Stocks hold the pivot
- Energy, tech fuel gains in up-and-down week
- Interest rates climb, 10-year yield highest in more than 12 years
- This week: Big-tech (and big-oil) earnings, GDP, Fed inflation
It was another back-and-forth battle, but bulls ultimately topped the bears to claim the first full week of earnings season.
After a Monday-Tuesday surge pushed the S&P 500 (SPX) 5% higher—and nearly 8% above the previous week’s year-to-date low—the index pulled back before a 2.4% Friday rally locked in its best week since June:
Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)
The headline: Market bounces off bear-market low.
The fine print: Stocks rallied despite another week of rising interest rates—on Friday, the benchmark US 10-year T-note yield topped 4.3% for the first time since June 2008 before pulling back to close lower on the day. Friday’s stock rally unfolded amid reports that the Fed was reconsidering its aggressive rate-hike policy.1
The move: It wasn’t the week’s biggest move, but Netflix’s (NFLX) 13% rally on Wednesday after reporting its Q3 numbers highlighted a week of earnings that, while mixed, surprised some analysts with its relative strength.
The scorecard: After three weeks at the bottom of the pile, the Nasdaq 100 (NDX) tech index climbed back on top:
Source (data): Power E*TRADE. (For illustrative purposes. Not a recommendation.)
Sector roundup: The strongest S&P 500 sectors last week were energy (+7.9%), information technology (+6.5%), and materials (+6.1%). The weakest sectors were utilities (+1.9%), consumer staples (+2.1%), and health care (+2.2%).
Stock movers: Akouos (AKUS) +88% to $13.19 on Tuesday, KLX Energy Services (KLXE) +20% to $12.25 on Wednesday. On the downside, Tenet Healthcare (THC) -31% to $37.50 and Snap (SNAP) -28% to $7.76, both on Friday.
Futures: After falling to a two-week low of $81.30/barrel last Tuesday, December WTI crude oil (CLZ2) ended the week at $85.05. December gold (GCZ2) pressured its lowest levels of the past two-and-a-half-years, falling to $1,621.21/ounce on Friday before reversing to close at $1,656.30. Week’s biggest up moves: December soybean oil (ZLZ2) +9.5%, November lumber (LBSX2) +9.3%. Week’s biggest down moves: November natural gas (NGX2) -22.5%, December oats (ZOZ2) -5.4%.
Coming this week
This week’s numbers include the first estimate of Q3 GDP and the Fed’s go-to inflation gauge (PCE Price Index):
●Monday: Chicago Fed National Activity Index, S&P Global Manufacturing and Services PMIs (flash)
●Tuesday: S&P Case-Shiller Home Price Index, FHFA House Price Index, Consumer Confidence Index
●Wednesday: Trade Balance in Goods (advance), New Home Sales
●Thursday: Durable Goods Orders, Q3 GDP (initial estimate)
●Friday: Personal Income and Spending, Employment Cost Index, PCE Price Index, Michigan Consumer Sentiment (final), Pending Home Sales
On the earnings front, it's a big week for big tech, but a couple of big-oil names and automakers are on the calendar, too:
●Monday: Medpace (MEDP), Crown Castle (CCK), Logitech (LOGI)
●Tuesday: Archer Daniels Midland (ADM), UBS Group (UBS), United Parcel Service (UPS), Synchrony Financial (SYF), General Motors (GM), Coca Cola (KO), General Electric (GE), Kimberly-Clark (KMB), Alphabet (GOOGL), Microsoft (MSFT), Spotify (SPOT), Visa (V)
●Wednesday: Turning Point Brands (TPB), Bristol Meyers Squibb (BMY), Boeing (BA), Etsy (ETSY), Meta (META), Ford (F), ServiceNow (NOW), Spirit Airlines (SAVE)
●Thursday: Baxter (BAX), Southwest Airlines (LUV), American Tower (AMT), Merck (MRK), Amazon.com (AMZN), Apple (AAPL), Intel (INTC), McDonald's (MCD), Keurig Dr. Pepper (KDP), First Solar (FSLR), Verisign (VRSN), Shopify (SHOP), Mastercard (MA), Honeywell (HON), US Steel (X)
●Friday: AbbVie (ABBV), Aon (AON), Chevron (CVX), Exxon Mobil (XOM), Colgate-Palmolive (CL)
Check the Active Trader Commentary each morning for an updated list of earnings announcements, IPOs, economic reports, and other market events.
An October flip?
For now, the October 13 intraday turnaround, when the SPX fell to its lowest low since November 2020 but rallied to close up on the day, remains an important reference point for stocks. It marked a new low for the bear market, but as of Friday the market had yet to pull back and test it.
Morgan Stanley & Co. recently discussed the possibility that a bear-market rally could propel the SPX to 4,000, or even a little higher,2 which provides an interesting backdrop for some analysis of the index’s recent price action.
Since 1960 the SPX has fallen to a 52-week (or longer) low and closed higher (and made a higher weekly low) the following week 25 other times. The index closed higher the next week 13 out of 25 times, but only 12 times the week after that. After a month had passed, though, the SPX was higher in 67% of all cases.3
And for the record, eight of these weekly pivots occurred in October—more than in any other month of the year.
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1 Bloomberg.com. Stocks Rally With Treasury Bond Reversal, Fedspeak: Markets Wrap. 10/21/22.
2 MorganStanley.com. Will Bond Markets Follow the Fed? 10/17/22.
3 All data reflects S&P 500 (SPX) weekly prices, 1960–2022. Supporting document available upon request.