October 31, 2023

Markets:

Stock futures were little changed Tuesday, with traders set to close out a dismal month that saw Treasury yields surge to multiyear highs.

Earnings season continued Tuesday, with Caterpillar reporting earnings for the third quarter that exceeded estimates. However, Caterpillar said its fourth-quarter revenue would only be “slightly” higher than the same quarter a year before, worrying investors it could miss analysts’ expectations. Shares were down more than 4% in premarket trading.

The moves come after the S&P 500 on Monday climbed out of correction territory and posted its best day since late August. The Nasdaq Composite added about 1.2%, while the Dow jumped roughly 1.6% in its best day since early June.

The major averages remain on pace to end the month in the red. The Dow and the S&P 500 are down 1.7% and 2.8% in October, respectively, in their third consecutive negative month. This marks the first three-month losing streak for both indexes since March 2020. The tech-heavy Nasdaq has declined more than 3% month to date, also on pace for its third negative month in a row.

Wall Street is also keeping a close eye on the Fed’s next decision on interest rates this Wednesday. Fed funds futures pricing suggests a roughly 98% probability that the central bank will keep rates at current levels, according to the CME FedWatch Tool.

Portfolio:

We enter the last trading session of the month holding set-ups in AX, GEO, and CAVA. We expect a busy day potentially. Could see a few nice swings today in the market today. Many traders are beginning to position themselves for tomorrow Fed meeting as well as AAPL and AMD earning reports over the next few trading sessions. We want to stay nimble and be ready to swing with both sides of the trade. Just please keep in mind we are entering a period that has historically been super positive for the markets. We still firmly believe in the pain trade theory and can see this being exaggerated as shorts are forced out of trades. Just a theory we see ending 2023 but we will obviously not fight the trend if technicals become bearish. What is absolutely undeniable, after such a tough period for traders over the past few weeks, this market will provide great opportunity to end 2023.