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Company earnings and the potential for war are the focus for US Stocks

Earnings drive the equity markets

Geopolitical forces and company earnings are dominating the sentiment towards stocks. The potential for war in the Middle East as the war in Ukraine continues on. War is a terrible even at any time. In economic terms the impact on Crude prices is already being felt. Prices increased by more than 5% on fears of the potential impact on crude supply from the Middle East.

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The earnings season kicked off last week lifting a gloomy market mood. Gains in bank stocks came after both JPMorgan Chase and Wells Fargo, posted better-than-expected third-quarter earnings. Energy firms which have been strong recently continued their run. This was due to the gains in Crude prices.
 
In the week ahead the third quarter earnings season will continue. Investors will have to evaluate the earnings and economic data. All against the new back drop of potential war. Leading the way will be Tesla (TSLA) and two Healthcare stocks. Procter & Gamble (PG) and Johnson & Johnson (JNJ) will provide their earnings preview.
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Earnings announcements will continue with Netflix (NFLX), Bank of America (BAC), and Taiwan Semiconductor (TSM). This will give some insight to recent events that have dominated the news cycle. Being the bank failures earlier in 2023, the Writers and Actors strike and the AU Boom with TSM.
 
On Friday the S&P 500 Index (SPY) closed down -0.50%, and the Nasdaq 100 Index (QQQ) closed down -1.24%.
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KEY ECONOMIC DATA

On the economic front in the United States, the University of Michigan’s Oct consumer confidence index slid -5.1 points to a 5-month low of 63.0. This fell short of the forecasted of 67.0. Inflation expectations climbed as well, weighing on markets. Year-on-year inflation predictions unexpectedly rose to +3.8%, higher than the expected rate of 3.2%. On the plus side, the Sep import price index ex-petroleum declined -0.3% m/m, missing estimates of -0.1% m/m. The core rate of retail sales in the United States is expected to rise slightly from August. The forcasted statistics on industrial output and housing starts are for growth month-on-month.

FURTURE EARNINGS AND RISING LONG TERM INTEREST RATES

Hanging over the market will be the continued uncertainty over interest rates. First off the Long-end of the U.S. Yield Curve. One has to consider that, while choppy, yields are set to rise. This could be by 100 basis points or more in 2024. Short-term rates, the expectations are 10% or less that the FOMC will raise rates by +25 basis points at its next meeting. This meeting concludes on November 1.

THE NEXT MOVE FOR THE FOMC?

For the final meeting of 2023, markets are predicting a 30% likelihood of a 25-basis point hike at the December 13 meeting. Into 2024, markets are anticipating that the FOMC will begin decreasing rates. Possibly in the second half of 2024 in reaction to a predicted decline in US economic activity. Thus expect the rotation and normalization of the yield curve. Investors will need to focus and adjust their Equity Risk Premium accordingly.

Euro Stoxx 50 closed down -1.48%. China’s Shanghai Composite Index closed down -0.64%. Japan’s Nikkei 225 today closed down -0.55 %.

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BARCHART: QUICK STOCK IDEAS

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PRICE SURPRISES AND VOLATILITY

surprises both upside and downside. 

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STOCK PERFORMANCE LEADERS AND LAGGARS

Stocks below are ranked by Barchart based on the Highest Daily Percentage Change. 

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The charts used in this Blog Post are from Barchart. Barchart is a financial data and technology company that provides financial market data, news, analysis, and trading solutions. 

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Company earnings and the potential for war are the focus for US Stocks

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Warren William

Warren William

Meet the author behind Smartest-Data. Warren William has a career in Finance and Investments extending over 35 years, both on the Buy Side and Sell Side. His most recent roles include, developing Institutional Risk Management Programs for managing Equity and Fixed Income Risk.  Prior to this Warren William work in Alternative Investments, in Investment Management and as a Buy Side Equity Analyst. Warren William brings a wealth of knowledge and expertise to the table, providing in-depth analysis and commentary on the latest trends in the Stock Markets. Contact information: wwBLOG@smartest-data.blog or Telegram +393339034488

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