T3’s Take 3: Big Faith in the Fed


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1) Big Faith in the Fed

Even with Friday’s slightly weaker-than-expected jobs report, the US dollar kept rallying today on rising expectations for a Fed rate hike in December.

Fed funds futures now imply a 67% probability of a December rate hike, up from 61% a week ago.

The rising Fed expectations drove outperformance in banks, which benefit from higher interest rates through improved profit margins.

Some market observers think the weak jobs data could make the Fed pause – but by and large, the market seems pretty convinced that December is in play.

2) A Solid Rally

Stocks rose today after crude oil approached a new 2016 high after Saudi Arabia and Russia both expressed support for a coordinated output cut.

This in turn drove big rallies in energy stocks, as well as the currencies of major oil producing nations like Russia and Canada.

The S&P 500 rose 0.5%, while the Nasdaq rallied 0.7%.

Apple (AAPL) got a boost from news reports that Samsung has halted production of its Galaxy Note 7 smartphone due to issues with exploding batteries.

Biotechnology and small caps also impressed as traders embraced risky stocks.

And finally, the Mexican peso rallied big today, a sign that traders believe Hillary Clinton won last night’s Presidential debate.

3) Twitter Craziness

Last Thursday, Twitter (TWTR) collapsed by 20.1% on news reports that Google (GOOGL) and Disney (DIS) lost interest in a takeover of the social media giant.

Today, Twitter shares dropped as much as 14.7% intraday after  Bloomberg reported today that buyers have lost interest in a takeover.

That didn’t exactly seem like news, but it spurred traders to head for the exit to avoid being left holding the bag.

And then late in the afternoon, Reuters reported that Salesforce.com (CRM) is still considering bidding for Twitter, driving a late day rally.

But even with the boost, Twitter shares finished down 11.5% at $17.56.

Twitter reports earnings on October 27 and traders are incredibly eager to see if the company’s fundamentals will show continued deterioration.

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Tuesday’s Trading Calendar

US Economics (Time Zone: EDT)

06:00 NFIB Small Business Optimism (Sep): exp. 95, prior 94.4
10:00 Labor Market Conditions Index Change (Sep): exp. 1.5, prior -0.7
11:00 Fed's Kashkari Speaks at Town Hall in Arden Hill, MN

Global Economics

05:00 EUR German ZEW Economic Sentiment


Before Open:

Alcoa (AA)
Fastenal (FAST)

After Close:

None of significance