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Market Update📈📉

Welcome back.

The indexes barely sneezed last week, and the high-momentum flyers from quantum computing, nuclear, space, drones, rare earth metals, robots, crypto, and AI pulled back 10-40%. The price action in momentum stocks is often a precursor of what might happen in the general market. Timing it is the tricky part as sector rotations could continue to keep the indexes near their all-time highs.

The market is currently in a range-bound, choppy mode. In such an environment, breakouts don’t work for more than a day or two and often lead to a reversal. Breakdowns don’t last too long either, as the dips near support levels are getting bought. The market is digesting its recent gains and looking for new catalysts. They are right around the corner.

The new earnings season has just begun. Morgan Stanley crushed estimates and gapped up. Then, lending troubles in select regional banks brought down the entire financial sector, and Morgan Stanley gave back its gap. American Express also reported strong results, gapped up, and finished strongly.

It is a scalper’s tape for nimble traders for the time being, where trading less and focusing on earnings movers makes sense until the next clear swing move.

Pocket Lobbyist Insights:

Budget Prime Minister Mark Carney gave a speech in advance of the forthcoming November 4 federal budget outlining his government’s priorities.

Auto alarms: Tariff wars continue–internally with Stellantis and GM decisions to move operations to the U.S., as well as externally with President Trump saying he has “terminated” trade talks with Canada after anti-tariff ads were taken out by Ontario Premier Doug Ford.

Foreign policy: Carney is travelling to South Korea for the APEC summit next week and might meet with President Xi, though that meeting is yet to be confirmed publicly. President Trump will be there and is meeting with Xi.

Crime crackdown: Bail reform through Bail and Sentencing Reform Act introduces over 80 clauses of targeted changes to the bail and sentencing framework in the Criminal Code.

Podcast & YouTube Recommendations🎙

* Historical Cycles: History shows these massive transformations happen in ~80-year cycles. Each cycle involves “watching an old system being essentially dismantled... at the same time as we’re taking off on these new technologies to build the next systems”

* The U.S.’s Self-Inflicted Challenge - Chinese Rare earths leverage and the shocking comparables across multiple industries in Canada:

China’s announcements last week should have the same effect on the U.S.: we need to always act with the understanding that (1) we have a critical dependency on China that is particularly important to our tech industry and (2) that China is willing to leverage that dependency.

Best Links of The Week🔮

* “The six largest U.S. banks collectively earned nearly $41 billion in the third quarter, a 19% increase from the previous year. Bankers express unease about the future despite strong third-quarter profits, healthy consumer spending and low debt delinquencies. Concerns include a cooling job market, elevated inflation and the federal government shutdown’s potential economic impact.” Source: WSJ

* “The U.S. has to use industrial policy to compete against nonmarket economies like China, Treasury Secretary Scott Bessent told CNBC. The Trump administration will set price floors across a range of strategic industries to combat Beijing, Bessent said. The administration could take equity stakes in more companies in the wake of China’s new restrictions on rare earth exports, he said.” Source: CNBC

* “United Airlines posted higher-than-expected earnings for the third quarter but revenue that missed Wall Street’s estimates. The carrier boosted capacity more than 7% in the third quarter while unit sales fell for both domestic and international travel. United said it expects an adjusted-earnings forecast of $3 to $3.50 a share in the fourth quarter.” Source: CNBC

* From Hodinkee: “On this episode of The Business Of Watches Podcast, we catch up with Antoine Pin, the Chief Executive Officer of Tag Heuer, who is having quite a year. The brand is in the first season of a new decade-long deal to be the official timekeeping sponsor of Formula 1. It’s a high-profile, multi-brand agreement that, if executed correctly, could launch Tag Heuer to a whole new level of visibility. But it also comes at a challenging time for the global economy and the watch industry in general, as soaring input costs, a strong Swiss franc, and U.S. tariffs on Swiss goods take a toll on margins and confidence.” You can listen to the podcast or read a transcript of the interview here on Hodinkee.