Tag: Dow Jones Industrial Average

Dow ekes out gain, stocks end higher on signs of easing inflation, but Russia’s war in Ukraine intensifies
U.S. stocks closed higher Tuesday, but off the session’s best levels, after more data suggested inflation may be slowing and mega-retailer Walmart offered a rosier annual forecast.

The Dow turned negative earlier in the session after the Associated Press reported that Russian missiles crossed into Poland and killed two people, ratcheting up geopolitical tension given Poland is a NATO country.
How stocks traded
- S&P 500 index
  SPX,
  +0.87%
  rose 34.48 points, or 0.9%, to close at 3,991.73.
- Dow Jones Industrial Average
  DJIA,
  +0.17%
  climbed 56.22 points, or 0.2%, ending at 33,592.92, after touching a nearly three-month high of 33,987.06 earlier.
- Nasdaq Composite
  COMP,
  +1.45%
  climbed 162.19 points, or 1.5%, closing at 11,358.41.
On Monday, U.S. stocks finished near session lows after early gains evaporated. The Dow Jones Industrial Average fell 211 points, or 0.6%, while the S&P 500 declined 36 points, or 0.9% and the Nasdaq Composite dropped 226 points, or 2%.

What drove markets

U.S. stocks closed higher Tuesday, after another batch of inflation data showed that whole prices rises were slowing in October for the second straight month.

The Dow’s brief negative turn came after reports that Russian military bombarded Ukraine Tuesday. In the attack, missiles reportedly crossed into Poland, a member of NATO, the Associated Press said, citing a senior U.S. intelligence official.

“Geopolitical concerns obviously are never positive for the market,” said Peter Cardillo, chief market economist at Spartan Capital Securities.

On Tuesday, oil futures settled higher. West Texas Intermediate crude for December delivery rose to $1.05, or 1.2%, reaching $86.92 a barrel.

While markets had started to price in the toll of Russian’s nearly nine-month invasion of Ukraine, it had not priced in an potential escalation of the war, said Kent Engelke, chief economic strategist at Capitol Securities Management.

“Talk about geopolitical angst returning,” Engelke said, later adding, “If there were really missiles shot to Poland and that was really not an accident, wow, that is really increasing the scope of the war.”

A U.S. National Security Council spokesperson said the agency was aware of the news reports out of Poland, but that it cannot confirm the reports or any details at this time.

While international worries clouded the session, there was also encouraging domestic news.

The U.S. producer-price index climbed 8% over the 12 months through October, the Labor Department said Tuesday, easing from September’s revised 8.4% increase. Last week, stocks surged after the October consumer-price index rose more slowly than expected.

See: Wholesale prices rise slowly again and point to softening U.S. inflation

Tuesday’s PPI report helped support the notion that inflation has peaked, at least for now.

“Today, it’s really about the PPI and the market reaction to it,” Steve Sosnick, chief strategist at Interactive Brokers
IBKR,
+3.45%,
said in a Tuesday morning interview before the reports of missiles crossing into Poland.

Markets ripped higher last Thursday after October’s consumer-price index showed signs of easing. The same dynamic was playing out Tuesday, but the response now has been “a bit more muted” because it’s an iteration on inflation data that investors already had been starting to see, Sosnick said.

So, is the economy really at peak inflation? It’s too early to say for sure, according to Sosnick. Still, the PPI numbers, paired with last week’s CPI reading “does add evidence to that narrative,” he added.

Walmart’s third quarter earnings also were buoying markets, Sosnick said. The massive retailer’s beat on earnings offers a glimpse at the minds and wallets of many American consumers. For anyone who worries about consumers “getting highly defensive” and not spending, Walmart’s numbers are “counter evidence.”

In other news, the first face-to-face meeting between President Joe Biden and President Xi Jinping helped support stocks listed in China and Hong Kong, as some of the tensions between the world’s two largest economies were seen to be easing.

The upbeat tone from Asia, which included Taiwan Semiconductor Manufacturing Company
TSM,
+10.52%
jumping 7.7% on news Warren Buffett had bought a $5 billion stake, underpinned European bourses, which closed higher for a fourth session in a row.

Read also: Warren Buffett’s chip-stock purchase is a classic example of why you want to be ‘greedy only when others are fearful’

Analysts increasingly expect stocks to enjoy a positive end to the year. “The near-term picture still looks positive for U.S. benchmark indices and while momentum has reached intra-day overbought levels, this doesn’t imply a selloff has to happen right away,” said Mark Newton, head of technical strategy at Fundstrat.

Philadelphia Federal Reserve President Patrick Harker said Tuesday that he favored a 50 basis-point hike to the Fed’s benchmark rate in December. Atlanta Fed President Raphael Bostic said more rate hikes will be needed, even through there have been “glimmers of hope” on inflation.

Fed Vice Chairman for Supervision Michael Barr said Tuesday that the U.S. economy is likely to slow in coming months, and more workers will lose their jobs, in Senate testimony. The Fed is working with regulators to assess risks tied to cryptocurrency markets, following the collapse of FTX and its associated companies.

In other U.S. economic data, the New York Empire State manufacturing index for November showed a gauge of manufacturing activity in the state rose 13.6 points to 4.5 this month.

The yield on the 10-year Treasury note
TMUBMUSD10Y,
3.774%
was down 6.7 basis points at 3.798%. Bond yields move inversely to prices.

Companies in focus
- Walmart
  WMT,
  +6.54%
  shares jumped after the giant retailer swung to a net third-quarter loss, due to $3.3 billion in charges related to opioid legal settlements, but reported adjusted profit, revenue and same-store sales that were well above expectations and a full-year outlook that was above forecasts. Walmart shares opened Tuesday at $145.61 and closed at $147.48, or 6.57% higher.
- Home Depot
  HD,
  +1.63%
  rose after the home improvement retailer reported fiscal third-quarter earnings that beat expectations, citing strength in project-related categories, but kept its full-year outlook intact. Home Depot shares opened Tuesday at $304.06 and closed at $311.99.
- Chinese-listed technology traded sharply higher on Tuesday, including U.S.-traded ADRs for Alibaba Group Holding
  BABA,
  +11.17%,
  Baidu Inc.
  BIDU,
  +9.02%
  and JD.com Inc.
  JD,
  +7.14%
  The KraneShares CSI China Internet exchange-traded fund
  KWEB,
  +9.56%
  also traded substantially higher.
—Jamie Chisholm contributed reporting to this article
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November 15, 2022
Home Depot Earnings Top Estimates. Customers Are ‘Resilient,’ CFO Says.

Home Depot

third-quarter earnings results beat expectations, giving the stock a boost on Tuesday.

