Macro Matters

Robust Consumer Demand Fuels Stronger-than-Expected September Retail Sales

US retail sales surged 0.4% in September 2024 compared to the previous month, surpassing both August's 0.1% increase and market projections of 0.3%. Miscellaneous store retailers led the growth with a 4% rise, followed by clothing (1.5%), health and personal care stores (1.1%), and food and beverage outlets (1%). However, electronics and appliance stores experienced a significant 3.3% decline, while gasoline stations and furniture stores saw decreases of 1.6% and 1.4%, respectively. Auto dealer sales remained unchanged.

Notably, the core retail sales figure—which excludes food services, auto dealers, building materials stores, and gasoline stations, and is used in GDP calculations—jumped 0.7%, marking the highest increase in three months. This indicator suggests robust underlying consumer spending trends despite mixed performance across various retail sectors.

Source: Trading Economics

Builder Optimism Continues to Climb in October Housing Market

The National Association of Home Builders (NAHB) reported a second consecutive month of increased confidence among builders in the new single-family home market. The NAHB/Wells Fargo Housing Market Index (HMI) rose by two points to reach 43 in October.

This uptick in builder sentiment is attributed to easing inflation and positive expectations regarding mortgage rates. The HMI, which measures builder perceptions of current and future home sales, operates on a scale where any reading above 50 indicates that more builders view market conditions as "good" rather than "poor."

While the current index of 43 still falls below the threshold of 50, the consecutive monthly increases suggest a growing sense of optimism in the housing construction sector.

Source: Trading Economics

Smart Money Flow

Spot gold surpasses $2,700/oz. to reach an all time RECORD high. Uncertainty around the U.S. election and expectations around looser monetary policy has driven it higher almost every single month this year.

Chinese Stock Rally Resumes as Xi, PBOC Fuel Policy Optimism.

Chinese stocks extended gains in the afternoon as President Xi Jinping’s emphasis on technology development and a slew of central bank statements reignited optimism over policy support.

The CSI 300 Index closed up 3.6%, rebounding from a three-day loss, with chip shares leading the advance. A gauge of Chinese tech stocks listed in Hong Kong was up more than 7% at its session high.

November historically marks a period of increased investor activity in equity markets, often leading to substantial inflows.

BofA's private clients have been buying REITS, financials, utilities ETFs, and selling low-vol, industrials, staples ETFs over the past four weeks.

Top Corporate News

TSMC Hits $1 Trillion Market Cap, Setting New Benchmark for Asian Companies.

On Thursday, TSMC announced a substantial 54% increase in net profit for the September quarter, reaching NT$325.3 billion ($10.1 billion), surpassing expectations. The company also projected fourth-quarter revenues between $26.1 billion and $26.9 billion, exceeding forecasts of $24.9 billion.

In the third quarter, revenue from 3-nanometer wafer shipments constituted 20% of the total, while 5-nanometer and 7-nanometer technologies contributed 32% and 17%, respectively. Collectively, advanced technologies, which include 7-nanometer and more sophisticated processes, made up 69% of the total wafer revenue. Wendell Huang, the CFO, noted, "Our third-quarter performance was bolstered by robust demand for our cutting-edge 3nm and 5nm technologies, driven primarily by the smartphone sector and AI-related applications."

According to Bloomberg analyst Charles Shum, TSMC's guidance for a gross margin exceeding 57% in the fourth quarter—higher than the consensus estimate of 54.7% underscores strong ongoing demand for its AI chips, particularly from Nvidia and other clients. TSMC further sees gross profit margin in the 4thquarter to be between 57.0% and 59.0%. Shum suggests that a 25% sales growth in 2025 is achievable, supported by TSMC's proprietary CoWoS semiconductor packaging technology.

Netflix added 5.1 million subscribers, exceeding estimates and alleviating concerns about its ability to produce compelling new content.

The streaming giant reported $5.40 per share earnings, up from $3.73 a year earlier, topping the FactSet consensus of $5.12. Revenue rose to $9.83 billion from $8.54 billion, exceeding expectations of $9.77 billion.

In Q4, Netflix expects subscriber growth to accelerate, spurred by seasonal trends and high-profile content releases such as 'Squid Game' Season 2 and the much-anticipated Jake Paul/Mike Tyson fight.

ASML shares drop sharply after warning on semiconductor recovery.

Shares in ASML led a tech rout on Nasdaq on Tuesday after the chip equipment maker warned of a slower recovery in the semiconductor market, in results accidentally published a day early. Net bookings — a measure of orders placed by ASML’s customers — were €2.6bn for the third quarter, far lower than the more than €5bn analysts had expected. Analysts at Stifel said in a note to clients that the order intake was “very weak”.

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