Good morning!
As we approach the final days of Q3, markets are giving off a mix of signals that have traders scratching their heads. Yesterday, the S&P 500 and Dow hit new record highs, yet investor sentiment remains fragile with conflicting data and uncertain economic narratives. On one hand, the U.S. is contending with disappointing consumer confidence numbers, and on the other, global markets are reacting to a slew of stimulus measures out of China and rate cuts from central banks around the world.
It’s a weird Wednesday, to say the least. Bond yields are fluctuating, energy prices are volatile, and tech stocks are teetering on the edge of exuberance as Meta gears up for its Connect 2024 conference. Meanwhile, OPEC’s long-term oil demand projections clash with the growing push for greener energy, and the Federal Reserve’s jumbo rate cut from last week continues to raise more questions than answers. As the quarter winds down, it feels like the market is simultaneously running on fumes and flying high on speculative optimism—setting up a potentially turbulent start to Q4.
1. Meta’s Connect 2024 – AR, AI, and the Metaverse
All eyes are on Meta Platforms (META) as its highly anticipated Connect 2024 conference kicks off today. CEO Mark Zuckerberg will deliver the keynote at 1 PM ET, where he’ll outline Meta’s vision for AI and the metaverse. Meta’s focus on augmented reality (AR) is in the spotlight, especially with the expected unveiling of the “Orion” AR glasses, which aim to integrate advanced AR technology with a sleek Ray-Ban design. Additionally, a new Quest 3 headset and potential celebrity-driven AI voice assistants featuring Judi Dench, Kristen Bell, and others will also take the stage.
Meta shares have rallied close to 60% year-to-date, propelled by its strong push into AI and metaverse technologies. Investors will be keen to see if these ambitious projects will continue to drive growth or if market sentiment will shift amid Meta’s ballooning capex. Watch for reactions to any new announcements and how they might influence broader tech stocks.
2. Peak Oil? OPEC Remains Confident
Despite the growing global push for greener energy and the slow adoption of electric vehicles (EVs), OPEC maintains that oil demand will rise through 2050. The group sees demand climbing to 120.1M barrels per day, driven by growth in emerging markets like India, Africa, and the Middle East. OPEC’s forecast bucks the narrative of “peak oil,” and if correct, it could mean prolonged demand for traditional energy sources, pushing commodity prices higher in the long term.
Crude oil has been fluctuating on the news, with WTI currently trading at $71.08, down 0.7%. Despite today’s slight dip, energy stocks are expected to stay in focus as global dynamics evolve.
3. AI Regulation on the Horizon
The U.S. Department of Justice is starting to factor in the risks of AI when evaluating corporate compliance programs. Companies will now need to assess how they use AI, identify any potential risks, and implement safeguards to avoid regulatory pitfalls. The push for more scrutiny on AI underscores the importance of not only adopting these technologies but doing so responsibly. As AI continues to proliferate across industries, compliance officers and executives alike will need to be proactive in ensuring their firms aren’t caught in the regulatory crosshairs.
4. Markets: A Tepid Open
U.S. equity futures are mixed this morning as the Dow and S&P flirt with flat territory, while the Nasdaq is showing a slight 0.2% decline. The major indices closed at record highs yesterday, largely driven by China’s stimulus efforts and a strong showing from NVIDIA (NVDA). However, today’s market mood seems more cautious, as investors digest yesterday’s consumer confidence miss and mixed global economic data.
In Asia, China’s Shanghai Composite added 1.2% following another stimulus move by the People’s Bank of China (PBOC), which cut its medium-term lending facility rate by 30 basis points to shore up growth. Hong Kong’s Hang Seng rose 0.7%, while Japan’s Nikkei dipped 0.2%. European markets are similarly subdued, with London’s FTSE 100 up 0.4%, but Germany’s DAX and France’s CAC 40 slightly lower.
Key Economic Data Today:
- 7:00 AM – MBA Mortgage Applications (up 11% on lower rates)
- 10:00 AM – New Home Sales (Expected: 695K; Previous: 739K)
- 10:30 AM – EIA Petroleum Status Report
- 11:00 AM – Treasury Buyback Announcement
- 1:00 PM – $70B, 5-Year Note Auction
What to Watch:
- Meta’s Connect 2024: Expect major developments in AR and AI from Mark Zuckerberg’s keynote, with the potential to drive tech stocks.
- China’s Stimulus: The PBOC continues to deploy aggressive monetary tools, but the market’s response is becoming more muted as structural concerns about China’s economy persist.
- OPEC’s Oil Forecast: A long-term bullish outlook for oil may keep energy stocks in play, especially with rising geopolitical tensions adding a premium to crude.
Stay tuned for updates throughout the day as we see how these events play out and shape the broader market narrative. Tomorrow we have Durable Goods, GDP, Corporate Profits, Pending Home Sales and 1/2 of the Fed speaking: Collins, Bowman, Powell, Williams, Barr, Cook, Kashkari and Cook again – it should be quite a day!
Stay informed, stay disciplined, and let’s navigate this market together.
— Cosmo
