Market gears up for key week

11/01/21
  • Strongest October since 2015, stocks on four-week win streak
  • Earnings a hit, GDP a miss, oil bends but doesn’t break
  • This week: Jobs report, Fed meeting, more than 1,200 earnings reports

November has a tough act to follow.

The stock market kept its foot on the accelerator last week, wrapping up its strongest month since last November and its strongest October since 2015, as earnings mostly continued to surprise to the upside—despite a few high-profile misses.

The S&P 500 (SPX) ended October with a 6.9% gain and a fourth record high in its last five days—failing to flinch at Thursday’s weaker-than-expected GDP estimate or Friday’s PCE Price Index reading, which showed year-over-year inflation increased at its fastest clip in 30 years:1

Chart 1: S&P 500 (SPX), 8/23/21–10/29/21. S&P 500 (SPX) price chart. Ended October near record high.

Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)


The headline: Stocks hug highs as investors embrace earnings season.

The fine print: Amazon (AMZN) and Apple (AAPL) both sold off on Friday after releasing their numbers, but they were the exception to what has so far been a stronger-than-expected earnings season. Through Friday, 82% of S&P 500 companies had topped their headline earnings numbers and 75% topped revenue estimates. The “blended” earnings growth rate (which combines reported results with estimates of unreleased earnings) was 36.6%—which, if it turns out to be accurate, would be the third-highest year-over-year earnings growth rate since 2010.1

The number: 2%, the initial estimate of Q3 GDP reported last week, well below the 2.7% forecast. While the stock market closed at a record high the day of the report, its weakness highlights the challenges the Federal Reserve faces in terms of fostering sustained growth while keeping inflation in check.

The scorecard: The Nasdaq 100 (NDX) tech index led the market with its best week since April, and reclaimed the year-to-date return lead:

US stock index performance table for week ending 10/29/20. S&P 500 (SPX), Nasdaq 100 (NDX), Russell 2000 (RUT), Dow Jones Industrial Average (DJIA).

Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)


Sector roundup: The strongest S&P 500 sectors last week were consumer discretionary (+3.6%), communication services (+1.9%), and information technology (+1.8%). The weakest sectors were financials (-0.8%), energy (-0.6%), and utilities (-0.5%).

Highlight reel: Bakkt Holdings (BKKT) +234% to $30.6 on Monday (then -22% to $23.78 on Tuesday), IronNet (IRNT) +59% to $16.34 on Wednesday (then -24% to $12.39 on Thursday). On the downside, World Acceptance (WRLD) -27% to $151.61 on Tuesday, Cortexyme (CRTX) -77% to $13.51 on Wednesday.

Futures action: After hitting a new contract high of $85.41/barrel last Monday, December WTI crude oil (CLZ1) closed Friday at $83.57—its first weekly loss (if a very small one) since August. December gold (GCZ1) closed a mostly quiet week at a five-day low of $1,783.90/ounce after a sharp Friday pullback. Biggest up moves: December oats (ZOZ1) +9.4%, October ether (ETHV1) +8.5%. Biggest down moves: January lumber (LBSF2) -15.1%, November cheese (CSCX1) -5.3%.

Coming this week

The first week of the new month starts with the latest manufacturing data and ends with the monthly jobs report—with a Fed meeting sandwiched between:

Today (all times ET): Markit Manufacturing PMI (9:45 a.m.), ISM Manufacturing Index (10 a.m.), Construction Spending (10 a.m.)
Wednesday: ADP Employment Change, Markit Services PMI, ISM Non-Manufacturing Index, Factory Orders, Fed Interest Rate Decision
Thursday: Challenger Job Cuts, Trade Balance, Productivity, Labor Costs
Friday: Employment Report

Earnings seasons peaks this week, with more than 1,200 companies releasing their numbers. Here’s a small sample:

Today: Arista Networks (ANET), Cirrus Logic (CRUS), ON Semiconductor (ON), Clorox (CLX), Okta (OKTA), NXP Semiconductors (NXPI)
Tuesday: Match Group (MTCH), Ralph Lauren (RL), LGI Homes (LGIH), Pfizer (PFE), ConocoPhillips (COP), Global Payments (GPN), Martin Marietta Materials (MLM), Exact Sciences (EXAS), Lyft (LYFT), SolarEdge Technologies (SEDG), Paycom Software (PAYC), Zillow (ZG), Activision Blizzard (ATVI)
Wednesday: Booking Holdings (BKNG), Hyatt Hotels (H), CVS Health (CVS), Trade Desk (TTD), ETSY (ETSY), Fastly (FSLY), Revolve Group (RVLV), Qorvo (QRVO), Qualcomm (QCOM), Roku (ROKU)
Thursday: Intellia Therapeutics (NTLA), Moderna (MRNA), Kellogg (K), Vulcan Materials (VMC), Carvana (CVNA), Pinterest (PINS), Dropbox (DBX), Airbnb (ABNB), Peloton (PTON), SunRun (RUN), First Solar (FSLR), Uber (UBER)
Friday: Johnson Controls (JCI), Honda Motor (HMC), DraftKings (DKNG), Canopy Growth (CGC)

This week’s IPOs include: to come

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

November market profile

Although October will indeed be a tough act to follow, November has been one of the stock market’s most consistently bullish months of the year. Over the past 10-, 20-, and 30-year periods, it’s had either the strongest or second-strongest average return of any month of the year, and the SPX has posted a net gain in 41 of the past 61 Novembers:3

Chart 3: S&P 500 November returns, 1960–2020. Stock market seasonal analysis, S&P 500 historical performance.

Data source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)


In fact, the past nine Novembers have been positive—the longest streak since 1960, and something that may have contrarians wondering whether a reversion to the mean is in the cards. But strong Octobers haven’t necessarily been harbingers of weak Novembers: Although the SPX has gained 6% or more in only eight other Octobers since 1960, November was positive after six of them.

 

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1 CNBC.com. Inflation notches a fresh 30-year high as measured by the Fed’s favorite gauge. 10/29/21.
2 FactSet. Earnings Insight. 10/29/21. (Represents results with 56% of S&P 500 companies having reported.)
3 All figures reflect S&P 500 (SPX) daily price data, 12/31/59–10/29/21. Supporting document available upon request.

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