The home-improvement retailer reported third-quarter earnings of $4.24 a share, topping analysts’ projections of $4.12 a share. Revenue came in at $38.9 billion, up 5.6% from a year earlier and topping estimates for $38 billion. Same-store sales rose 4.3%, ahead of estimates for 3.1%. U.S. same-store sales rose 4.5%.

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November 15, 2022
U.S. stock futures, bonds rally as wholesale price growth slows

U.S. stock futures rallied Tuesday morning after the producer price index for October came in lower than expected. The PPI index slowed to 8% from 8.4% in the 12 months through October, while core price growth slowed to 5.4% from 5.6%. Futures for the S&P 500 rose 78 points, or 2%, to 4,045, while futures for the Nasdaq 100 rose 366 points, or 3.1% to 12,102 after stock futures traded modestly higher before the data. Futures for the Dow Jones Industrial Average rose 405 points, or 1.2% to 33,967. Treasurys also rallied, with Treasury yields falling 9.4 basis points to 3.778%. Treasury yields move inversely to prices. The PPI data, which gauge prices paid by wholesale producers of goods, appeared to mirror a slowdown in consumer-price inflation exhibited by the October CPI released on Thursday. The October CPI report helped to cement expectations that the Federal Reserve will opt for a smaller interest-rate hike in December after four consecutive 75 basis point hikes.

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November 15, 2022
Wall Street ends lower as investors gauge Fed’s policy path; Nasdaq loses over 1%

Wall Street’s main indexes ended lower on Monday, with real estate and discretionary sectors leading broad declines, as investors digested comments from US Federal Reserve officials about plans for interest rate hikes and looked for next catalysts after last week’s big stock market rally.

Losses accelerated toward the end of the up-and-down session, with the focus turning to Tuesday’s producer price index report and markets highly sensitive to inflation data.

Earlier on Monday, Fed Vice Chair Lael Brainard signaled that the central bank would will likely soon slow its interest rates hikes. Her comments somewhat buoyed sentiment for equities that had been dampened after Federal Reserve Gov. Christopher Waller on Sunday said the Fed may consider slowing the pace of increases at its next meeting but that should not be seen as a “softening” in its commitment to lower inflation.

A massive equity rally late last week was set off by a softer-than-expected inflation report that boosted investor hopes the Fed could dial back on its monetary tightening that has punished markets this year.

“There is still a sensitivity to Fed speak… One was a little hawkish, one was a little dovish,” said Eric Kuby, chief investment officer at North Star Investment Management Corp.

The Dow Jones Industrial Average fell 211.16 points, or 0.63%, to 33,536.7, the S&P 500 lost 35.68 points, or 0.89%, to 3,957.25 and the Nasdaq Composite dropped 127.11 points, or 1.12%, to 11,196.22.

The S&P 500 last week posted its biggest weekly percentage gain since late June, while the tech-heavy Nasdaq notched its best week since March.

More Fed officials are due to speak later this week along with a slew of data, including on retail sales and housing, and earnings reports from major retailers.

“It just makes sense the market wants to pause and really both try to make sense of the trajectory (of Fed policy) and what the next drivers are going to be,” said Yung-Yu Ma, chief investment strategist at BMO Wealth Management.

Among S&P 500 sectors, real estate fell 2.7%, consumer discretionary dropped 1.7% and financials declined 1.5%.

In company news, Amazon shares fell 2.3% as The New York Times on Monday reported the company was planning to lay off about 10,000 people in corporate and technology jobs starting as soon as this week.

Shares of Biogen Inc and Eli Lilly gained 3.3% and 1.3%, respectively, after the failure of Swiss rival Roche’s Alzheimer’s disease drug candidate.

Declining issues outnumbered advancing ones on the NYSE by a 2.23-to-1 ratio; on Nasdaq, a 1.61-to-1 ratio favored decliners.

The S&P 500 posted 15 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 72 new highs and 74 new lows.

About 11.5 billion shares changed hands in US exchanges, compared with the 12.1 billion daily average over the last 20 sessions.

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November 14, 2022
Why the Bear Market Isn’t Over

Investors finally got the inflation reading they were looking for, and are likely to get a split government for the next two years. That combination propelled stocks to their best weekly showing since June. On Friday, the

S&P 500

even briefly crossed the 4,000 threshold, a level it hadn’t breached in two months.

The S&P ended the week 5.9% higher, closing just below 4,000. The

Dow Jones Industrial Average

rose 4.1%, and the

Nasdaq Composite

jumped 8.1%. It was the best weekly showing for the Nasdaq since March, and it came during a week when tech news seemed largely negative. Facebook parent

Meta Platforms

(ticker: META) announced that it will cut 11,000 jobs, the latest in a wave of Silicon Valley layoffs. The best thing Facebook can say for itself now is that it isn’t Twitter.

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November 12, 2022
Investors may be whistling past the graveyard of a recession with latest rally in stocks

Investors feeling giddy about last week’s sharp rally for stocks might want to give a listen to Tom Waits’ song, “Whistlin’ Past the Graveyard” from 1978, to sober up for the dangers that still lurk ahead.

The surge in stocks catapulted the S&P 500 index
SPX,
+0.92%
almost back to the 4,000 mark on Friday, also lifting it to the biggest weekly gain in roughly five months, according to Dow Jones Market Data.

Investors showed courage on signs of a slight slowing of inflation, but the fortitude also comes as a drearier backdrop for investors has been unfolding in plain sight. Massive layoffs at big technology companies, the dramatic implosion of crypto-exchange FTX, and the day-to-day pain of high inflation and skyrocketing borrowing on businesses and households are all taking a toll.

“We are not convinced this is the beginning of a new bull market,” said Sam Stovall, chief investment strategist at CRFA Research. “We believe that we are headed for recession. That has not been factored into earnings estimates and, therefore, share prices.”

Stovall also said the stock market has yet to see the “traditional shakeout of confidence capitulation that we typically see that marks the end of the bear markets.”

From Meta Platforms Inc.
META,
+1.03%
to Lyft Inc.
LYFT,
+12.59%
to Netflix Inc.
NFLX,
+5.51%
there is a wave of major technology companies resorting to layoffs this fall, a threat that could sweep other sectors of the economy if a recession materializes.

Yet, information technology stocks in the S&P 500 jumped 10% for the week, while financials, which stand to benefit from higher interest rates, rose 5.7%, according to FactSet.

That could reflect optimism about the odds of a slower pace of Federal Reserve rate hikes in the months ahead, after sharp rate rises helped to undermine valuations and pull tech stocks dramatically lower in the past year. However, Loretta Mester, president of the Cleveland Fed, and other Fed officials since the October inflation reading on Thursday have reiterated the need to keep rates high, until 7.7% annual rate finds a clearer path to the central bank’s 2% target.

