The Stock Market News of The Week

While this week, investors await major data amid corporate earnings and CPI print & US midterm elections show signs of a Republican tilt, the major indexes gain momentum:  The S&P 500 advanced  1%. In comparison, the technology-heavy Nasdaq Composite rose 0.9%.

Stocks finished rallying with losses the previous week – with a rather gloomy outlook by FOMC. It indicated that the Federal Reserve would likely raise rates and increments at a higher pace than anticipated by investors. Adding to the not-so-wonderful broad picture, Friday’s published jobs data also showed that the labor market remains resilient. This further confirmed investors’ fear of interest rate hikes.

Economic/Political Factors Influencing Trajectories

In the current week, investors focus on the US midterm elections, indicating that the Republican tilt in the House of Representatives will positively impact the stock market. They are also eyeing Thursday’s CPI print, with analyst consensus at an annual inflation rate of 7.9%, lower than the previous month’s 8.2%. Major prospects are also set on corporate earnings from Walt Disney, Adidas, and Occidental Petroleum.

Alas, expectations eventually result in disappointment, and respectively, investors state that interest rate expectations and economic data will finally overshadow any boost catalyzed by the elections and corporate earnings. The potential upcoming rally is customary to be short-term and eventually reversed by the souring of the global economy due to ongoing geopolitical conflicts, strained supply chains exacerbated by China’s Zero-COVID policy, and persistent global inflation.

The yield on a benchmark 10-year Treasury note rose from Friday in bond markets. Bond prices and yields are inversely correlated.

Forecasts of individual US stocks and EU stock market

Individual tech stocks also spiked due to anticipation of layoffs. It could follow after Meta’s announced reduction in force (RIF). Palantir Technologies shares plummeted by 11% after announcing a slower sales growth forecast. The signs of neurosis are apparent. In corporate performance, nearly a quarter of companies that have reported results are missing the forecasts. 

In Europe, Stoxx 600 index plunged. Followed by a busy earnings week dragged by real estate, automobile and consumer stocks, and monetary tightening. The BOE raised rates by 75 basis points last week, indicating more to come.