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- Monday Morning Edge Report - October 30, 2023
Monday Morning Edge Report - October 30, 2023
The S&P 500 is officially in Correction Territory
Mark Roussin
October 30, 2023
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Market Talk ⏪
Welcome to the Monday Morning Edge Report, where we breakdown the top stories going on in the stock market to help give you, the investor, and edge in the market.
Last week was was a jam packed week of earnings as we heard from a number of large companies that really showed a mixed bag. You saw big swings to the upside and big swings to the downside as volatility remained heightened. This week is expected to be much of the same, with another full week of earnings on deck including from the likes of Apple.
We are giving the newsletter a refresh in terms of layout and also rebranding it to “THE INVESTORS EDGE” as we look to keep ALL investors informed on the stock market and cover more than just dividend stocks.
5 Stories Moving The Market:
The S&P 500 officially falls into correction territory ⏩ A solid year being wiped away
Q3 GDP Stronger than expected ⏩ GDP grew 4.9% on an annual pace
Fed Meeting THIS WEEK ⏩ No rate hike expected this week
META & Alphabet get slammed while Microsoft climbs ⏩ This continues to be a stock pickers market
October Jobs Report on deck ⏩ Report is due out on Friday as we look for stead unemployment
1. S&P 500 Falls into Correction Territory
Since topping out at the end of July, the S&P 500 has pulled back more than 10%, which officially marks a correction within the index. The next level of support for the index is 4,000, and if that does not hold, watch out, but all eyes will be on the Federal Reserve first, then various earnings reports, and finally the October Jobs Report to close the week on Friday.
The Federal Reserve is widely expected to keep rates unchanged during their meeting, but it will likely be the comments from the Fed CHairman that will determine the direction of the stock market for the rest of the week.
Volatility is expected to remain high as the VIX has crossed above 20 and fear levels have increased to ‘Extreme Fear” on the Fear & greed index.
2. Q3 GDP Stronger than expected
Gross domestic product, or GDP, is a measure of all goods and services produced in the U.S. During Q3, US GDP rose at a 4.9% annualized pace, which was better than the expected 4.7% pace that was estimated. The biggest driver came from higher than expected consumer spending, which was evidenced in the higher retail sales report we saw a few weeks back as well.
The stronger than expected GDP report could have the Fed thinking about a potential rate hike, but with the markets pulling back sharply in recent weeks, some of that work is being done for them.
The Q3 GDP uptick was a sharp increase from the 2.1% growth we saw in Q2, and it was the highest GDP growth since Q4 2021.
3. Fed Meeting THIS WEEK
The Federal Reserve is expected to meet this week, but as I already mentioned, no additional rate hike is expected. Although inflation remains sticky, the economy is in a weird spot right now as prior rate hikes are starting to put pressure on the economy and make a bigger impact.
At the same time, Fed officials still seem likely to hike rates at least one more time either during the December meeting or the January 2024 meeting.
If rates do in fact remain steady, as expected, investors will key in on the stance of the Fed Chair’s comments. A hawkish stance from the Fed Chair could spook investors, which could spark fears of a recession and put even further pressure on the markets. Not something out of the question because if the market falls, it is a way for the Fed to slow the economy in a hands off approach.
A lot of interest is less about the next Fed hike and more about when the Fed anticipates cutting rates in 2024.
4. Mixed Bag of Earnings
An interesting week of earnings to say the least and it was less about sectors and more about individual stocks.
Microsoft had a solid earnings report that saw a re-acceleration of growth for the company’s Azure cloud segment. MSFT shares jumped more than 4% following the report and ending the week in the green.
Alphabet and Meta on the other hand were not as fortunate. Alphabet saw slower cloud growth which missed expectations by $200 million, something I thought was completely overblown as the stock fell 9% after the report, which is where the stock ended the week.
META actually reported a solid quarter, but soft guidance for Q4 spooked investors a bit and the stock ended the week down 4%
PREMIUM Subscribers will continue to receive Earnings Recaps this week as well as our Individual Stock Deep Dives for the month. Become a subscriber today for less than $1 per day!
5. October Jobs Report on deck
Weekly jobless claims totaled 210,000 last week, an increase of 10,000 over the prior week, but still remaining in ultr-low territory. Economists were expecting a total of 207,000.
Although initial claims remain low, continuing claims are slowly rising, indicating laid off workers are not finding jobs as quickly. The number of people already collecting jobless benefits in the week ended Oct. 14 rose by 63,000 to 1.79 million. That’s the fifth straight increase and the highest level since May.
The job market remains remarkably strong and has largely kept the economy afloat. However, this week I will be looking at the updated unemployment figure from the October Jobs report due out Friday as well as new jobless data coming out of Thursday to look at the continuing claims data more specifically.
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Subscribers will continue to receive Earnings Recaps this week as well as Stock Deep Dives.
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Earnings on Deck 💰
Another FULL week of Earnings is on deck!
Here are the companies reporting earnings this week:
Analyst Upgrades/Downgrades 📝
In this section we will highlight any recent notable analyst upgrades or downgrades.
Citi downgrades Diamondback Energy to neutral from buy
Piper Sandler downgrades Salesforce to neutral from overweight
William Blair initiates Celsius Holdings as outperform
UBS upgrades Waste Management and Republic Services to buy from neutral
JPMorgan upgrades Walgreens to overweight from neutral
Piper Sandler upgrades American Express to neutral from underweight
Loop initiates Trade Desk as buy
Wells Fargo initiates Public Storage as overweight
BMO upgrades Progressive to outperform from market perform
Barclays upgrades Verizon to overweight from equal weight
DA Davidson upgrades Adobe to buy from hold
Oppenheimer upgrades Adobe to outperform from market perform
HSBC upgrades Microsoft to buy from hold
HSBC upgrades Intel to hold from sell
TD Cowen downgrades Hershey to market perform from outperform
BMO upgrades Merck to outperform from market perform
Poll of the Day 📊
Economic Data This Week 📆
Monday
None
Tuesday
Consumer Confidence
Wednesday
ADP employment
JOLTS Report
ISM manufacturing
Construction spending
FED DECISION DAY**
Fed Chair Press Conference
Thursday
Initial Jobless Claims
US productivity
US unit labor costs
Factory orders
Friday
US nonfarm payrolls
US unemployment rate
US hourly wages
Hourly wages YoY
S&P US services PMI
ISM services
Other Resources 📺
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Happy Investing!
Mark
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