The stock-market rally also might suggest that investors view continued mayhem in the crypto sector as contained, despite bitcoin
BTCUSD,
+0.42%
trading near its lowest level in two years and the shocking collapse in recent days of FTX, once the world’s third-largest cryptocurrency exchange.

Read: FTX’s fall: ‘This is the worst’ moment for crypto this year. Here’s what you should know.

What happens to stocks in recessions

Blows to the American economy rarely have been good for stocks. A look at seven past recessions, starting in 1969, shows declines for the S&P 500 as more typical than gains, with its most violent drop occurring in the 2007-2009 recession.

The more than 37% drop of the S&P 500 from 2007 to 2009 was the worst of its kind in a recession since the late 1960s.

Refinitiv data, London Stock Exchange Group

While a looming U.S. recession isn’t a foregone conclusion, CEOs of America’s biggest banks have been warning about the risks for months. JP Morgan Chase’s Jamie Dimon said in October that a “tough recession” could drag the S&P 500 down another 20%, even though he also said consumers were doing fine, for now.

Still, the steady stream of warnings about the recession odds have left many Americans confused and wondering if one can even happen without an increase in job losses.

Big moves lately in stocks also have been hard to decode, given the economy was shocked back to life in the pandemic by trillions of dollars in fiscal stimulus and easy-money policies from the Fed that are now being reversed.

“What I think goes unnoticed, certainly by the average person, is that these moves are not normal,” said Thomas Martin, senior portfolio manager at Globalt Investments, about stock swings this week.

“It’s all about who is positioned how — and for what — and how much leverage they’re employing,” Martin told MarketWatch. “You get these outsized moves when people are offside.”

Here’s a view of the sharp trajectory upward of the S&P 500 since 2010, but also its dramatic drop this year.

Sharp rise of S&P 500 since 2010, but recent fall

Refinitiv Datastream

While Martin isn’t ruling out the potential for a seasonal “Santa Claus” rally heading into year-end, he worries about a potential leg lower for stocks next year, particularly with the Fed likely to keep interest rates high.

“Certainly what’s being priced in now is either no recession or a very, very mild recession,” he said .

However, Kristina Hooper, Invesco’s chief global market strategist, said the overarching story might be one of stocks sniffing out the first steps in a path to economic recovery, and the Fed potentially stopping its rate hikes at a lower “terminal” rate than expected.

The Fed increased its benchmark interest rate to a 3.75% to 4% range in November, the highest in 15 years, but also has signaled it could top out near 4.5% to 4.75%.

“If often happens that you can see stocks do well, in a less-than-good economic environment,” she said.

The S&P 500 rose 4.2% for the week, while the Dow Jones Industrial Average
DJIA,
+0.10%
gained 5.9%, posting its best weekly gain since late June, according to Dow Jones Market Data. The Nasdaq Composite Index shot up 8.1% for the week, its best weekly stretch in seven months.

In U.S. economic data, investors will get an update on household debt on Tuesday, retail sales and homebuilder data on Wednesday, followed by jobless claims and housing starts data Thursday. Friday brings existing home sales.

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November 12, 2022
Consumer sentiment hits lowest level since June as fear of recession looms

The numbers: Consumer sentiment soured in November, hitting its lowest level since July as Americans contended with continued inflation and a worsening economic outlook.

The University of Michigan’s gauge of the U.S. consumer’s outlook fell 5.2 index points from 59.9 in October.

Economists were expecting a reading of 59.5, according to a Wall Street Journal poll.

Inflation expectations for the next year rose to 5.1% from 5% in the prior month, while five-year inflation expectations rose to 3% from 2.9% in October.

Big picture: Inflation eased somewhat in October, but prices for a typical basket of consumer goods are still rising a historically rapid pace even as rising interests rates are weighing on many sectors of the economy.

Fears of a coming recession also weighed on Americans’ confidence about the economy.

“Declines in sentiment were observed across the distribution of age, education, income, geography, and political affiliation, showing that the recent improvements in sentiment were tentative,” wrote Joanne Hsu, director of the survey, in a statement. “Instability in sentiment is likely to continue, a reflection of uncertainty over both global factors and the eventual outcomes of the election.”

Key details: A gauge of consumer’s views of current conditions fell in November to 57.8 from 65.6 in October, while an indicator of expectations for the next six months fell to 52.7 from 56.2 last month.

Market reaction: U.S. stocks were trading mixed Friday morning, with the S&P 500
SPX,
+0.92%
posting gains and the Dow Jones Industrial Average
DJIA,
+0.10%
edging lower.

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November 11, 2022
Is the stock market open? Veterans Day is a regular day for U.S. stocks, but the bond market is closed.

The stock market remains open Friday, Nov. 11, the Veterans Day holiday in the U.S., even through it counts as a holiday for the $53 trillion American bond market.

That means a full day of trading for stocks, which appear poised to book a robust week of gains, despite continued fears of a potential U.S. economic recession as the Federal Reserve works to tame stubbornly high costs of living.

Signs of a potential cooling off on the inflation front led the Dow Jones Industrial Average
DJIA,
+3.70%
to advance 1,200 points on Thursday, with it, the S&P 500 index
SPX,
+5.54%
and Nasdaq Composite Index
COMP,
+31.35%
all booking their best daily gains since 2020.

Don’t miss: Veterans Day: Are banks open? Does USPS deliver mail?

While Friday marks the start of a three-day weekend for the bond market, Treasury yields already have climbed dramatically this year with the Fed’s sharp rate hikes. The central bank aims to temper demand for goods and services by making borrowing costs more restrictive.

Consumers may feel certain effects of inflation in their everyday lives, like when they go to the grocery store. But it can also impact our savings and investments. Here’s what to know.

The benchmark 10-year Treasury rate
TMUBMUSD10Y,
3.819%
fell to about 3.8% on Thursday, but was up from a 1.3% low last December. Bond yields move in the opposite direction of prices.

The fresh rally on Wall Street followed the consumer-price index reading for October showing a 7.7% annual rate, down from a 9.1% high in June. The Dow remains down more than 8% from its January peak, the S&P 500 is 17.5% lower and the Nasdaq is 31% below its last record close, according to Dow Jones Market Data.

Veterans Day was born out of the wreckage of World War I, with Nov. 11 recognized as a legal holiday in the U.S. in 1938, two decades after an armistice between the Allied nations and Germany went into effect at the 11th hour of the 11th day of the 11th month.

