The U.S. stock market will likely move lower this morning, continuing the selloff that started last week. Some of the weakness may be due to the fact that the yield on the 10-Year Treasury bond is now near the 5% mark, which may be a level of “psychological” importance. Meanwhile, this week investors will be sifting through numerous third-quarter earnings releases. A critical inflation report is also due out later in the week. Overseas, political and military hostilities between Hamas and Israel are becoming more of a concern as the conflict shows signs of spreading elsewhere in the region. Should the conflict indeed escalate, crude oil prices could move well above $100 a barrel, which could put a damper on the global economic outlook. As we were writing this report, the S&P 500 Index futures were down about 20 points (0.50%) in pre-market trading. The Dow and NASDAQ futures were also under pressure.
In the economic arena, no major reports will be released today or tomorrow. On Wednesday, new home sales for the month of September will be reported, with pending home sales following later in the week. On Thursday, the advanced estimate for third-quarter GDP (Gross Domestic Product) will be published. According to the consensus view, the numbers are expected to show that the economy expanded at an annualized rate of around 4.5% during the quarter. If this turns out to be the case, it would suggest that the economy is not headed for a recession, just yet. On Friday, we will get a look at the PCE (Personal Consumption Expenditures) Price Index for the month of September. Unfortunately, the numbers here will probably show that inflation remains well above the Federal Reserve’s 2% target. Most analysts no longer think that the central bank will lift rates at its November meeting. However, the idea that rates will soon be lowered now seems less credible.
On the corporate front, the third-quarter earnings season is now in full swing. This week we will hear from a handful of important technology names, including Microsoft (MSFT), Alphabet (GOOG), Meta Platforms (META), and Amazon.com (AMZN). These companies are undisputed technology leaders, and their reports will shed light on broader industry conditions.
From a technical viewpoint, the market has been quite choppy lately. The S&P 500 Index did manage to stage a rally attempt in early October. However, over the past week stocks sold off sharply, squashing the chances of a sustained advance. The broader market average is currently back at its 200-day moving average (situated near the 4,230 mark). Hopefully for the bulls, this key level will provide some support. - Adam Rosner
At the time of this article’s writing, the author had positions in Alphabet and Amazon.com.
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