Dear Trader,
Mark Sebastian has the State of the Market room all to himself today, so you get his full read on the market with nobody else taking up airtime.
His timing works out, too. JPMorgan, Goldman Sachs, Wells Fargo and Citi kick off earnings season tomorrow, Bank of America and Morgan Stanley follow Wednesday, and the CPI report drops that same morning. The five biggest banks already gave back about $350 billion in market value over the past month, and Morgan Stanley’s co-president warned everyone in September that the third quarter wouldn’t match the second.
I want to hear how Mark plans to trade into that stretch, with Treasury yields sitting at 20-plus-year highs and traders pricing roughly 80% odds of another Fed hike this month. He’ll get to the oil truce headlines and Dalio’s bubble warning below, but if you only bring one question into the room today, make it about the banks.
This link adds State of the Market to your calendar.
The Daily News Breakdown
SIGN: Ray Dalio thinks the AI bubble is getting close to popping, and retail traders are buying anyway. Dalio even gave everyone a tell to watch: billionaires cashing out. Panmure Liberum strategist Joachim Klement went further, calling for the pop in 2027 or 2028 and chopping his year-end 2027 S&P 500 target from 8,300 to 5,000, with the index closing Thursday at 7,765.
Bank of America says its retail clients just turned net buyers for the first time since late July. Google searches for “stock market bubble” have dropped to 14 on Google Trends’ 100-point scale, down from a June peak of 100. Even Mike Novogratz agrees it’s a bubble, and he told investors to pile in anyway.
SIREN: Oil slipped Monday after President Trump announced that Russia and Ukraine agreed to quit bombing each other’s energy facilities. Brent fell $1.37 to $103.35 a barrel, and WTI dropped to $90.55. I wouldn’t get too comfortable with that dip, though, since Zelenskiy says he’s still waiting on details and Russia hasn’t said a word.
The fighting in the Middle East still holds Brent above $100. The Houthis claimed a weekend strike on Riyadh’s airport that killed 13 people, Trump said the U.S. might join Saudi strikes on them, and two tankers took hits near Oman and the Strait of Hormuz. Goldman Sachs figures traders still pay more than $20 a barrel just for the risk that supply gets cut.
SNEAKER: Earnings season starts Tuesday, and the big banks have to go first. JPMorgan, Goldman Sachs, Wells Fargo and Citi report Tuesday, then Bank of America and Morgan Stanley follow on Wednesday. Morgan Stanley’s co-president already lowered the bar at a September conference, admitting the third quarter won’t match the second.
Financials dropped about 4% over the past month as Treasury yields climbed to 20-plus-year highs, and the five biggest banks gave back roughly $350 billion in market value. A Truist survey found just 35% of institutional investors expect bank stocks to beat the market, down from 82% in December. Wednesday’s CPI report lands right in the middle of that mess, and traders already price about 80% odds of another Fed hike this month.