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November 11, 2022
Dow drops nearly 650 points as U.S. stocks log worst post-election day performance in a decade

U.S. stocks closed sharply lower on Wednesday, with the Dow logging its biggest daily drop since Oct. 7, as the major indexes saw their worst post-election day performance since 2012, according to Dow Jones Market Data. The S&P 500
SPX,
-2.08%
finished down 79.54 points, or 2.1%, at 3,748.57. The Dow Jones Industrial Average
DJIA,
-1.95%
closed 646.89 points, or 2%, lower at 32,513.94. The Nasdaq Composite
COMP,
-2.48%
finished down 263.02 points, or 2.5%, at 10,353.17.

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November 9, 2022
U.S. stocks snap 4-day losing streak but Nasdaq still logs worst week since January

U.S. stocks finished higher on Friday, snapping a four-day losing streak in a hectic session that saw the three major indexes swing in and out of positive territory multiple times. Volatility was high across asset classes as investors contended with shifting expectations surrounding where the Fed funds rate is expected to peak next year, along with Friday’s October jobs report data and the expiration of daily and weekly options tied to individual stocks, stock indexes and exchange-traded funds, which helped to exacerbate volatility, market strategists said. The S&P 500
SPX,
+1.36%
finished 50.66 points, or 1.4%, higher at 3,770.55, but still logged a weekly loss of 3.4% its worst weekly performance in about a month, according to Dow Jones Market Data. The Nasdaq Composite
COMP,
+1.28%
closed 132.31 points, or 1.3%, higher at 10,475.25, but logged a weekly loss of 5.7% for its worst such pullback since the week ended Jan. 21. The Dow Jones Industrial Average
DJIA,
+1.26%
gained 401.97 points, or 1.3%, to finish at 32,403.22 on Friday, but still saw a weekly decline of 1.4%.

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November 4, 2022
U.S. stocks extend losing streak to fourth day as S&P 500 logs lowest close in 2 weeks

U.S. stocks finished lower on Thursday for the fourth session in a row as all three major indexes logged their longest losing streak in at least two weeks, according to FactSet data. The S&P 500
SPX,
-1.06%
closed down 39.80 points, or 1.1%, to 3,719.89, notching its longest losing streak since Oct. 12 and its lowest closing level since Oct. 20. The Nasdaq Composite
COMP,
-1.73%
finished 181.86 points, or 1.7%, lower at 10,342.94, and also cemented its longest stretch of losses since Oct. 12. The Dow Jones Industrial Average
DJIA,
-0.46%
closed 146.51 points, or 0.5%, lower at 32,001.25, tying a four-day losing streak that ended Oct. 10. Stock losses have accelerated over the last two days after Federal Reserve Chairman Jerome Powell said it was “premature” to discuss pausing the central bank’s campaign of interest-rate hikes.

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November 3, 2022
Fed approves 0.75-point hike to take rates to highest since 2008 and hints at change in policy ahead

The Federal Reserve on Wednesday approved a fourth consecutive three-quarter point interest rate increase and signaled a potential change in how it will approach monetary policy to bring down inflation.

In a well-telegraphed move that markets had been expecting for weeks, the central bank raised its short-term borrowing rate by 0.75 percentage point to a target range of 3.75%-4%, the highest level since January 2008.

The move continued the most aggressive pace of monetary policy tightening since the early 1980s, the last time inflation ran this high.

Along with anticipating the rate hike, markets also had been looking for language indicating that this could be the last 0.75-point, or 75 basis point, move.

The new statement hinted at that policy change, saying when determining future hikes, the Fed “will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”

Economists are hoping this is the much talked about “step-down” in policy that could see a rate increase of half a point at the December meeting and then a few smaller hikes in 2023.

Changes in policy path

This week’s statement also expanded on previous language simply declaring that “ongoing increases in the target range will be appropriate.”

The new language read, “The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time.”

Stocks initially rose following the announcement, but turned negative during Chairman Jerome Powell‘s news conference as the market tried to gauge whether the Fed thinks it can implement a less restrictive policy that would include a slower pace of rate hikes to achieve its inflation goals.

On balance, Powell dismissed the idea that the Fed may be pausing soon though he said he expects a discussion at the next meeting or two about slowing the pace of tightening.

He also reiterated that it may take resolve and patience to get inflation down.

“We still have some ways to go and incoming data since our last meeting suggests that the ultimate level of interest rates will be higher than previously expected,” he said.

Still, Powell repeated the idea that there may come a time to slow the pace of rate increases. He has said this at recent news conferences

“So that time is coming, and it may come as soon as the next meeting or the one after that. No decision has been made,” he said.

Soft-landing path narrows

The chairman also expressed some pessimism about the future. He noted that he now expects the “terminal rate,” or the point when the Fed stops raising rates, to be higher than it was at the September meeting. With the higher rates also comes the prospect that the Fed will not be able to achieve the “soft landing” that Powell has spoken of in the past.

“Has it narrowed? Yes,” he said in response to a question about whether the path has narrowed to a place where the economy doesn’t enter a pronounced contraction. “Is it still possible? Yes.”

However, he said the need for still-higher rates makes the job more difficult.

“Policy needs to be more restrictive, and that narrows the path to a soft landing,” Powell said.

Along with the tweak in the statement, the Federal Open Market Committee again categorized growth in spending and production as “modest” and noted that “job gains have been robust in recent months” while inflation is “elevated.” The statement also reiterated language that the committee is “highly attentive to inflation risks.”

The rate increase comes as recent inflation readings show prices remain near 40-year highs. A historically tight jobs market in which there are nearly two openings for every unemployed worker is pushing up wages, a trend the Fed is seeking to head off as it tightens money supply.

Concerns are rising that the Fed, in its efforts to bring down the cost of living, also will pull the economy into recession. Powell has said he still sees a path to a “soft landing” in which there is not a severe contraction, but the U.S. economy this year has shown virtually no growth even as the full impact from the rate hikes has yet to kick in.

At the same time, the Fed’s preferred inflation measure showed the cost of living rose 6.2% in September from a year ago – 5.1% even excluding food and energy costs. GDP declined in both the first and second quarters, meeting a common definition of recession, though it rebounded to 2.6% in the third quarter largely because of an unusual rise in exports. At the same time, housing demand has plunged as 30-year mortgage rates have soared past 7% in recent days.

On Wall Street, markets have been rallying in anticipation that the Fed soon might start to ease back as worries grow over the longer-term impact of higher rates.

The Dow Jones Industrial Average has gained more than 13% over the past month, in part because of an earnings season that wasn’t as bad as feared but also due to growing hopes for a recalibration of Fed policy. Treasury yields also have come off their highest levels since the early days of the financial crisis, though they remain elevated. The benchmark 10-year note most recently was around 4.09%.

