Last Week
The headline in Barron’s “The Trader” column reads “A Winning Week Masks Trouble Below the Surface”. Indeed, while the casual observer might see Wall Street scoring a three-week winning streak and closing out October on a six-month positive run, digging deeper reveals some canaries in the coal mine. Declining issues doubled the number of advancing issues, while only the Technology and Consumer Services (Amazon) sectors finished in the green. The Nasdaq Composite jumped 2.2%, the S&P 500 gained 0.7%, but both the Mid and Small Cap indexes finished approximately 1.5% in the red. Further highlighting the poor breadth in the market was that the S&P Equal Weight index was down 1.7%. The bond market was also soft, with the yield on the 10-year Treasury rising 10 basis points to 4.1%. The Dollar inched forward, while Gold and Crude Oil slipped lower.
The highlights of the week included strong earnings reports, particularly from Amazon (AMZN) and Alphabet (GOOG), encouraging trade developments, and the Federal Reserve’s interest rate cut. Fed Chair Jerome Powell dampened the mood by repeatedly stating during his press conference that another cut in December was not a sure thing, calling such a move “far from” a foregone conclusion. There were also some high-profile companies whose earnings reports triggered share price declines, such as Meta Platforms (META), Chipotle Mexican Grill (CMG), Cigna (CI), and Fiserv (FI). Those declines should serve as a reminder to investors that momentum is a double-edged sword. Caveat emptor for high-flying high multiple shares.
Turning to the trade teeter-totter, President Donald Trump announced deals with several Asian nations, including a reported deal with China over rare earths and critical minerals.
On the Chicago Sports Scene, the Bulls looked terrific starting the season with 5 straight wins before falling to the Knicks Sunday night in Madison Square Garden. The Bears pulled out a thrilling victory Sunday afternoon in Cincinnati to improve their record to 5-3 and remain in the playoff hunt. It could be a fun winter after all!
This Week
The final 132 S&P 500 companies will be reporting earnings, including Palantir Technologies (PLTR), Advanced Micro Devices (AMD), Amgen (AMGN), Qualcomm (QCOM), and McDonald’s (MCD). Thus far, it has been a strong earnings season with 80% of companies exceeding estimates.
The economic data calendar is light as there will be limited reports, as the government shutdown will set a record for the longest in history. On Wednesday, ADP will release its National Employment Report for October, with economists forecasting a 30,000 increase in private-sector employment, after a decline of 32,000 in September.
Also on Wednesday, the Supreme Court will hear arguments over President Trump’s sweeping global tariffs, taking up an appeal that deals with the centerpiece of his administration’s economic agenda. Trump wants the justices to overturn a lower court ruling that found his administration acted unlawfully by imposing many of his sweeping import taxes.
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