Mill Street Research

NVIDIA's stock has been more volatile lately, and it matters because of its nearly $5 trillion market cap.

Our work shows that analysts are still raising EPS estimates ahead of next week's earnings report, which is usually a good sign and suggests dip buyers will continue.

Still a lot of day-to-day rotation between Tech and everything else, or Growth vs Value.

Small-caps are still struggling relative to large-caps overall, with earnings still stronger in large-caps and late-cycle economic/market conditions still mostly in place despite Fed rate cuts.

One of those days when one stock has a notable impact on the indices.
The -2% drop in NVIDIA is mostly responsible for the mild decline in the NASDAQ today, and is weighing on the S&P 500.

The rest of the market is mostly higher: 9 of 11 sectors are up today.

The data available is noisy but suggests the labor market is not great but not terrible given the drop in labor supply caused by drastic immigration reductions.

The bond market is closed today for Veterans Day but futures show bond prices up (yields down).

Stocks are mixed to lower so far.

Without the usual government employment data, economists and the private sector (like Goldman Sachs) are trying to fill the gap.

ADP is now producing weekly estimates of rolling 4-week employment changes, and said today US firms cut 11K jobs/week over the last 4 weeks, similar to Goldman.

Q3 earnings reports are still going but the majority have come out now, and in aggregate look pretty good, so analyst EPS estimates are holding up.

There may be more internal rotation to come but it still looks like risk appetite is positive and investors don't want to bail out of stocks.

Back to risk-on and Big Tech leadership in stocks today after last week's pullback and Growth-to-Value rotation.

Some interest in the Senate moves to end the shutdown, though it may take a little longer for that to happen given that the House is still not in session.

The shutdown and the SNAP benefit halt are starting to have more visible economic effects, including via air travel, etc.
This will intensify the political pressure to end it, though with the House still refusing to even show up for work, it may take a while longer.

Not coincidentally, crypto also rebounded from its recent decline at the same time, indicating a risk recovery along with the internal rotation in stocks.

Headlines of a shutdown deal proposal are being cited, though the GOP quickly rejected the Dem proposal in the Senate.

Something of a reversal day in stocks, opening down and then rebounding in the afternoon.

It was also a sector reversal day, as Tech and Comm. Services were the only sectors down, everything else was up, led by Energy, Utilities, and Real Estate, i.e., Value and small/mid-caps.

The Fed seems to want to pause rate cuts in December due to inflation concerns and potential stabilization in the labor data that is available.

And if Trump's IEEPA tariffs are ruled illegal, there could be a moderate stimulus effect next year along with the OBBBA tax changes.

Private sources have been trying to construct data to fill in the gaps, but it is noisier and limited.

Bloomberg has made an alt-data labor market index from 19 inputs that has sort of tracked the Fed's Labor Conditions index. It ticked up slightly at the latest update but remains in slowing mode.

Well, it's the first Friday of the month and for a second consecutive month we are not getting the US labor report due to the longest-ever government shutdown.

The ADP data on private sector employment shows very little growth in recent months, but labor supply is also lower due to immigration.

The UBS Profitless Tech index continues to weaken, now down about -14% from its mid-September peak and starting to threaten its trend.

This is one proxy for the most speculative Tech stocks in the roughly $1 - 20B market cap range.

The NASDAQ-100 is only down -3.8% from its peak a week ago.

NVIDIA, Microsoft, Amazon, and Tesla are the biggest drags on the S&P 500 today, joined by AMD, Meta, and Palantir.

Apple is the biggest positive contributor today.

DoorDash is the biggest outright decliner, down -16% after it said it will invest more next year, hurting the earnings outlook.

Energy is up despite lack of support in crude oil, and Health Care is up somewhat thanks to Pharma/Biotech names.

Real Estate, Utilities, and Financials are near unchanged with some help from lower bond yields today and a Growth to Value rotation.

Looks like an anti-momentum day in stocks, as former winners lag and laggards outperform. Momentum and Growth factors are negative today.

Big Tech and some small Tech are dragging down both NASDAQ-100 and Russell 2000, but equal-weight S&P 500 and several sectors are down only mildly or are up.

A pullback in stocks after such a massive rally is entirely normal, and major indices (except the Russell 2000 and equal-weight S&P 500) remain in uptrends.

Valuations are high but seasonality tends to be positive for stocks in November-January.

While the longest-ever government shutdown is having a growing impact on the economy, it is still big Tech/AI that is driving things in US stocks.

Worries about an AI bubble, particularly around OpenAI and its massive commitments that vastly exceed its potential revenue, are growing.

Red day for most stocks, major indices down 1-2%.

Bonds rallying, reversing the decline in price (rise in yield) from yesterday as concerns about the economy come back.

Big Tech/AI leading the way down, while Energy and Utilities are holding green for now.

The Fed also seems to be pushing back on the idea that a December rate cut is a lock after two consecutive rate cuts.

Today brought headlines about growing corporate layoffs, but comes after yesterday's firmer ADP data. The lack of proper government economic data remains a big problem in the US.

Central banks are still in cutting mode, but slowing down.

The Bank of England just voted to hold rates steady, slowing the previous once-a-quarter pace of rate cuts, but it was a close 5-4 vote. Another rate cut looks likely in December.

ECB and Bank of Canada seem to be moving similarly.

The fact that Trump's Commerce Secretary Howard Lutnick's firm Cantor Fitzgerald (now run, Trump-like, by his sons) has been buying up the rights to get future tariff refunds from importers at 20-30 cents on the dollar suggests Lutnick is set to profit if the Court rules against the tariffs.

Striking the IEEPA tariffs would likely then force Trump to potentially use Section 232 ("national security") or Section 301 ("unfair trade practices") tariffs more, though they require investigations by the US Trade Representative (slower) and apply to products rather than whole countries.

The Supreme Court tariff case is still going on, but so far the court seems skeptical of the Trump administration's claims.

If the "emergency" (IEEPA) tariffs are struck down, importers who paid them could get over $100 billion in refunds.

Stocks are recovering from a pullback yesterday that was led by Tech, so clearly still some dip-buying going on and no one seems too concerned about the rise in bond yields today.

Lots of attention on the big tariff case at the Supreme Court today, which could produce refunds if Trump loses.

Big jump in bond yields today after ADP employment data and ISM Services report showed somewhat better-than-expected employment and higher inflation readings.

This adds to the arguments against another rate cut in December, and markets are responding.

10-year Treasury yield back up to 4.15%

One sector holding up today is Financials, which have been lagging recently despite strong earnings news.

It is one of our favored sectors as the Value-oriented alternative to Tech, and still has macro tailwinds supporting it.

Down day for stocks as Palantir's earnings report provoked selling despite an apparent "beat", and weakness in crypto is bleeding into stocks.

Basically situation where valuations are high so even good news can be sold if it's not extraordinary, and risk appetite is coming off extreme levels.

And while it seems that there is enough demand right now to max out all the capacity at the big providers, the future revenue required to justify the required capex continues to rise rapidly too.

Cloud providers may find other uses for capacity if AI demand eases, but firms like Meta may not.