There is little if any expectation that the rate hikes will halt anytime soon, so the anticipation is just for a slower pace. Futures traders are pricing a near coin-flip chance of a half-point increase in December, against another three-quarter point move.

Current market pricing also indicates the fed funds rate will top out near 5% before the rate hikes cease.

The fed funds rate sets the level that banks charge each other for overnight loans, but spills over into multiple other consumer debt instruments such as adjustable-rate mortgages, auto loans and credit cards.

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November 2, 2022
Stocks open lower as S&P 500 pulls back from 6-week high; Dow heads for best October ever

U.S. stocks opened lower on Monday with the S&P 500 pulling back from Friday’s six-week high as investors wait for the Federal Reserve to deliver another jumbo interest-rate hike later this week. The S&P 500
SPX,
-0.75%
fell 25 points, or 0.7%, to 3,875. The Dow Jones Industrial Average
DJIA,
-0.39%
shed 199 points, or 0.6%, to 32,662. The Nasdaq Composite
COMP,
-1.03%
fell 69 points, or 0.6%, to 11,033. All three major indexes have had a stellar October even as the Nasdaq has lagged. The Dow, which finished Friday’s session at its highest closing level in two months, leaving it on track to log its best monthly performance since the 1970s, and its best October gain since its creation.

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October 31, 2022
Why the Dow is having a killer month as it heads for best October ever

The Dow Jones Industrial Average has been criticized by some market watchers for being a poor barometer of equity-market performance given its relatively small sample size of just 30 stocks.

But this quality, along with the paucity of megacap technology names, has helped shepherd the index toward what’s expected to be its biggest October gain in its 126-year history.

With a month-to-date gain of 14.40% through Friday, the Dow
DJIA,
+2.59%
is on track for its best monthly performance since January 1976, when it rose 14.41%, according to Dow Jones Market Data. To clinch its best October ever, it only needs to hang on to a month-to-date gain of 10.65% by the time the U.S. market closes on Monday.

The Dow is still in a bear market, but is now down less than 10% for the year to date. That compares, however, with year-to-date losses of 18.2% for the S&P 500
SPX,
+2.46%
and 29% for the Nasdaq Composite
COMP,
-8.39%.

Read: What the Dow’s stellar October and Big Tech’s ugly rout say about the stock market right now

What exactly has made the Dow’s October performance so stellar?

The blue-chip gauge is packed with energy and industrials stocks, which have been among the best performing sectors for the stock market since the start of the year, noted Art Hogan, chief market strategist at B. Riley Wealth Management.

These stocks have performed particularly well since the start of the latest quarterly earnings season, while megacap technology names like Meta Platforms Inc.
META,
+1.29%,
Amazon.com Inc.
AMZN,
-6.80%
and Alphabet Inc.
GOOG,
+4.30%
have sputtered after delivering results and guidance that disappointed Wall Street this week.

“It’s very tech-light, and it’s very heavy in energy and industrials, and those have been the winners,” Hogan said. “The Dow just has more of the winners embedded in it and that has been the secret to its success.”

See: Live markets coverage

The Dow is on track to log its highest close in at least two months on Friday as it outperforms both the S&P 500
SPX,
+2.46%
and Nasdaq Composite
COMP,
-8.39%.
Furthermore, it’s on track to climb for a sixth straight session, what would be its longest winning streak since May 27, according to DJMD.

Adding to the list of notable factoids, the average is also on track to log a fourth straight weekly gain, which would cement its longest winning streak since Nov. 5, 2021, when the index rose for five straight weeks.

Caterpillar Inc.
CAT,
+3.39%,
Chevron Corp.
CVX,
+1.17%
And Amgen Inc.
AMGN,
+2.46%
are the top-performing Dow stocks so far this month, having gained 29.3%, 21.2% and 18.3%, respectively, as of Friday.

In recent trade, the blue-chip average was up around 700 points, or 2.2%, on track for its biggest daily point and percentage gain in exactly one week.

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October 30, 2022
The Dow is soaring as Big Tech tumbles: What that says about the Fed, recession fears, and the path ahead for stocks

The past week offered a tale of two markets, with gains for the Dow Jones Industrial Average putting the blue-chip gauge on track for its best October on record while Big Tech heavyweights suffered a shellacking that had market veterans recalling the dot-com bust in the early 2000s.

“You have a tug of war,” said Dan Suzuki, deputy chief investment officer at Richard Bernstein Advisors LLC (RBA), in a phone interview.

For the technology sector, particularly the megacap names, earnings were a major drag on performance. For everything else, the market was short-term oversold at the same time optimism was building over expectations the Federal Reserve and other major global central banks will be less aggressive in tightening monetary policy in the future, he said.

Read: Market expectations start to shift in direction of slower pace of rate hikes by Fed

What’s telling is that the interest-rate sensitive tech sector would usually be expected to benefit from a moderation of expectations for tighter monetary policy, said Suzuki, who contends that tech stocks are likely in for a long period of underperformance versus their peers after leading the market higher over the last 12 years, a performance capped by soaring gains following the onset of COVID-19 pandemic in 2020.

RBA has been arguing that there was “a major bubble within major portions of the equity market for over a year now,” Suzuki said. “We think this is the process of the bubble deflating and we think there’s probably further to go.”

The Dow
DJIA,
+2.59%
surged nearly 830 points, or 2.6%, on Friday to end at a two-month high and log a weekly gain of more than 5%. The blue-chip gauge’s October gain was 14.4% through Friday, which would mark its strongest monthly gain since January 1976 and its biggest October rise on record if it holds through Monday’s close, according to Dow Jones Market Data.

While it was a tough week for many of Big Tech’s biggest beasts, the tech-heavy Nasdaq Composite
COMP,
-8.39%
and tech-related sectors bounced sharply on Friday. The tech-heavy Nasdaq swung to a weekly gain of more than 2%, while the S&P 500
SPX,
+2.46%
rose nearly 4% for the week.

Big Tech companies lost more than $255 billion in market capitalization in the past week. Apple Inc.
AAPL,
+7.56%
escaped the carnage, rallying Friday as investors appeared okay with a mixed earnings report. A parade of disappointing earnings sank shares of Facebook parent Meta Platforms Inc.
META,
+1.29%,
Google parent Alphabet Inc.
GOOG,
+4.30%

GOOGL,
+4.41%,
Amazon.com Inc.
AMZN,
-6.80%
and Microsoft
MSFT,
+4.02%.

Mark Hulbert: Technology stocks tumble — this is how you will know when to buy them again

Together, the five companies have lost a combined $3 trillion in market capitalization this year, according to Dow Jones Market Data.

