U.S. Futures & World Markets

The message this morning is pretty simple: gridlock in D.C. is good for stocks, at least in the very short term. Stocks are popping premarket after Democrats took control of both the House and Senate. Treasuries and precious metals are also higher on the news, as interest rates tick lower.

This quote from Steven Chiavarone of Federated Hermes sums it up well: "While the present uncertainty and changing of the guard might make investors anxious, no US midterm election has ended the world, and this one will not either."

AMD and SuperMicro (SMCI) reported solid results, which is helping semiconductor stocks catch a bid. It's not a surprise to see a relief rally in semi names after the recent bloodbath. Data center guidance from AMD is helping support the AI trade. AMD said supply, not customer demand, is its main constraint — an important distinction.

There is a great chart below on market corrections and what we've been seeing in the Nasdaq. It's an excellent reminder to pay a little less attention to short-term sentiment and daily headlines, and more attention to long-term returns. Tech stocks have historically returned more than other sectors, but there is a price to pay for those returns. That price is called VOLATILITY. And sometimes the admission fee gets pretty expensive.

S&P Futures vs. Fair Value: +80.00  |  10-Year Yield: 4.91%

CORE Headlines

Charts & Data

126 years of market history tell a simple story: stocks and earnings move together with a 98% correlation. The short run is all about noise. The long run is all about profits. Speculators chase noise. Investors follow profits. Peter Mallouk.

With a 10%+ drop from its recent highs, the Nasdaq 100 is back in correction territory. The Nasdaq has now been in a correction more often than in a rally over the last year. Bespoke Investment Research.

One of the most unbelievable chart combinations we have ever seen: the S&P 500 is at extreme oversold levels, and nearly half of its components are overbought. Bespoke Investment Research.

The S&P 500 Index is within about 3% of its latest record high, and yet 60% of the benchmark is languishing in bear market territory. Jan-Patrick Barnert, Bloomberg via Daily Chartbook (the stealth bear market).

The tariff tantrum in the spring of last year was a proper growth scare, producing a 20% drawdown in the AI/ex-AI pair while breadth was very weak at 19%. Today we have a 22% drawdown and 61% breadth — that distinction tells me this is an AI-only scare and not a broader growth scare. Jurrien Timmer, Fidelity via Daily Chartbook.

US gas prices averaged $4.13 a gallon on Tuesday — the most expensive price ever recorded on November 3 of any year, and more expensive than any prior election day, including 2022. Will Kubzansky, Bloomberg via Daily Chartbook.

Official data on supply coming from the Gulf suggests oil is indeed beginning to flow again, despite the ongoing disruption to the Strait of Hormuz. John Authers, Bloomberg via Daily Chartbook.

CTAs have covered only a fraction of their bond shorts despite the sharp rally in Treasuries. The positioning unwind may be far from over. Deutsche Bank via Zero Hedge.

Overall equity positioning ticked up to the 44th percentile (from the 41st) last week, with discretionary investors at the 21st percentile (from the 18th) and systematic strategies unchanged at the 79th. Deutsche Bank via @neilsethinew.

Monday marked only the 2nd day this year that retail investors have been net sellers — a $1.4B net sale, their first since April. This is after retail has bought more than $1 trillion of ETFs and stocks YTD. Morgan Stanley via Daily Chartbook.

Semiconductors have gone from nearly 20% of the index back down to 16%, still very elevated. Historically, it is rare for a group to maintain a greater-than-15% weight, so there's some mean reversion going on. @todd_sohn, Strategas via Daily Chartbook.

The breakdown in S&P 500 Momentum relative to the S&P 500 is a 99.7th percentile reading (1989-2026). Other notables date to the 2000-2002 Tech Wreck and the market action leading into the federal government's seizure of Fannie in 2008. @jeffweniger, Corgi Invest via Daily Chartbook.

History says the broad market, and most individual stocks, are likely to be higher in 12 months' time, with both the median and average gain in double digits. But given today's concentration, whether the run extends to a 22nd consecutive positive post-midterm period likely depends on the performance of just a handful of stocks. Jim Reid, Deutsche Bank via Daily Chartbook.

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