Stocks are expected to take their cue from the bond market in the week ahead, as investors weigh earnings from bellwethers Apple, Microsoft, and Alphabet. Strategists continue to watch the market’s trading patterns for signs a bottom is forming after the Oct. 13 washout, when the market first fell and then surged following a hotter-than-expected September consumer inflation report. Some strategists also say it appears Treasury yields may have peaked — at least temporarily — and that could help stocks. Stocks were higher in the past week despite a sharp runup in Treasury yields. The closely watched benchmark 10-year yield touched a high of 4.33% Friday, before retreating to about 4.21%. The yield went on a wild ride, after ending the prior week at 4.02%. The three major averages closed higher Friday, with the S & P 500 adding 2.37% to close at 3,752.75. The Nasdaq Composite gained 2.31% to end at 10,859.72. The Dow Jones Industrial Average gained 748.97 points, or 2.47%, to reach 31,082.56. “Even though we’re only three weeks into the month, we’re ahead of the average [stock market] volatility in October by 50%,” said Sam Stovall, CFRA chief market strategist. “On average, October sees 5.4 days where it sees 1% volatility, and this month we’ve had eight so far.” Stovall said the S & P 500 had six positive moves of 1% or more in the last 17 trading days, as of Friday. “And five of those were up by more than 2%. Each of those strong jumps were then smacked down by a series of negative days,” he said. “A lot of time, volatility in that tug of war is a signal a bottom is being formed.” Strategists have been looking for signs the market is near a bottom, since historically stocks typically rally into the end of the year during mid-term election years. Treasury yields reversed some of their rapid run higher Friday, after the Wall Street Journal published an article suggesting the Fed could consider a smaller rate hike in December after it raises rates by another three-quarters point in early November. Yields move opposite to price. San Francisco Fed President Mary Daly made a similar comment Friday, saying the Fed is close to a point where it should consider slowing rate hikes. That could be good for stocks. “Yields will have a direct impact on earnings going forward, and also yields would have an impact on how deep or shallow a recession will be,” said Stovall. “Yields are still the key. That’s why the market is rallying [Friday] because of the hint that the Fed might consider a 50 basis points hike in December, not 75.” (A basis point equals 0.01 of a percentage point) AmeriVet rate strategist Greg Faranello said it’s possible the 10-year yield may have reached a temporary peak Friday morning. “If you look at the momentum and volatility, you can talk yourself into it peaking in and around these levels. Typically the moves back down have been very violent as well,” Faranello said. He said the yield could hold and begin to slide back down, but that does not mean it is a longer term top. “Next week is going to be wild too,” he said, noting that both the Bank of Japan and European Central Bank hold rate meetings Thursday. The Federal Reserve then holds its next meeting the following week, on Tuesday and Wednesday, Nov. 2-3. “It’s the level of interest rates that are driving equities,” said Gargi Chaudhuri, head of BlackRock’s iShares investment strategy America. “I would like to say it’s going to be the trajectory of earnings, but frankly that’s not what we’re finding. It’s not the micro driving markets these days. It’s the macro.” Earnings, earnings, earnings About 150 S & P 500 companies report earnings in the coming week. Amazon and Meta Platforms are among those reporting, as well as Exxon Mobil and Chevron. Strategists have expected the earnings season would make for choppy trading as estimates are revised lower. Stovall points out that expectations for third quarter profits have gotten progressively weaker. “Actually on June 30, expectations were for a 10% gain in earnings. As of September 30, it was a 3% gain, and now it looks like it’s going to be a 2% gain,” Stovall said. He said technology earnings are expected to be down 4%, but system software is down almost 7%. Internet and direct market retail profits are expected to plunge 42%, he added. “The earnings are going to be challenging,” Stovall said. Chaudhuri said earnings