Opinion: A $3 trillion loss: Big Tech’s horrible year is getting worse

Aggressive interest rate increases by the Fed and other major central banks have punished tech and other growth stocks the most this year, as their value is based on expectations for earnings and cash flow far into the future. The accompanying rise in yields on Treasurys, which are viewed as risk-free, raises the opportunity cost of holding riskier assets like stocks. And the further out those expected earnings stretch, the bigger the hit.

Excessive liquidity — a key ingredient in any bubble — has also contributed to tech weakness, said RBA’s Suzuki.

And now investors see an emerging risk to Big Tech earnings from an overall slowdown in economic growth, Suzuki said.

“A lot of people have the notion that these are secular growth stocks and therefore immune to the ups and downs of the overall economy — that’s not empirically true at all if you look at the history of profits for these stocks,” he said.

Tech’s outperformance during the COVID-inspired recession may have given investors a false impression, with the sector benefiting from unique circumstances that saw households and businesses become more reliant on technology at a time when incomes were surging due to fiscal stimulus from the government. In a typical slowdown, tech profits tend to be very economically sensitive, he said.

The Fed’s policy meeting will be the main event in the week ahead. While investors and economists overwhelmingly expect policy makers to deliver another supersize 75 basis point, or 0.75 percentage point, rate increase when the two-day gathering ends on Wednesday, expectations are mounting for Chairman Jerome Powell to indicate a smaller December may be on the table.

However, all three major indexes remain in bear markets, so the question for investors is whether the bounce this week will survive if Powell fails to signal a downshift in expectations for rate rises next week.

See: Another Fed jumbo rate hike is expected next week and then life gets difficult for Powell

Those expectations helped power the Dow’s big gains over the past week, alongside solid earnings from a number of components, including global economic bellwether Caterpillar Inc.
CAT,
+3.39%.

Overall, the Dow benefited because it’s “very tech-light, and it’s very heavy in energy and industrials, and those have been the winners,” Art Hogan, chief market strategist at B. Riley Wealth Management told MarketWatch’s Joseph Adinolfi on Friday. “The Dow just has more of the winners embedded in it and that has been the secret to its success.”

Meanwhile, the outperformance of the Invesco S&P 500 Equal Weight ETF
RSP,
+2.08%,
up 5.5% over the week, versus the market-cap-weighted SPDR S&P 500 ETF Trust
SPY,
+2.38%,
underscored that while tech may be vulnerable to more declines, “traditional parts of the economy, including sectors that trade at a lower valuation, are proving resilient since the broad markets bounced nearly two weeks ago,” said Tom Essaye, founder of Sevens Report Research, in a Friday note.

“Stepping back, this market and the economy more broadly are starting to remind me of the 2000-2002 setup, where extreme tech weakness weighed on the major indices, but more traditional parts of the market and the economy performed better,” he wrote.

Suzuki said investors should remember that “bear markets always signal a change of leadership” and that means tech won’t be taking the reins when the next bull market begins.

“You can’t debate that we’ve already got a signal and the signal is telling up that next cycle not going to look anything like the last 12 years,” he said.

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October 29, 2022
Why the Dow is having a killer month as it heads for best October ever

The Dow Jones Industrial Average has been criticized by some market watchers for being a poor barometer of equity-market performance given its relatively small sample size of just 30 stocks.

But this quality, along with the paucity of megacap technology names, has helped shepherd the index toward what’s expected to be its biggest October gain in its 126-year history.

With a month-to-date gain of 14%, the Dow
DJIA,
+2.57%
is on track for its best monthly performance since January 1976, when it rose 14.4%, according to Dow Jones Market Data. To clinch its best October ever, it only needs to hang on to a month-to-date gain of 10.65% by the time the U.S. market closes on Monday.

The Dow is still in a bear market and remains down more than 10% for the year to date. That compares, however, with year-to-date losses of 18.6% for the S&P 500
SPX,
+2.40%
and 29.6% for the Nasdaq Composite
COMP,
+2.74%.

What exactly has made the Dow’s October performance so stellar?

The blue-chip gauge is packed with energy and industrials stocks, which have been among the best performing sectors for the stock market since the start of the year, noted Art Hogan, chief market strategist at B. Riley Wealth Management.

These stocks have performed particularly well since the start of the latest quarterly earnings season, while megacap technology names like Meta Platforms Inc.
META,
+1.14%,
Amazon.com Inc.
AMZN,
-7.41%
and Alphabet Inc.
GOOG,
+4.28%
have sputtered after delivering results and guidance that disappointed Wall Street this week.

“It’s very tech-light, and it’s very heavy in energy and industrials, and those have been the winners,” Hogan said. “The Dow just has more of the winners embedded in it and that has been the secret to its success.”

See: Live markets coverage

The Dow is on track to log its highest close in at least two months on Friday as it outperforms both the S&P 500
SPX,
+2.40%
and Nasdaq Composite
COMP,
+2.74%.
Furthermore, it’s on track to climb for a sixth straight session, what would be its longest winning streak since May 27, according to DJMD.

Adding to the list of notable factoids, the average is also on track to log a fourth straight weekly gain, which would cement its longest winning streak since Nov. 5, 2021, when the index rose for five straight weeks.

Caterpillar Inc.
CAT,
+3.22%,
Chevron Corp.
CVX,
+0.75%
And Amgen Inc.
AMGN,
+2.21%
are the top-performing Dow stocks so far this month, having gained 29.3%, 21.2% and 18.3%, respectively, as of Friday.

In recent trade, the blue-chip average was up around 700 points, or 2.2%, on track for its biggest daily point and percentage gain in exactly one week.

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October 28, 2022
Dow hits 2-month high as blue-chip gauge heads for longest winning streak since May
The Dow Jones Industrial Average rose nearly 600 points on Friday to its highest level in two months as the blue-chip gauge remained on track for a sixth straight session in the green in what would be its longest winning streak since May 27, according to Dow Jones Market Data.

All three major indexes were trading higher as expectations that the Federal Reserve will shift toward smaller interest-rate hikes after its November meeting have offset weak earnings this week from some of the market’s biggest megacap technology names.
How are stocks trading?
- The S&P 500
  SPX,
  +1.67%
  gained 59 points, or 1.6%, to 3,866.
- The Dow Jones Industrial Average
  DJIA,
  +1.98%
  rose 589 points, or 1.8%, to 32,623.
- The Nasdaq Composite
  COMP,
  +1.80%
  advanced 181 points, or 1.7%, to 10,974.
Both the S&P 500 and Nasdaq were on track to cement their second weekly gain in a row on Friday, although the tech-heavy Nasdaq has substantially lagged after Thursday’s performance, where it was the only one of the major indexes to finish in the red following abysmal earnings from Meta Platforms Inc.

