The U.S. stock market’s record-setting rise could hit its scariest stretch of 2024 this coming week, when a huge number of risks are expected to happen.
A lot will depend on how much money big tech companies report, how volatile the U.S. debt markets are, the monthly jobs report for October due out on Friday, and the last few weeks of a very heated presidential race.
One person who works at SLC Management and is in charge of investment strategy and asset allocation said, “It’s a tossup that’s definitely bothering the rates market.” “In the last month, the 10-year has really sped up.”
Mullarkey said that there is a lot of election anxiety in the gold GC00 0.03% and Treasury markets before the Nov. 5 election. This is especially true since polls show that the race for president is very close.
Count on big tech
The S&P 500 index SPX 0.41% finished the week down, even though Tesla Inc.’s TSLA 1.01% roughly 22% weekly gain after it shocked Wall Street with strong third-quarter earnings and an optimistic outlook gave it a big boost.
Next on the list are Alphabet Inc. (GOOG) at 0.80% on Tuesday, Microsoft Corp. (MSFT) at 0.20% and Meta Platforms Inc. (META) at 0.48% on Wednesday, and Apple Inc. (AAPL) at 0.97% and Amazon.com Inc. (AMZN) at 0.85% on Thursday. Nvidia Corp. NVDA -0.60%, which makes AI chips, will release its earnings on November 20.
“This is a big week,” said Eric Beiley, executive managing director of wealth management at Steward Partners. “The ‘Magnificent Seven’ are all very important earnings reports.” “Those companies need to show good results because their stocks are trading at very high prices.”
Big tech stocks are back in style, even though the rise earlier this year included midcap and even small-cap stocks that could benefit from the Federal Reserve’s decision to cut interest rates.
In the week ending Friday, the Russell 2000 index RUT 1.72% of small-cap stocks went down 3%, while the S&P 500’s IT sector SP500.45 0.23% went up 0.2%, according to FactSet.
“Big tech could be a trick or a treat,” said Keith Lerner, co-chief investment officer at Truist Advisory Services.
If the stakes weren’t high enough, Apple and Amazon’s third-quarter results also coincide this year with Halloween, which can be among the more volatile days of the year since it falls within the typical month-end portfolio rebalancing period.
“Stocks are getting into the teeth of earnings season,” said Matt Stucky, chief portfolio manager, equities, at Northwestern Mutual Wealth Management.
For one day, jobs
Fed officials are still hoping that the job market can find a good balance between cooling off too much and warming up in a way that makes people worry about inflation again.
That debate will be brought back to the forefront on Friday with the monthly jobs report for October, even though Wall Street experts have been warning that the data could be skewed by two strong hurricanes and workers on strike at Boeing Co. BA -0.66% last week.
Surprisingly good job numbers in September helped ease earlier worries that the economy might go into a sharp decline. A big worry has been that higher wages, while generally good, could also cause prices to rise and make it impossible for the Fed to cut rates in a real way.
Someone at Truist said, “It will have some effect, unless it’s a big negative or big positive reading.” “I believe the jobs report will be the most important thing for one day. After that, it will be all about the election.”
Election stress
Even though the U.S. economy has been doing well in 2024, not all households have been able to handle their money as well since the COVID problem.
The strong economy that has been going on since September is to blame for the sharp drop in U.S. government debt. The bond market had to cancel out earlier expected Fed rate cuts. Another reason that is growing is worry about the upcoming election.
Bloomberg says that the 10-year Treasury yield finished the week at 4.23%, just a few days after seeing its biggest 26-day gain since October of last year. It costs more for people, companies, and the government to borrow money when yields are high.
Neither Vice President Kamala Harris nor former President Donald Trump are seen as likely to deal with the big U.S. government debt by Wall Street. Some very wealthy investors, like Paul Tudor Jones, have recently been very worried about America’s huge debt and what might happen with import taxes and tax cuts if Trump wins the election.
Mullarkey at SLC Management said that the only things that are really scared about the election right now are U.S. debt and the gold market. Even though he wasn’t a “gold bug,” he said that the fact that global central banks bought more gold in October, which helped drive prices to record highs, should be taken into account.
Trump’s campaign has made threats about both putting tariffs on imports and punishing countries that stop using the dollar. Mullarkey said, “Gold is a well-respected alternative or hedge against tail risks.” He also said that the price of the valuable metal could go up even more if the election results cause more tension.
Friday, most of the three major U.S. stock indexes finished down. Only the Nasdaq Composite Index COMP 0.49% ended up, making it seven weeks in a row that it has done well. The S&P 500 went down 1%, the Nasdaq went up 0.2%, and the Dow Jones Industrial Average DJIA 0.64% went down 2.7%. All three were off by less than 3% from their previous highs.
