T3’s Take 3: Poundcake!


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1) Poundcake

Currency volatility skyrocketed today, with the British pound sterling taking center stage.

The pound fell another -2% against the US dollar today after UK Monetary Policy Committee member Michael Saunders and Financial Policy Committee member Anil Kashyap said the currency may weaken further due to the Brexit.

Several Wall Street strategists also cut their targets on the pound.

Meanwhile, South Africa’s rand fell -4.4% after the nation’s finance minister was issued a summons to appear in court to face fraud charges.

Some traders believe that the acceleration in forex volatility is a sign of underlying economic trouble, and will drive higher equity market volatility.

Today’s action certainly supports that notion.

2) Wild Day

The spike in currency volatility, combined with a confluence of bad news, drove the S&P 500 down -1.2% to 2136.73.

The Nasdaq fell 1.5% to 5246.79.

The action under the surface was nasty, with major underperformance in small caps and biotech.

That’s a sign that traders’ risk tolerance is disappearing very quickly.

Aluminum giant Alcoa (AA) reported weaker-than-expected third-quarter, and lowered its full-year revenue guidance for 3 of its segments.

And industrial name Dover (DOV) lowered its third-quarter and full-year outlook due to weaker capital spending trends, particularly in oil and gas.

US economic data has been decent to the point that traders increasingly believe the Fed will raise rates in December, but this is a pretty ugly way to start earnings season.

3) An Exploding Galaxy

South Korean electronics giant Samsung officially pulled its Galaxy Note 7 smartphone off the market due to exploding batteries.

Samsung shares fell -8% today, contributing to a -1.2% drop in the KOSPI index.

The recall and loss of revenues will cost Samsung billions of dollars, and is a huge PR disaster.

In fact, the Federal Aviation Administration has urged passengers to not use or charge Note 7 devices on planes.

Apple (AAPL) rallied on the news, since the elimination of the Note 7 means one less competitor for the iPhone 7.

Google’s (GOOGL) recently-released Pixel flagship smartphone should also see higher sales.


Wednesday’s Trading Calendar

US Economics (Time Zone: EDT)

07:00 MBA Mortgage Applications (10/7): 2.90%
08:00 Fed's Dudley Speaks at Fireside Chat in Albany
09:40 Fed's George Speaks at Chicago Fed's Payments Conference
10:00 JOLTS Job Openings (Aug): exp. 5775, prior 5871
14:00 U.S. Fed Releases Minutes from Sept. 20-21 FOMC Meeting
14:00 FOMC Meeting Minutes (9/21):
Monthly Budget Statement (Sep): exp. $30.0b, prior $91.1b

Global Economics

05:00 GBP MPC Member Cunliffe Speaks
Tentative CNY Trade Balance


Before Open:

None of significance

After Close:

Cepheid (CPHD)
CSX Corp (CSX)