Barring an intraday turnaround, the Dow is on track to log its fourth straight weekly advance. It remains down just 10.2% so far this year.

The blue-chip gauge has risen 5% so far this week, while the S&P 500 is up 3.1% and the Nasdaq has risen 1.1%.

What’s driving markets?

All eyes were on the Dow Friday as the blue-chip gauge was the only major index to reach new notable highs late this week as its advance during the month of October has somewhat ameliorated its losses for the year so far.

The Dow has risen 13.5% since the start of the month, leaving it on track for its best October performance since it was created in the late 19th century.

Perhaps the biggest reason for the Dow’s rise this month is tied to its composition. The average is generally light on technology stocks, while including more of the energy and industrial stocks that have outperformed this year.

“The Dow just has more of the winners embedded in it and that has been the secret to its success,” said Art Hogan, chief market strategist at B.Reily Wealth.

Despite some volatility in the premarket session, all three major indexes turned higher after the open as investors remained fixated on expectations for the Fed to down shift to smaller interest rate hikes after next week’s policy meeting — an expectation that endured after the latest reports on inflation and wage growth released Friday.

See:Market expectations start to shift in direction of slower pace of rate hikes by Fed

Brad Conger, deputy chief investment officer at Hirtle, Callaghan & Co., said Friday’s data didn’t interfere with mounting expectations that the Fed might soon pause its campaign of aggressive rate hikes.

“Basically, the market is starting to price in a pause, not a pivot, but maybe a pause. The end is in sight,” Conger said.

The September core personal consumption expenditures price index — the Fed’s preferred gauge of inflation pressures — came in roughly in line with economists expectations, while a more modest 1.2% gain in private wages and salaries in the third quarter was interpreted as a sign that wage growth may have finally peaked, according to Andrew Hunter, senior U.S. economist at Capital Economics.

“The Federal Reserve has not yet broken the persistent trend in core inflation and so will likely stay aggressive at next week’s meeting. However, some areas of the economy show significant weakness and could build the case that the Fed downshifts to smaller rate hikes in 2023,” Jeffrey Roach, Chief Economist for LPL Financial in Charlotte, NC, said.

The final reading of the University of Michigan consumer sentiment index for October added 1.3 index points from 58.6 in September, and was up slightly from an initial reading of 59.8 earlier in the month.

See: GDP looked great for the U.S. economy, but it really wasn’t

Since the start of the week, investors have digested a batch of disappointing numbers from some of America’s largest tech companies, which helped to sully the overall quality of S&P 500 earnings this quarter.

On Thursday night, Amazon.com
AMZN,
-9.29%
joined Microsoft Corp.
MSFT,
+2.75%,
Alphabet Inc.
GOOGL,
+2.76%
and Meta
META,
+0.34%
by publishing disappointing earnings for the quarter that ended Sept. 30.

But despite the disappointing results reported this week, in aggregate, S&P 500 firms are beating earnings expectations by 3.8%, according to Refinitiv data. That’s compared to a long-term average of 4.1% since 1994. However, if energy firms are excluded, the picture darkens substantially.

Opinion: The cloud boom has hit its stormiest moment yet, and it is costing investors billions

Shares of Amazon were off 10% after the e-commerce giant, which dominates the consumer-discretionary sector, predicted slower holiday sales and profit while also reporting slower-than-expected growth in its key cloud-computing business.

Peter Garnry, head of equity strategy at Saxo Bank, said investors were unnerved by Amazon’s guidance cut.

“The outlook for Q4 was what terrified investors with the retailer guidance operating income in the range $0-4 billion vs est. $4.7 billion and revenue of $140-148 billion vs est. $155.5 billion,” he said in a note.

One notable exception to the downbeat earnings news this week was Apple Inc.
AAPL,
+7.21%,
which proved a bright spot after the iPhone maker’s revenue and earnings topped forecasts, helped by record back-to-school sales of Macs. Shares were up nearly 0.9% in premarket trading.

Companies in focus
- Oil giants Chevron Corp. CVX and Exxon Mobil Corp. XOM were climbing on Friday after reporting strong results. Chevron is a Dow component.
- Pinterest Inc. PINS also saw strong sales and profit in the third quarter, beating Wall Street expectations. Its shares were up more than 14%.
- Intel Corp. INTC shares advanced more than 8% after reporting an earnings beat. The chip maker said it would cut costs by $3 billion next year, and lay off employees, as it trimmed its outlook again.
See also: Live Markets coverage:
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October 28, 2022
Consumer mood indicates ‘a recession ahead’ amid stock, housing market ‘tumult’

The numbers: Consumer sentiment improved slightly in October to 59.9, though Americans perceptions of the economy remained historically negative as a weak stock market and ongoing inflation weighed on their finances.

The University of Michigan’s gauge of consumer attitudes added 1.3 index points from 58.6 in September, and was up slightly from an initial reading of 59.8 earlier in the month.

Economists were expecting at a reading of 59.8, according to a Wall Street Journal poll.

Big picture: While the rate of inflation is no longer worsening, steady price increases for key items like food and shelter continue to weigh on the American mood.

“With sentiment sitting only 10 index points above the all-time low reached in June, the recent news of a slowdown in consumer spending in the third quarter comes as no surprise,’ wrote the survey’s director, Joanne Hsu, in a Friday note.

“While lower-income consumers reported sizable gains in overall sentiment, consumers with considerable stock market and housing wealth exhibited notable declines in sentiment, weighed down by tumult in those markets,” she added. “Given consumers’ ongoing unease over the economy, most notably this month among higher-income consumers, any continued weakening in incomes or wealth could lead to further pullbacks in spending that would reinforce other risks of recession.”

Key details: A gauge of consumer’s views of current conditions rose in October to 65.6 from 59.7 in September, while an indicator of expectations for the next six months fell to 56.2 from 58 last month.

Market reaction: U.S. stocks were trading mixed Friday morning, with the Dow Jones Industrial Average
DJIA,
+2.59%
TK and the S&P 500 TK
SPX,
+2.46%.

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October 28, 2022
Cash Is the Focus as Boeing Reports Its Earnings

Boeing

has reported positive free cash flow in only one quarter in more than three years. Whether the company generated more than it burned through in the three months through September, and how much it will produce in coming quarters, holds the key to the stock’s next move.

Wednesday morning, B

oeing

(ticker: BA) is due to report third-quarter numbers. Wall Street is looking for earnings of about 10 cents a share from $17.8 billion in sales, a significant improvement from the second quarter, when

Boeing

reported an adjusted loss of 37 cents a share from sales of $16.7 billion.

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October 25, 2022
Stocks are having a stellar October. Why the bear-market rally may have more room to run.

