To The Moon

The $S&P 500(.SPX)$ and the $NASDAQ(.IXIC)$ posted solid gains for the second week in a row, and the $DJIA(.DJI)$ notched its fourth consecutive positive result, surging nearly 6% to outperform its peers by wide margins. Mixed earnings results from some major technology companies weighed on the NASDAQ’s result.

As of last Friday, the$Straits Times Index(STI.SI)$ gained 3% weekly with a -1.92% YTD in 2022; and$S&P/ASX 200(XJO.AU)$‘s YTD performance is-8.43%, with a gaining of 1.63% last week.

Over the past week, investors have grappled with earnings reports from some of the largest U.S. companies, as well as a slew of uncertain economic and geopolitical news. However, the next two weeks could be even worse:

On November 2nd, Eastern Time, the FED will announce its latest interest rate decision and give hints on the future direction of policy,

On November 4, the October jobs report will bring important information about the labor market,

On November 8, the midterm elections could usher in a change in Congress,

The consumer price index (CPI) for October, due on Nov. 10, has played a key role in shaping market expectations for the direction of Fed policy amid a surge in inflation to a 40-year high.

It's clear that a group of investors on Wall Street is bracing for a new wave of volatility.

Analysts at Bank of America pointed out that the bank's U.S. stock bull and bear indicator remained at its most bearish level for the sixth week in a row.

Sectors & Stocks Performances Review

In terms of sectors, the Real Estate, Utilities, and Consumer Defensive sectors rose the most with 6.44%. 5.96%.5.72% respectively, while only the Communication Services sector fell 2.06%.

In individual stocks, the market continued to assess disappointing earnings from tech companies:

$Amazon.com(AMZN)$ fell 13.33% last week, shares hit a new closing low since June 14, the company announced a quarterly revenue decline and issued a disappointing Q4 sales revenue forecast.

$Apple(AAPL)$ rose 5.75% for the week as the company announced weaker-than-expected iPhone revenue, but its quarterly earnings and revenue beat market expectations.

Affected by weak earnings reports and pessimistic expectations for the future from companies such as $Microsoft(MSFT)$ , $Alphabet(GOOG)$ and $Meta Platforms, Inc.(META)$, U.S. technology stocks underperformed this week, and investors have shifted to sectors that are sensitive to economic conditions and can avoid the impact of recession.

Tom Essaye, president of Stevens Report Research, said:

"We are still in the middle of the earnings season, and U.S. earnings will continue to dominate the stock market until next week. Except for technology stocks, other companies' earnings are not as bad as everyone thinks."

Weekly Top Gainers of S&P 500

$Universal Health(UHS)$ ,$DexCom(DXCM)$ ,$Enphase Energy(ENPH)$ ,$MSCI Inc(MSCI)$ ,$Raymond James(RJF)$ ,$Moderna, Inc.(MRNA)$ ,$Gilead Sciences(GILD)$ ,$AMP LIMITED(AMP.AU)$ ,$IQVIA(IQV)$ ,$ServiceNow(NOW)$ .

Macro Factors to Watch  

Shrinking Margins: Companies profit margins continue to shrink, with the energy sector being a notable exception. Margins for companies in the S&P 500 are forecast to average around 12% for the Q3, according to FactSet. If that figure is maintained by the time all quarterly reports are released, it would mark the fifth quarter in a row of declining profit margins.

Bond Yield Reversal: The yield of the 10-year U.S. Treasury bond fell, finally snapping a 12-week string of gains that boosted the yield to the highest level since 2008. It settled to around 4.02% on Friday after briefly climbing as high as 4.33% the previous week. When the streak began in early August, the yield was around 2.60%.

Inversion Extremism: Although the yield of the 10-year U.S. Treasury bond fell for the week, the yield of the 3-month Treasury climbed, rising above the 10-year yield on Tuesday and staying there the rest of the week. That rare occurrence marked a deepening of the yield curve inversion that began in early July, when the 2-year yield exceeded that of the 10-year Treasury.

GDP Turnaround: U.S. economic growth returned to positive territory in the third quarter after recording slightly negative results in the first two quarters of 2022. GDP grew at an annual rate of 2.6% in the latest period, beating most economists’ expectations and easing concerns about the prospects of a protracted recession.

Housing Trouble: The National Association of Realtors on Friday reported a 10.2% decline in pending home sales compared with the previous month. Economists had expected a decline of around 4.0% on average. The key measure of housing market sales activity fell far more than expected.

The Week Ahead: October 31-November 4

Notable Earnings to Watch：

$Uber(UBER)$, $Pfizer(PFE)$ ,$Eli Lilly and(LLY)$ ,$AMD(AMD)$ ,$Yum(YUM)$ ,$CVS Health(CVS)$ ,$Qualcomm(QCOM)$ ,$Moderna, Inc.(MRNA)$ $Coinbase Global, Inc.(COIN)$ ,$Block(SQ)$ ,$PayPal(PYPL)$ ,$Starbucks(SBUX)$ ,$Cloudflare, Inc.(NET)$ ,$DraftKings Inc.(DKNG)$

Major Events This Week:

Monday

• No major reports schedule

Tuesday

• Institute for Supply Management’s manufacturing index
• Job Openings and Labor Turnover Survey, U.S. Bureau of Labor Statistics
• Construction spending, U.S. Census Bureau

Wednesday

• U.S. Federal Reserve Board concludes two-day policy meeting, Chair Jerome Powell holds press conference
• ADP National Employment Report, ADP

Thursday

• Institute for Supply Management’s nonmanufacturing index
• Weekly unemployment claims, U.S. Department of Labor
• Trade balance, U.S. Census Bureau
• Productivity and labor costs, U.S. Bureau of Labor Statistics

Friday

• Jobs and unemployment, U.S. Bureau of Labor Statistics

Why did Dow Jones rally 6% LAST week?

What's you forcast for this week?

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