will also be important for not only what companies reveal about future profits, but also about the macro picture. “I’ll be watching earnings to see what companies are talking about as it comes to…the margin pressures they’re feeling, how the higher and stronger dollar has impacted their businesses,” she said. “We’ll also be looking to hear about hiring plans or if there are any job freezes. It doesn’t have to be firing plans, but is there something to take away from companies, looking to freeze hiring.” Chaudhuri said she expects even if the market heads higher, it could retest the bottom set on Oct. 13, when the S & P 500 got as low as 3,491. “We could have a period of buying in the market, a sentiment-driven technical shift that could lead to a lot of people buying,” she said. “Overall, I would still approach the equity market with a very defensive stance.” She recommends using minimal volatility strategies that reduce downside risk. Technically speaking Scott Redler, partner with T3Live.com, said he is watching a formation in the S & P 500 that could be positive. The S & P was in the area around 3,735 by week’s end, which would be the neckline in an inverted head and shoulders pattern in the index. He said the shoulder was building all week. If completed, the pattern is positive for forward momentum, just like the traditional head and shoulders pattern is negative. Redler watches short-term technical trends, and he expects Fridays’ action in the 10-year yield signaled a temporary top in interest rates. “There was a bit of capitulation in TLT [the iShares 20+ year Treasury ETF ]. It feels like [Friday] put in a short-term low,” he said. “That would help next week.” He said the big tech earnings will be important. “As long as they’re not disasters, it feels like the path of least resistance is higher,” he said. His first target for the S & P 500 is 3,800. “I think a really hard spot would be 3,900, ” he said. He noted that it was a positive that banks have been participating in the rally since reporting earnings. “Energy is actually breaking out again,” he said. Week ahead calendar Monday Earnings: Discover Financial , Zions Bancorp, TrueBlue 9:45 a.m. October manufacturing PMI 9:45 a.m. October services PMI Tuesday Earnings: Alphabet , Microsoft , Visa, Coca-Cola, UPS, 3M , Raytheon Technologies, JetBlue, Archer Daniels Midland, Cleveland-Cliffs, General Electric, General Motors, Chubb, Chipotle Mexican Grill, Boyd Gaming, Enphase Energy, Ameriprise, UBS, Novartis, SAP, Biogen, Corning, Kimberly-Clark, PulteGroup, Synchrony Financial, Centene, Valero Energy , Polaris, HSBC, Moody’s, Sherwin-Williams, MSCI, Juniper Networks 9:00 a.m. S & P/Case-Shiller August home prices 9:00 a.m. FHFA August home prices 10:00 a.m. October consumer confidence Wednesday Earnings: Boeing, Meta Platforms, Ford, Bristol-Myers Squibb , General Dynamics, Kraft Heinz, Penske Auto Group, Harley-Davidson, Norfolk Southern, Seagate Technology, Brink’s, Hess, Wingstop, Waste Management, Molina Healthcare, O’Reilly Automotive, SLM, United Rentals, Raymond James, Canadian Pacific, Flex , Olin, Pilgrim’s Pride, Ethan Allen , Fortune Brands, Frontier Group, Teladoc Health, Samsung Electronics, Vale, Weyerhaeuser, Southwestern Energy, Hartford Financial , Mohawk Industries, Capital One, First Solar, Yamana Gold, Edwards Lifesciences, Eastman Chemical 8:30 a.m. Advance economic indicators 10:00 a.m. September new home sales Thursday Earnings: Apple, Amazon, Intel, McDonald’s, Merck, Caterpillar, Honeywell, Northrop Grumman, Comcast, Anheuser-Busch, Mastercard , Gilead Sciences, T. Rowe Price, Hertz Global, Ambev, PG & E, Travel+Leisure, Textron, Southern Co, Carrier Global, BorgWarner, Lazard, Oshkosh, Reliance Steel, AutoNation, Southwest Air , Altria, American Tower, International Paper, Shopify, S & P Global, Sonic Automotive, Tradeweb Markets 8:30 a.m. Weekly initial jobless claims 8:30 a.m. September durable goods 8:30 a.m. Real GDP Q3 (advance; first preliminary) Friday Earnings: Exxon Mobil , Chevron, Colgate-Palmolive, LyondellBasell, Newell Brands, Booz Allen Hamilton, Bloomin’ Brands, Church and Dwight , AbbVie, AllianceBernstein, Equinor, Airbus, W.W. Grainger, DaVita 8:30 a.m. September personal income and spending 8:30 a.m. 3Q employment cost index 10:00 a.m. September pending homes 10:00 a.m. October consumer sentiment
Sumber: www.cnbc.com