An earlier version of this story misstated the date of the U.S. midterm elections. They will be held Nov. 8, not Nov. 9.

Despite a raft of risky events that investors must face down over the coming weeks, some on Wall Street believe that the latest bear-market rally in stocks has more room to run.

Although the S&P 500
SPX,
+1.50%,
Dow Jones Industrial Average
DJIA,
+0.97%
and Nasdaq Composite
COMP,
+16.23%
remain mired in bear markets, stocks have been bouncing back from the “oversold” levels when the major indexes fell to their lowest levels in two years. Bear markets are known for sharp bounces, such as the rebound that took the S&P 500 up more than 17% from its mid-June low before sliding back down to set a new 2022 low on Oct. 12.

With that said, here are a few things for investors to keep in mind.

There’s plenty of event risk facing markets

On top of a deluge of corporate earnings this week, including some of the biggest megacap tech stocks like Microsoft Corp.
MSFT,
+1.07%
and Amazom.com Inc.
AMZN,
+0.64%,
investors will also receive some key economic data reports over the next couple of weeks — including a reading from the Fed’s preferred inflation gauge on Friday, and the October jobs numbers, set to be released on Nov. 4.

Beyond that, there’s also the Fed’s next policy meeting that concludes on Nov. 2. The Fed is widely expected to hike interest rates by another 75 basis points, the fourth “jumbo” hike this year.

Midterm U.S. elections, which will determine which party controls the House and Senate in the U.S. are slated to take place Nov. 8.

Investors are still trying to parse the Fed’s latest messaging shift

Investors cheered what some market watchers described as a coordinated shift in messaging from the Fed last week, conveyed via an Oct. 21 report from The Wall Street Journal that indicated the size of a December Fed rate increase would be up for debate, along with comments from San Francisco Fed President Mary Daly.

Still, the Fed isn’t expected to materially pivot any time soon.

Because the fact remains: there’s plenty of froth that needs to be squeezed out of markets after nearly two years of extraordinary monetary and fiscal stimulus unleashed in the wake of the COVID-19 pandemic, according to Steve Sosnick, chief strategist at Interactive Brokers.

“It’s easier to inflate a bubble than to pop it, and I’m not using the term ‘bubble’ facetiously,” he said during a phone interview with MarketWatch.

Richard Farr, chief market strategist at Merion Capital Group, played down the impact of the Fed’s latest “coordinated” shift in guidance during an interview with MarketWatch, saying the impact on the terminal fed-funds rate is relatively immaterial.

Fed-funds futures traders anticipate the upper end of the central bank’s key target rate will rise to 5% before the end of the first quarter of next year, and remain there potentially into the fourth quarter, although an earlier cut wouldn’t be a complete surprise, according to the CME’s FedWatch tool.

Market technicians believe stocks might move a little higher

So far, October isn’t shaping up to be anything like September, when stocks fell 9.3% to polish off the worst first nine months of a calendar year in two decades.

Instead, the S&P 500 has already risen more than 5.5% since the start of October despite briefly crashing to its lowest intraday level in more than two years following the release of the September consumer-price index report earlier this month.

Read: ‘Bear killers’ and crashes: What investors need to know about October’s complicated stock-market history

Technical indicators suggest the S&P 500 can continue to build on last week’s gain, said Katie Stockton, a market strategist at Fairlead Strategies, in a note she shared with clients and MarketWatch.

According to her, the next key level to watch out for on the S&P 500 is north of 3,900, more than 100 points above where the index closed on Monday.

“Short-term momentum remains to the upside within the context of the year-to-date downtrend. Support near 3,505 was a natural staging ground for a relief rally, and initial resistance is near 3,914,” she said.

A key bear sees a tradeable opportunity

Mike Wilson, Morgan Stanley’s chief U.S. equity strategist and chief investment officer, has been one of Wall Street’s most outspoken bears for more than a year now.

But in a note to clients early this week, he reiterated that stocks were looking ripe for a bounce.

“Last week’s tactical bullish call was met with doubt from clients, which means there is still upside as we transition from Fire to Ice — falling inflation expectations can lead to lower rates and higher stock prices in the absence of capitulation from companies on 2023 EPS guidance,” Wilson said.

This earnings season is off to an good start

At this point, it’s safe to say that the third-quarter earnings season has vanquished fears that the Fed’s interest-rate hikes and gnawing inflation had already dramatically eroded profit margins, market strategists said.

The quality of earnings reported already has surpassed some of the early “whisper numbers” bandied about by traders and strategists, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.

In aggregate, companies are reporting earnings 5.4% above expectations, according to data from Refinitiv shared with the media on Monday. This compares to a long-term average — since 1994 — of 4.1%.

However, when the energy sector is removed from the equation, expectations seem much more grim. The blended year-to-year earnings estimate for the third quarter is -3.6%, according to the Refinitiv data.

While investors are still waiting on earnings from roughly three-quarters of S&P 500 firms, according to FactSet data, some — like Morgan Stanley’s Wilson — are already looking toward next year as they expect the outlook for profits will darken substantially, possibly leading to an earnings recession — when corporate earnings shrink for two quarters in a row.

The outlook for the global economy remains dim

Speaking of energy, crude oil prices are flashing an ominous warning about expectations for the global economy.

“A lot of the weak oil reflects expectations that the global economy will be in recession and near recession,” said Steve Englander, global head of G-10 currency strategy at Standard Chartered.

West Texas Intermediate crude-oil futures
CLZ22,
+0.48%
settled lower on Monday, as lackluster import data from China and the end of the Communist Party’s leadership conference hinted at softening demand in the world’s second-largest oil consumer. Prices continued to decline early Tuesday.

Be wary of ‘fighting the Fed’

Investors remain worried that “something else might break” in markets, as MarketWatch reported over the weekend.

It’s possible that such fears inspired the Fed’s apparent guidance shift, Sosnick said. But the fact remains: anybody buying stocks while the Fed is aggressively tightening monetary policy should be prepared to tolerate losses, at least in the near term, he said.

“Simplest thing of all is: ‘don’t fight the Fed.’ If you’re trying to buy stocks now, what are you doing? It doesn’t mean you can’t buy stocks overall. But it means you’re fighting an uphill battle,” he said.

The VIX is signaling that investors expect a wild ride

Even as stocks extended their October rebound for another session on Monday, the Cboe Volatility Index
VIX,
-4.49%
remained conspicuously elevated, reflecting the notion that investors don’t anticipate the market’s wild ride will end any time soon.

The Wall Street “fear gauge” finished Monday’s session up 0.5% at 29.85 and it was trading just shy of the 30 level early Tuesday.

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October 25, 2022