Did Beijing Flinch in Trade Talks?
Let's check the latest in Pres. Trump's Asia tour. Also, Microsoft hits $4 trillion as it strikes an OpenAI deal and I chart TJX.
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To date, Pres. Donald Trump's trip to Asia has gone about as well as could have ever been expected. The president had already come to new or improved trade deals with Malaysia, Thailand, Cambodia, and Vietnam that included increased U.S. access to rare earth minerals and metals with Malaysia, Cambodia and Thailand. This had come after such a deal had also been struck the week prior with Australia. You could feel the U.S. gaining momentum and a better position from which to bargain going into Thursday's meeting between Pres. Trump and Pres. Xi of China.
Then came Japan. The U.S. president quite visibly got along very well with new Prime Minister Sanae Takaichi who was a political ally of the late Shinzo Abe, who as prime minister had been a Trump and a U.S. ally. Trump and Takaichi signed documents on trade and also again, increased U.S. access to critical minerals.
Beijing flinched. Or did it? Reuters is reporting overnight that a Chinese state-owned company, COFCO, purchased three U.S. soybean cargoes ahead of the meeting between the two leaders on Thursday. The purchase supposedly comes to about 180,000 metric tons and was the first Chinese purchase of U.S. soybeans from this year's harvest.
In all honesty, this is not a large purchase. There is definitely a message being sent. I am just not quite sure what that message is. If Beijing's cages had been rattled by increased U.S. access to rare earths and critical minerals elsewhere, Beijing would not likely make their jitters publicly visible. More than likely, this was something of a tease. This was a message to the U.S. president that there is a lot more where that came from if these talks go well. Remember, China maintains a strategic reserve for soybeans and will very likely purchase up to 8 million tons of soybeans, potentially from U.S. farmers during the winter and spring period. That kind of tonnage in U.S. soybeans would go for a ballpark $4 billion in the home currency.
Blackwell
The U.S. president told reporters early Wednesday morning that fentanyl flows into the U.S. would be discussed on Thursday as well as agricultural purchases. On rare earths, Pres. Trump said, "We are gonna work out something."
About Taiwan, the president said, "He may want to ask about it. There is not that much to ask about."
When asked about Nvidia's (NVDA) Blackwell architecture AI-capable chips, the president added, "I think we may be talking about that with President Xi."
The president elaborated, "We'll be talking about Blackwell, it's the super-duper chip."
Trump added, "That's our country. We're about ten years ahead of anybody else in chips, the highly sophisticated chips."
The super-duper chip that the president was referring to is believed to be the GB200 Grace Blackwell Superchip, which is Nvidia's most advanced, currently available, AI chip.
The president has implied in the recent past that he may allow a chip less advanced than the GB200 for export to China. This must mean that something more advanced than the already available for export H20 chips, which were designed on the Hopper architecture (one generation earlier than Blackwell) could be on the way.
All The While...
Nvidia held its GTC Conference in Washington, D.C., on Tuesday. Notable announcements included a $1 billion investment in Finnish telecom infrastructure company Nokia (NOK) . The two companies will team up to develop a "next generation" 6G cellular technology. Nvidia also announced a collaboration with T-Mobile (TMUS) to integrate AI-RAN technology into T-Mobile's 6G development. Outside of the telecom space, deals or collaborations were also announced with the likes of Oracle (ORCL) , CrowdStrike (CRWD) and Eli Lilly (LLY) . All while Nvidia soared past a $4.5 trillion valuation and appears headed for a $5 trillion destination. For now.
Fed Day ...
...Today is "Fed Day," and that's become secondary news.... Why? So much is going on in Asia, several members of the "Magnificent 7" are about to report, and the U.S. is government still shut down. Unless, of course, Jerome Powell somehow screws this up, the Fed probably stays secondary news today. I don't think there is any chance that the Federal Open Market Committee does not reduce its target range for the Fed Funds Rate by a quarter percentage point this afternoon. Futures markets are now pricing in a 100% probability for such an event.
