Let’s not forget – the US election is only weeks away and the Fed once again is confused…so look at the rally as more of a ‘safety play’. Look – Gold is Gold – Period.
Yesterday I identified where I think it could go before it hits resistance…that is around $2750…. Trendline support remains at $2590…so that puts us in the $2590/$2750 trading range.
The VIX shot higher by 5% yesterday and is up another 1% this morning….as it tries to decipher what’s next. We are now above all 3 trendlines and if we get another piece of news that we did not expect – (think ASML) then watch how fast the VIX surges…which just means – be patient…. there is no need to rush out to buy just anything…. yet. Surely there is another headline out there in the not-so-distant future.
This morning US futures are mixed…. Dow futures are -11, S&P’s 2, Nasdaq up 20 and the Russell is up 10 pts…Clearly SMID’s (small and mid-caps – represented by the Russell) are finding buyers…. Up nearly 0.5%.
European markets are all lower…. The Eurostoxx index down 0.7% while Spain is just below the unchanged line. This morning the news is about LVMH (Louis Vuitton/Moet Hennessey) down 6% as 3rd qtr. revs drop…Again, why did they wait until they announce? Why didn’t they Pre-announce weeks ago…just to soften the blow…. What do these brain surgeons need to understand…. announcing disappointing results on earnings days that surprises the markets is never a good idea…. If they pre-announce in the weeks ahead – they will get punished, but NOT as much as they do, when they surprise…ASML is a perfect example and now LVMH is just another example.
The S&P closed at 5815 – down 45 pts. You know that I have been looking for the markets to back off a bit…maybe it started yesterday? We are in the final two weeks of October – hovering around the market crashes of 1929 and 1987…. Just sayin! Sit tight….and pay attention – this is not the time to fall asleep!
In the end though, as a long-term investor – rest assured that your advisor is doing the right thing…and if they are not – reach out – I am happy to discuss your concerns. If you have a plan and are well diversified and have some cash on the side to take advantage of any weakness – then don’t panic…be patient…Having a plan is key to building long term wealth.
Successful investing is a marathon not a sprint. Click on the link to send me a message – I’m happy to discuss.
https://slatestone.com/contact-us/
Take good care.
kpolcari@slatestone.com
Sources: Bloomberg, CNBC, Reuters, Wall Street Journal
Disclosure: The content provided in this material is designed for educational and informational purposes only, and it is important to note that it does not constitute personalized recommendations. This commentary is not nor is it intended to be relied upon as authoritative or taken in substitution for the exercise of judgment. The comments noted herein should not be construed as an offer to sell or the solicitation of an offer to buy or sell any financial product, or an official statement or endorsement of Kenny Polcari or SlateStone Wealth.
The market commentary is the opinion of the author and is based on decades of industry and market experience; however, no guarantee is made or implied with respect to these opinions, which may not necessarily align with our firm’s standpoint.
While considerable effort has been invested to ensure the accuracy and dependability of the information presented, we must clarify that we cannot guarantee the accuracy of third-party information. Our usual sources for third-party data include channels such as Bloomberg.
Kenny Polcari is the Chief Market Strategist for SlateStone Wealth. Neither Kenny nor the partners of SlateStone Wealth are compensated in any manner by the issuers of any securities mentioned in the publication.
Vermont Maple and Bourbon Marinade
This is a simple marinade and is wonderful when grilling a nice sirloin steak or bone in Rib-Eye.
For this you need: 1 cup of real Vermont maple syrup, ½ cup of Jack Daniels Bourbon, s&p and a shot of ground red pepper….
Mix well – and then use it to marinate your favorite cut of meat. (Overnight always works well). You can use this marinade on steak, chicken or even pork –
Marinate it overnight – and then spark up the grill.
Buon Appetito
