Market Turmoil and Resilience
Over the past few days, the Dow Jones Industrial Average (DJI), S&P 500 Index (SPX), and Nasdaq Composite (IXIC) have undergone significant volatility, yet they are all on track for a fifth consecutive weekly gain. The week started off on an uneasy note as oil prices and Treasury yields surged, propelling the Cboe Volatility Index (VIX) above the critical 20 level. However, as the week progressed, the markets stabilized ahead of key events such as the Federal Reserve’s meeting minutes, essential inflation data, and a wave of corporate earnings releases.
Despite the high likelihood, as indicated by the CME’s FedWatch tool, of a 25 basis-point interest rate hike in November, internal discord within the central bank, evident in the meeting minutes, cast uncertainty on the matter. Against this backdrop, September’s consumer price index (CPI) exceeded expectations, while the subsequent producer price index (PPI), in line with forecasts, did little to uplift investor sentiment. Now, all eyes are on the beginning of earnings season to glean further insights into the state of the U.S. economy.
Corporate Performance and Major Developments
The banking sector led the charge in commencing the fourth-quarter earnings season. Wells Fargo (WFC) and JPMorgan Chase (JPM) both surpassed Wall Street’s projections in their third-quarter results, with the latter benefiting from higher-than-anticipated interest income. However, Delta Air Lines (DAL) disappointed with its quarterly performance, missing revenue estimates and issuing a bleak outlook for the fourth quarter. Additionally, PepsiCo (PEP), a competitor to Coca-Cola (KO), unveiled its third-quarter financial results.
Beyond earnings, Tesla (TSLA) encountered a setback as its much-anticipated product unveiling failed to meet analysts’ expectations. On a positive note, DocuSign (DOCU) reached a 52-week high after replacing MDU Resources (MDU) in the S&P MidCap 400. Meanwhile, Rio Tinto (RIO) ventured into the lithium market through the acquisition of U.S.-based Arcadium Lithium (ALTM) for $6.7 billion.
Insights from Analysts
Apple (AAPL) and Amazon.com (AMZN), two prominent tech giants, faced downgrades this week, with Apple downgraded to “hold” and Amazon to “equal weight.” Wells Fargo initiated bearish coverage on homebuilding firm KB Home (KBH), warning of potential lagging performance compared to industry peers. On a brighter note, TD Cowen raised its price target on Chewy (CHWY) to nearly 30% above Tuesday’s closing price. Reddit (RDDT) also received bullish analyst coverage with an optimistic price target. Finally, Wells Fargo stock received a bullish endorsement from Wolfe Research ahead of earnings.
Anticipating Full-fledged Earnings Season
The upcoming week heralds a flurry of earnings reports from various banks, as well as Johnson & Johnson (JNJ), Netflix (NFLX), PNC (PNC), Procter & Gamble (PG), and Walgreens Boots Alliance (WBA). Concurrently, additional employment and housing data is on the horizon, promising further market movements.
Be sure to explore Schaeffer’s Senior Quantitative Analyst Rocky White’s take on the advantages of owning both stocks and commodities, along with Senior V.P. of Research Todd Salamone’s analysis of a pivotal SPX pivot point.