Bugs in the Banks, Tech Troubles, Obesity Drug Shares on Diet
Let's take a look at Dimon's warning, see why Micron hit a bump and why Novo Nordisk and Eli Lilly trimmed down.
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Shock Me
Your lightnin's all I need
My satisfaction grows
You make me feel at ease
You even make me glow
Don't cut the power on me
I'm feelin' low, so get me high
- Ace Frehley (KISS), 1977
RIP Spaceman, this one hurts more than most.
Freaky Friday
You kids got your helmets on? Better buckle those chinstraps. I need everyone in front of the barracks in full battle rattle. Fifteen minutes, Two sources of water. Clean socks, Gas masks on the hip. This may get nasty. After Thursday's U.S. market weakness, Asian stocks sold off, outside of India. Then, European markets opened in the hole. U.S. equity index futures have been touched by the ugly stock overnight as well, driven at least in part by renewed concerns over regional banks and their lending practices.
On Thursday, Zions Bancorp (ZION) disclosed a $50 million loss across two loans. This came after Western Alliance (WAL) revealed what could be up to $200 million in loan losses and days after Wall Street started to learn about Jefferies Financial's (JEF) exposure to bankrupt auto parts maker First Brands. While there are hopes up and down Wall Street that these might be isolated incidents, the words spoken earlier this week by JP Morgan Chase (JPM) CEO Jamie Dimon echoed across the landscape. Dimon, after his "best in class" U.S. bank suffered $170 million in losses on short-term loans made to non-financial clients, said, “When you see one cockroach, there are probably more. Everyone should be forewarned on this one.”
By the way, Fifth Third Bancorp is set to report this (Friday) morning.
More Than Banks
Overnight equity market weakness, of course, is much broader than a sagging exposure to the banking space. Shares of Eli Lilly (LLY) and Novo Nordisk (NVO) are trading sharply lower in response to comments made by Pres. Trump at a White House/Food and Drug Administration joint press conference. The president, in speaking on his administration's efforts to lower pharmaceutical prices, said that the cost of GLP-1 obesity drugs will come down "pretty fast."
Tech Too...
Shares of Micron Technology (MU) are trading lower as well. The memory chip designer led semiconductor stocks in a southerly direction following a report at Reuters that the company is about to halt sales of its server chips to data centers in China. Micron, according to this story, will continue to supply two Chinese customers with major facilities outside of China, but will exit the mainland marketplace. Readers may recall that Beijing had targeted Micron in the crosswinds of the existing U.S. / China trade war. Mainland China had accounted for a rough 12% of Micron sales (about $3.4 billion) over the fiscal year completed in August.
Somebody Save Me
Treasury debt securities caught a strong "flight to safety" bid on Thursday. The U.S. Ten-Year Note paid just 3.98% by day's end, which was down five basis points for the day. I see U.S. Ten-Year paper paying less than 3.96% overnight after trading as low as 3.94%. The Two-Year Note is yielding just 3.395% as I glance at the Treasury tables, down from where it went out on Thursday (3.43%), which was down eight basis points for the session.
These are the lowest yields for Treasuries since 2024. We were worried about losing the long end of the curve just a couple of months ago. Survey says... XXXX.
Gold is trading above $4.355 per ounce this morning, which is off the overnight highs of $4,375, but up significantly from $4,053 on Monday morning. Silver is trading at $52.72 per ounce on Friday morning up from $48.14 earlier this week. There are places to hide when the roof caves in. Bitcoin has not been one of them this week. I see the world's best known cryptocurrency trading at $105,103, down from more than $115,850 in four days.
Equities
On Thursday, the Dow Transports were up 1.03%. Really. Of course, that was because trucker JB Hunt (JBHT) ran 22% and all of the truckers ran at least 2%. That offset some ugliness across the airline space. The S&P 500 gave up 0.63% on Thursday as the Nasdaq Composite lost 0.47%. It wasn't in the final score on Thursday; it was in the broad intraday reversal that told investors and traders to go get their helmets. Smaller caps stocks were slapped around with the banks open Thursday. The Russell 2000, S&P 600 and S&P 400 surrendered 2.09%, 1.26% and 1.18% respectively.
Breadth was not minty fresh. Not even close. Ever wake up in the woods next to a Marine who ate whatever he killed the night before raw because we couldn't light a fire? Yeah, you don't know morning breath until you catch a whiff of that. Raw snake? I've gone hungry instead or just eaten a few dry crackers from my pack, but I've seen it done.
Ten of the 11 S&P sector SPDR ETFs closed in the red, led lower obviously by the Financials (XLF) and followed in that direction by Energy (XLE) . Only Technology (XLK) closed in the green, but that won't be where tech opens this morning. Losers beat winners by about 8 to 3 at the NYSE and by about 7 to 3 at the Nasdaq. Advancing volume took just a 30.3% share of composite Nasdaq-listed trade and an even weaker 25.6% share of composite NYSE-listed activity.
Now, here is where it gets tricky. Aggregate trade was up 7.4% on a day-over-day basis across NYSE-listings and higher across the membership of the S&P 500 as well. But aggregate trade contracted by just 0.3% across Nasdaq listed securities. Is that 0.3% contraction in trading volume across Nasdaq names enough to negate the Day of Bearish confirmation? maybe not in spirit, but technically, yes, it is. Today, they will come, on horseback, into our ranks waving the swift, silent sabers. We'll form in Napoleonic squares and use sharpened lances to slow them down. Bless you, warriors.
On The Bright Side...
Pres. Trump has built a reputation of being an exceptional peacemaker. His fans will readily agree with that. His detractors, I think, would have to at least admit that this is a talent of his. The U.S. president spent two hours on the phone with Russian Pres. Vladimir Putin on Thursday. The two agreed to meet in Budapest within a rough two weeks or so, we hope.
The president will try to bring an end to the war in eastern Europe or at least get the Russian president to agree to a ceasefire. The problem is that we have been here before. Pres. Putin plays up to Pres. Trump when they interact, as he did in Alaska earlier this year.
Pres. Trump comes away thinking progress has been made and within hours Russian missiles and drones are raining down on Ukrainian population centers. On this one, we'll be cautiously optimistic. No, make that even less than cautiously optimistic, but like Pres. Trump, we see no chance for peace if there is no communication.
Economics
(All Times Eastern)
08:30 - Import Prices (Sep): Expecting -0.2% m/m, Last 0.3% m/m.
08:30 - Export Prices (Sep): Expecting -0.3% m/m, Last 0.3% m/m.
08:30 - Housing Starts (Sep): Expecting 1.32M, Last 1.307M SAAR.
08:30 - Building Permits (Sep): Expecting 1.34M, Last 1.33M SAAR.
1:00 p.m. - Baker Hughes Total Rig Count (Weekly): Last 547.
1:00 - Baker Hughes Oil Rig Count (Weekly): Last 418.
2:00 - Net Long-Term TIC Flows (Aug): Last $42.9B.
The Fed
(All Times Eastern)
12:15 p.m. - Speaker: St. Louis Fed Pres. Alberto Musalem.
Today's Earnings Highlights
(Consensus EPS Expectations)
Before the Open: (AXP) (3.98), (CMA) (1.28), (FITB) (.87), (SLB) (.67), (STT) (2.65)
At the time of publication, Guilfoyle was long JPM, MU equity.
