CLOSING BELL
Stocks Surge As Government Shutdown (Nearly) Shutters
Source: Tenor.com
It was a risk-on day, with investors and traders celebrating what they believe to be the beginning of the end for the longest government shutdown in history.
Today’s RIP: The government’s reopening vote, Michael Burry’s AI hyperscaler warnings, the precious metals market pumping, and more.
8 of 11 sectors closed green. Technology $XLK ( ▲ 2.56% ) lead and staples $XLP ( ▼ 0.37% ) lagged.
Source: Finviz
POLICY
Government Set To Reopen After Senate Vote
After roughly 40 days, the longest-ever government shutdown is nearing a close (or shall we say, open?). With the vote sitting at 53-47, negotiations allowed Republicans to attract eight votes from the other side of the aisle, losing only Rand Paul in the process due to the proposed increase in national debt.
The deal includes an agreement for a vote in December on extending healthcare subsidies that are due to expire this year, a key issue Democrats had been holding out for concessions on. Still, the Senate’s Democratic leader, Chuck Schumer, said this bill does nothing to address the healthcare crisis. However, others felt it necessary to get a bill across and kick the can down the road until January 30th.
With many losing access to critical government services over the last six weeks, it appears the Federal Aviation Administration’s (FAA) impact on travel this weekend was the final catalyst to help get things done. Thousands of flights have been impacted, and the outlook looks bleak ahead of the upcoming holiday traveling season, prompting outrage across the nation. Additionally, the recent election outcomes may have spurred certain government leaders to reconsider whether the shutdown was serving them (or their constituents) politically.
Now, it moves to the House of Representatives, where it may face some challenges, but is expected to progress. Meanwhile, Fed Governor Stephen Miran continues to advocate for a 50 bp rate cut this December, playing his tune from the prior two Fed meetings. He’s focused on the deteriorating labor market and trying to position policy for 12 to 18 months away, when it will show up in the economy.
While the Fed board remains mixed on their forecast and policy suggestions, the market continues to bet on at least a 25 bp cut in December and more in 2026.
STOCKS
Are Hyperscalers Burry-ing The Lede?
After making headlines last week for his bets against Palantir and Nvidia, ‘Big Short’ investor Michael Burry made another accusation against AI hyperscalers.
He claims that companies are understating depreciation in order to boost earnings, calling it “one of the more common frauds of the modern era.” By artificially extending the useful lives of their compute equipment, they’re able to reduce their deprectiation expense and the short-term earnings impact of their capex spending.
He specifically called out Oracle, Meta, Microsoft, and others as he teased further details to be released on November 25th. Needless to say, this caused a lot of debate among those in the Fintwit community.
Source; Michael Burry on X
But Burry isn’t the only one raising red flags about the AI market. Jim Cramer warned that investors are seeing potential “cracks” in the data center market, citing concerns that OpenAI may be spending beyond its means.
And Bank of America is also cautious, issuing a warning that the AI boom may be hitting a “cash crunch.” Its research team noted massive borrowing for AI data centers during September and October, with $75 billion in bond/loan issuance nearly doubling the average from the last decade. It says capex is approaching limits on what cash flows alone can support. This echoes comments from Morgan Stanley Wealth Management CIO Lisa Shalett in late October.
Still, the stocks continue to rise, with prospects of lower interest rates and the government shutdown ending providing the bulls with fuel to push the market higher. Whether or not Burry, Bank of America, and AI skeptics are right remains to be seen, but this will undoubtedly be a heavily debated topic until November 25th.
COMMODITIES
Precious Metals Resume Their Pump
After a few weeks of downside, weak economic data and inflationary concerns put gold, silver, and other metals back on investors’ menu. However, it appears that retail is not necessarily on board with the rebound just yet.
Sentiment for one of the most popular gold miner ETFs ($GDX) is sitting at its lowest level year-to-date, suggesting the sharp pullback in late October shook a lot of the latecomers and trend chasers out.
Source: Stocktwits
The broader macro factors driving metals have not changed, but sentiment became too bullish in the short term, helping to usher in a pullback in prices. Now, after a several-week correction and traders shifting their focus elsewhere, some technicians believe today was the start of a move back to all-time highs.
Time will tell if they’re right. But if you’re looking for a contrarian indicator that some of the “greed” has washed out of gold, silver, and related stocks, Stocktwits sentiment data suggests that it has.
POPS & DROPS
Top Stocks News Stories
Priority Technology jumps on CEO-led $520 million buyout proposal.
Coinbase launches a new platform prior to them listing on the exchange.
Papa John’s is reportedly going private for $65/share, but retail is skeptical.
Sonder initiates bankruptcy after Marriott cancels licensing agreement.
TreeHouse Foods is going private in a $2.9 billion deal.
Grab is investing $60M in remote-driving tech provider Vay Technology.
Tower Semiconductor soars 17% after posting strong Q3 results.
Warren Buffett is “going quiet,” reaffirms his belief in CEO Greg Abel.
WHAT’S ON DECK
Tomorrow’s Top Things
Economic data: Fed Vice Chair for Supervision Barr Speaks (10:25 PM).
Pre-Market Earnings: Workhorse Gr ($WKHS), Nebius Gr ($NBIS), Sea ($SE).
After-Market Earnings: Beyond Meat ($BYND), Microvision ($MVIS), Oklo ($OKLO), Spruce Power ($SPRU), LightPath Technologies ($LPTH), Spectral AI ($MDAI).