Pivoting to November

With an election, a Federal Reserve interest rate decision, and a packed earnings calendar, this week looks to be a memorable one for traders and investors.

Last week was hardly a snooze-fest, though, as traders navigated megacap tech earnings, GDP, inflation numbers, and jobs data. The market did little until Thursday when, weighed down by weakness in Meta (META) and Microsoft (MSFT), rising Treasury yields, and perhaps some pre-election jitters, the SPX posted its fourth-biggest down day of the past year. That move was largely responsible for locking in the SPX’s first down month since April, and its second down week in a row:

The headline: Tech soft as market slips for second week.

The fine print: Alphabet (GOOGL), Apple (AAPL), Amazon (AMZN), Meta (META), and Microsoft (MSFT) reported earnings last week. While all of them topped their headline numbers, some of them also missed on below-the-headline numbers and forward guidance. Of the five, only two (GOOGL and AMZN) closed higher after releasing their numbers.

The number: 12,000, the number of new jobs in October, far below the 100,000 estimate. While payrolls were expected to be weak because of hurricanes and the Boeing strike, Friday’s number was well below most estimates. The first estimate of Q3 GDP came in slightly below expectations, while the PCE Price Index showed inflation decreased year over year.

The move: The 10-year Treasury yield ended last week at a five-week high of 4.36%. Its 49-basis-point increase in October was its second-biggest monthly gain of the past two years.

The scorecard: The indexes with the most exposure to big tech—Nasdaq 100 (NDX) and the SPX—lost ground, while the Russell 2000 (RUT) small cap index managed to break even for the week:

Sector returns: The strongest S&P 500 sectors last week were communication services (+1.7%), consumer discretionary (+0.5%), and financials (-0.1%). The weakest sectors were tech (-3.3%), real estate (-3%), and utilities (-2.8%).

Stock movers: Reddit (RDDT) +42% to $116.03 on Wednesday, Root (ROOT) +69% to $68.39 on Thursday. On the downside, Super Micro Computer (SMCI) -33% to $33.07 and AnaptysBio (ANAB) -28% to $22.18, both on Wednesday.

Futures: December WTI crude oil (CLZ4) closed at a five-week low last Tuesday, ending the week down $2.29 at $69.49. December gold (GCZ4) closed at record highs last Tuesday and Wednesday, but ended the week $16 lower at $2,738.60 after a sharp Thursday sell-off wiped out those gains. Week’s biggest gains: March cocoa (CCH5) +10.1%, January lumber (LBSF5) +5.8%. Week’s biggest declines: December natural gas (NGZ4) -14.4%, December palladium (PAZ4) -7.9%.

The Fed is expected to deliver another 0.25% rate cut after its Thursday meeting:

●Monday: Factory Orders
●Tuesday: US trade deficit, ISM Services Index, Election Day
●Wednesday: S&P Global Services PMI
●Thursday: Productivity and Labor Costs, wholesale inventories, Fed interest rate decision, consumer credit
●Friday: consumer sentiment (prelim)

With more than 1,500 companies scheduled to release earnings this week, there’s a little bit of everything on the calendar. This just scratches the surface:

●Monday: BioNTech (BNTX), Cirrus Logic (CRUS), Fabrinet (FN), Hims & Hers (HIMS), Illumina (ILMN), Lattice Semiconductor (LSCC), NXP Semiconductors (NXPI), Palantir Technologies (PLTR), Silicon Laboratories (SLAB)
●Tuesday: Archer Daniels Midland (ADM), Dupont De Nemours (DD), LGI Homes (LGIH), Restaurant Brands (QSR), Scholar Rock (SRRK), Yum Brands (YUM), Exact Sciences (EXAS), Super Micro Computer (SMCI)
●Wednesday: Novo-Nordisk (NVO), Arm Holdings (ARM), Duolingo (DUOL), E.L.F. Beauty (ELF), Lyft (LYFT), Match Group (MTCH), Qualcomm (QCOM), Royal Gold (RGLD), SolarEdge Technologies (SEDG), Workiva (WK), Zillow (ZG)
●Thursday: Halliburton (HAL), Hershey (HSY), Moderna (MRNA), Ralph Lauren (RL), Rockwell Automation (ROK), Airbnb (ABNB), Arista Networks (ANET), Dropbox (DBX), Five9 (FIVN), Oklo (OKLO)
●Friday: Baxter (BAX), Ubiquiti (UI)

Check the Active Trader Commentary each morning for an updated list of earnings announcements, IPOs, economic reports, and other market events.

While Tuesday’s presidential election is, understandably, a focal point for markets this week, Morgan Stanley & Co. analysts point out the outcome may be delayed because of the time required to count the high number of mail-in ballots.¹

In other words, this week’s election “theme” may not be about the market’s reaction to who wins, but the market’s reaction to uncertainty introduced by a prolonged delay in declaring a winner.

Of course, if this weren't an election week, traders might be thinking about more mundane matters, such as the market’s general tendencies after other two-week pullbacks from long-term highs. The SPX has closed lower two weeks in a row after a 52-week (or longer) high 133 other times since 1957. It closed higher the next week 57.1% of the time, which is essentially in line with its overall percentage of up weeks—56.5%.²

The examples from this year were mixed. The SPX rallied 2.3% the week after its two-week pullback in March, but it fell 3.1% and 2.1% after similar pullbacks in April and July, respectively.

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¹ MorganStanley.com. US Election: Situational Awareness—One Week Out. 10/28/24.
² All figures reflect S&P 500 (SPX) weekly prices, 1957-2024. Supporting document available upon request.