Tech volatility pressures market

Economic data was stronger than expected, oil prices declined, most mega-cap tech companies beat their earnings estimates (although their stocks didn’t necessarily rally), and the S&P 500 (SPX) still fell to a five-month low last week.

The SPX lost ground for the second week in a row after falling to its lowest levels since late May on Thursday and Friday:

The headline: Economy rolls, market slumps.

The fine print: Analysts expected a strong Q3 GDP reading last Thursday, and they got one. A robust consumer continued to drive economic growth, as evidenced by an increase in durable goods orders that was nearly five times the consensus estimate. The theme remains the same: A strong economy and sticky inflation imply continued high interest rates.

The number: 4.16%, how much the SPX needs to rally in the final two days of the month to avoid a negative October and its first three-month losing streak since 2020.

The scorecard: Despite a big boost from Amazon’s (AMZN) earnings beat on Friday, the Nasdaq 100 (NDX) was the weakest major index for a second week in a row:

Sector returns: The strongest S&P 500 sectors last week were utilities (+1.2%), materials (-0.5%), and consumer staples (-1.1%). The weakest sectors were communication services (-6.5%), energy (6.3%), and health care (-4.1%).

Stock movers: Textainer (TGH) +45% to $49.41 on Monday, Blueprint Medicines (BPMC) +26% to $55.22 on Thursday. On the downside, Revolution Medicines (RVMD) -34% to $18.36 on Monday, Vicor (VICR) -27% to $39.05 on Wednesday.

Futures: December gold (GCZ3) ended a mostly sideways week with a bang, rallying as high as  $2,019.70 on Friday before closing at $1,998.50. December WTI crude oil (CLZ3) also jumped on Friday, but still lost ground for the week, closing at $85.54 (see “Oil move has precedent”). Week’s biggest gains: October Micro bitcoin (MBTV3) +13.6%, October Micro ether (ETHV3) +11%. Week’s biggest losses: November ethanol (ZKX3) -4.4%, December milk (DCZ3) -4.4%.

A Fed rate decision and the monthly jobs report highlight this week’s packed economic calendar:

●Tuesday: Employment Cost Index (Q3), Chicago PMI, Consumer Confidence
●Wednesday: ADP Employment Change, S&P Global Manufacturing PMI, ISM Manufacturing Index, Job Openings and Labor Turnover Survey (JOLTS), Construction Spending, Fed interest rate announcement
●Thursday: Challenger Job Cuts, Productivity and Labor Costs, Factory Orders
●Friday: Employment Report, S&P Global Services PMI, ISM Services Index

Here’s a taste of the more than 2,000 companies scheduled to report earnings this week:

•Monday: Check Point Software (CHKP), McDonald’s (MCD), On Semiconductor (ON), Arista Networks (ANET), Lattice Semiconductor (SCC), Pinterest (PINS), Pricesmart (PSMT), Rambus (RMBS), XPO (XPO)
•Tuesday: Amgen (AMGN), BP (BP), Anheuser Busch (BUD), Caterpillar (CAT), LGI Homes (LGIH), Pfizer (PFE), Sysco (SYY), Advanced Micro Devices (AMD), First Solar (FSLR), Match Group (MTCH), Paycom (PAYC)
•Wednesday: CVS (CVS), Martin Marietta (LM), Toyota (TM), Verisk Analytics (VRSK), Yum Brands (YUM), Airbnb (BNB), Clorox (CLX), Electronic Arts (EA), Etsy (ETSY), Exact Sciences (EXAS), PayPal (PYPL), Qualcomm (QCOM), Qorvo (QRVO), Sunrun (RUN)
•Thursday: Baxter (BAX), ConocoPhillips (COP), Eli Lilly (LLY), Palantir (PLTR), Rockwell Automation (ROK), Starbucks (SBUX), Shopify (SHOP), Molson Coors (TAP), Apple (AAPL), Booking Holdings (BKNG), Coinbase (COIN), Carvana (CVNA), Dropbox (DBX), Block (SQ)
•Friday: Cboe Global Markets (CBOE), Dominion Energy (D), Ubiquiti (UI)

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

While inflation, interest rate concerns, and geopolitical turmoil will continue to play a big role in shaping market sentiment in the coming weeks, bulls are likely eager to turn the page to November.

Since 1985, November has been one of the strongest months of the year—in some respects, the strongest month. The SPX has a positive November return in 27 of the past 38 years—more often than any other months besides May and December—and also has the highest average monthly return (1.7%):

That tendency has been even more evident in recent years. The SPX has gained ground in nine of the past 10 Novembers, and 11 of the past 14.

Unless the SPX mounts a sharp rally in the next two days, October will go into the books as a negative month. (It will also be only the third time in the past 40 years the SPX lost ground in August, September, and October.) Since 1985, the SPX was positive in November after negative Octobers 10 of 13 times.

VIX update: On Friday, the Cboe Volatility Index (VIX) closed lower than it did a week earlier even though the SPX closed lower for the week—a possible signal the options market expected less near-term volatility despite the market’s decline.

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