Stocks rally on earnings, housing market softens, Bitcoin ETF debuts

US stocks rallied as investors remained upbeat on earnings as more companies continue to deliver strong beats.  Last week, the banks delivered strong results and a healthy outlook for the economy and today healthcare and insurers impressed while consumer stocks battled surging commodity and transportation costs.  Every inflation warning from corporate America was somewhat expected, so markets won’t get unnerved unless they start to see the Fed panic.  Consumer staples are the laggard as they will probably see the biggest hit to their margins this earnings season.

US Data

Surging construction prices appear to be weighing on demand for privately-owned housing starts.  The September housing starts declined to 1.555 million units, a miss of the 1.615 million consensus estimate.  Building permits also fell to 1.589 million from a downwardly revised 1.721 million prior reading.   The majority of the decline came from the volatile multi-family units, so traders shouldn’t just expect this to confirm a peak is in place for the housing market.

Earnings

Procter & Gamble’s strong revenue for the third quarter could not overcome a reduction in operating margin due to higher commodity and freight costs.  Gross margin was pummeled by 370 basis points as surging commodity prices had a USD 2.1 billion impact and USD 200 million from higher freight costs.  P&G’s earnings report screams inflation as costs have risen sharply.

Johnson & Johnson boosted their profit forecast, while Travelers delivered record underwriting revenue and was able to avoid a material impact from Hurricane Ida.

Bitcoin ETF launched in US

Today is an exciting, pivotal moment for the entire cryptoverse.  Bitcoin’s first approved US ETF will have difficulties in tracking the normal volatile swings.  This bitcoin ETF will hold future contracts and not actual Bitcoin, so pricing issues seem inevitable.  If the ETF can come close to tracking bitcoin’s daily directional moves, it should attract many investors.

Grayscale Investments also took a big step forward into converting its bitcoin trust to a spot ETF.  Grayscale submitted a 19B4 filing today which means we could see another ETF made available to the public in a few months.

The ProShares Bitcoin ETF trading debut saw a steady rise in the first minutes of trade, which was also accompanied by a push higher for Bitcoin.  Since ETF purchases don’t necessarily mean the underlying will be bought, traders will analyze the performance of the pricing mechanism.

After a quick 3% gain, the Bitcoin ProShares ETF saw profit-taking and the majority of the gains were erased.  It will take some time before most brokerages will offer shorting ability and options trading, so high-frequency trading might try to take advantage of this new market.

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