The danger this afternoon will come from the press conference at 2:30 p.m. ET. It is during that Q&A session that the Fed Chair will likely impact the probability for another rate cut at the Dec. 10 policy meeting. Whether intentional or not, Powell will have to answer questions in regard to where he sees the neutral rate and that will force keyword reading algorithms to react in real-time. Futures markets are currently pricing in an 85% chance for a quarter-percentage point cut that day as well.
Markets
Tuesday really was not all that great a day for financial markets, despite headline-level gains. Ahead of today's events, a pause in market momentum did not come unexpectedly. The gains made across the tech space ahead of this afternoon's earnings though were certainly interesting. The S&P 500 gained just 0.23% on Wednesday after a bout of profit taking ran across markets late in the regular session.
The Nasdaq Composite gained 0.8% for the session as Microsoft (MSFT) joined Nvidia in the $4 trillion valuation club. Apple (AAPL) also briefly achieved that lofty level only to surrender it ahead of the closing bell. Microsoft moved higher after the company had signed an agreement with OpenAI that gave MSFT a 27% stake in the OpenAI, currently worth about $135 billion.
Small- and mid-cap stocks did give something back on Tuesday, though. The S&P 600, Russell 2000 and S&P 400 gave up 0.54%, 0.55% and 0.86% respectively. The Dow Transports were also slapped around. Treasury debt securities showed some strength on Tuesday, implying where some of that dough may have gone ahead of today's events.
Breadth
Market breadth was a bit on the sardines with garlic side on Tuesday. There were no Tic Tacs to be found. Eight of the 11 S&P sector SPDR ETFs closed out the day in the red, led lower by the REITs (XLRE) and the Utilities (XLU) . Only Tech (XLK) was actually strong, up 0.99% for the day, with the Materials (XLB) and Discretionaries (XLY) barely inching into the green.
Losers beat winners by a rough 7-to-4 margin at the NYSE and by about 3-to-2 at the Nasdaq. Advancing volume took a 49.4% share of composite Nasdaq-listed trade and just a 37.3% share of composite NYSE-listed activity for the day. Aggregate trade for the day was up 7.7% over Monday across NYSE-listings, but 1.1% lower across Nasdaq-listings. Not exactly meaningful, but still more active than I had expected ahead of Wednesday's action.
Possible Breakout for TJX
Keep an eye on budget retailer TJX (TJX) . The stock has formed a Ascending Triangle pattern of bullish continuation at the top of the chart with a $145 pivot.
The 21-day exponential moving average has consistently provided support, despite a neutral looking reading for Relative Strength and daily Moving Average Convergence Divergence that appears to be possibly turning for the better. I am long the stock with a $167 target price. It is the Wall Street high. Honestly, I don't do that on purpose. I just have a lot of street highs at this time. Maybe they know something that I don't (but I doubt it). TJX will not report for another three weeks.
Economics
(All Times Eastern)
07:00 - MBA 30 Year Mortgage Rate (Weekly): Last 6.37%.
07:00 - MBA Mortgage Applications (Weekly): Last -0.3% w/w.
10:00 - Pending Home Sales (Sept): Expecting 1.7% m/m, Last 4.0% m/m.
10:30 - Oil Inventories (Weekly): Last -961K.
10:30 - Gasoline Stocks (Weekly): Last -2.147M.
The Fed
(All Times Eastern)
2:00 p.m. - FOMC Policy Decision.14:30 - FOMC Press Conference.
Today's Earnings Highlights
(Consensus EPS Expectations)
Before the Open: (BA) (-2.38), (CAT) (4.52), (CVS) (1.36), GEHC (1.05), (VZ) (1.19)
After the Close: (GOOGL) (2.28), (CVNA) (1.37), (CMG) (.29), (EBAY) (1.33), (KLAC) (8.62), (META) (6.65), (MSFT) (3.66), (NOW) (4.27), (SBUX) (.55), WEX (4.44)
At the time of publication, Guilfoyle was long BA, GOOGL, MSFT, NVDA, CRWD, TJX equity.
