Let's Get Ready To Rumble! Major News Events Hit the Market All Week
Will small beats will be enough to bring in more buying interest or trigger the danger of a sell-the-news reaction?
You've reached your free article limit
You've read 0 of 1 free Pro articles.
Let's get ready to rumble!
It will be an extremely busy week for the market with the likelihood of some major news. We will be hit with the most important earnings reports of the quarter, major economic data, worries about higher interest rates, and an extremely close and contentious election.
These aren't isolated events. They will interact with each other in various ways, and market movement will be determined by the cumulative emotional reactions to the news.
We start the week with good technical conditions and strong bullish sentiment. There have been a few temporary dips due to interest-rate worries and concerns about Goldilocks' economic narrative, but the market has quickly recovered from these brief selling attacks.
Earnings season started off very well with strong reports in the financial sector and from Netflix NFLX, but there have also been a few landmines and some concerns about semiconductors SMH, in particular.
Five of the Magnificent Seven names will report their quarterly earnings this week, and expectations are quite high. AI hysteria has cooled off, and the Mag 7 have not had the same level of relative strength, but buyers keep coming back to them on dips, while Nvidia NVDA is hovering at all-time highs.
The reaction to these earnings reports will tell us quite a bit about market health. The primary question is whether small beats will be enough to bring in more buying interest or result in a sell-the-news reaction. In prior quarters, just the mention of AI was enough to send the stocks higher, but there is now increased concern about how AI is impacting the bottom line. Companies such as Alphabet GOOGL are spending more on infrastructure than had been anticipated, and the payoff is delayed.
The economic setting is also in a fragile state as worries grow about the steady decline in bonds and the rise in interest rates. Early on Monday morning, bonds TLT are lower again, and talk about how the election could cause increased inflation is building.
We have inflation, job openings, and the October jobs report this week. While the market continues to price in very high odds of a quarter-point hike at the next two Fed meetings, there is some deterioration in the expectations of Fed dovishness.
Meanwhile, presidential election polling remains very close, and the campaigns are becoming increasingly contentious as we move toward election day in a little more than a week. The biggest market danger is that there will not be a clear winner immediately. If the election drags out, the uncertainty is very likely to be a market negative. When the Bush-Gore situation arose during the election in 2000, the market had a difficult time for weeks.
The good news is that the market has broadened out, and there has been better action in many individual stocks. There are some good charts, although many are extended. It has been much better for stock-picking as the market is no longer narrow and dominated by the Mag 7 stocks.
We have a positive start on Monday morning, but with all the news flow this week, there is a very good likelihood that we will see elevated volatility and big moves in many individual stocks.
At the time of publication, Rev Shark had no positions in any securities mentioned.
