Three Key Factors That Will Impact the Stock Market in This Critical Week of the Year

3 things will influence the stock market in the most consequential week of the year

The major stock benchmarks rallied Friday but were lower last week, with the Nasdaq leading the way lower after reaching new highs. In a heavy week of tech earnings, the Nasdaq lost 1.5% and broke a seven-week winning streak. The Nasdaq on Tuesday posted a record-high close of 18,712. The index finished 2.5% below Tuesday’s high. Advanced Micro Devices lost another 9.2% this week after the company reported a solid third quarter that was overshadowed by investors wanting to see faster growth in its artificial intelligence chip business. Apple and Microsoft fell more than 3.7% and 4.2%, respectively, for the week on less-than-perfect quarterly results and guidance. Conversely, Amazon and Alphabet jumped 5.4% and 3.6%, respectively, following strong financials. Meta Platforms was little changed on the week, as investors sought to reconcile quarterly beat and guidance raise against fewer-than-expected daily active users and a higher spending outlook. Eight other Club names reported earnings last week, including Eli Lilly and Eaton. Full reports on each of them can be found under Analysis by clicking the earnings tab. Despite indications from Big Tech that Nvidia’s AI chips will remain in hot demand, the Club stock fell 4.3% for the week. Nvidia reports earnings on Nov. 20. On Friday, it was announced that Nvidia would become one of the Dow 30 stocks, replacing Intel . The S & P 500 , which is less tech-weighted, fell nearly 1.4% for the week, making it back-to-back weekly losses for the broader market index. Thursday was a terrible day all around on Wall Street, which did take some of the momentum out of stocks and tilt the market into oversold territory, according to the S & P Short Range Oscillator . Jim Cramer put AMD and CrowdStrike on this coming week’s buy list. We bought the recent dip in BlackRock on Friday and identified three earnings catalysts . The Dow Jones Industrial Average , which saw some weekly strength beyond Amazon’s gains, dropped only about 0.2%. Dow stock in payments, Visa and American Express , were strong and so were financials Goldman Sachs and JPMorgan . Bond traders were, no doubt, being whipsawed by mixed economic data last week as investors tried to figure out how much the Federal Reserve will further cut interest rates this year. On Wednesday, the first read on third-quarter U.S. economic growth pointed to a slower rate of expansion — supportive of the Fed’s decisions to start cutting rates back in September. On Thursday, the Fed’s preferred inflation gauge, the core PCE price index, was still above central bankers’ 2% inflation target in September but roughly in-line with estimates and pretty steady for the past five months. The headline PCE price index, on the other hand, continues to track lower, falling to 2.1% year over year in September, down from 2.3% in the 12 months ending in August. On Friday, the government’s monthly employment report showed 12,000 nonfarm jobs added in October versus 100,000 expected. While that miss was pretty jaw-dropping, investors gave it a pass, understanding that it was heavily impacted by the negative effects of hurricanes in Florida and the Boeing machinists strike. The ADP employment survey, out Wednesday, also served to support the idea that the nonfarm payroll wasn’t giving a real picture of employment dynamics in October as it more than doubled expectations. Wage inflation in October, per the nonfarm payrolls report, which pretty much matched estimates. While some of the pressure on Wall Street no doubt resulted from the relentless rise in the 10-year Treasury yield , which was indeed up again on the week, some may also be due to investors taking a bit of a risk off the table ahead of this week’s presidential election. Ahead of Election Day on Tuesday, some 60 million ballots have already been cast to determine whether Kamala Harris or Donald Trump will win the White House. Also at stake is control of Congress, with all 435 members of the House of Representatives on the ballot and one-third of the 50 senators. In the week ahead, the outcome at the polls and what the Fed decides at its two-day monetary policy meeting are the big economic question marks. Earnings season also continues with more than 100 of the S & P 500 companies reporting but only including one Club name DuPont . Election While Vice President Harris and former President Trump both have their own economic and political agenda that would be sure to influence the future path of the economy and the country more broadly, the greatest near-term risk as far as the stock market is concerned is that the process to determine a winner be over quickly. That’s not too much of a surprise since the market hates uncertainty more than anything. You can model good news, you can model bad news, uncertainty however, is a nightmare when it comes to thinking about stock valuations. The same goes for thinking about the political landscape. As investors look to 2025, which sectors of the economy should be overweighted or underweight depends on who sits in the Oval Office. While few expect a winner to be determined by Wednesday morning, the sooner the better is what long-term investors like us are looking for. Interest rates Outside the election, the next major event will be the Fed meeting on Wednesday and Thursday. Market odds for a 25-basis-point rate cut are all but certain, following September’s jumbo 50-basis-point cut that kicked for the central bank’s monetary easing cycle. In addition to focusing on the interest rate decision at 2 p.m. ET on Wednesday afternoon, investors will be studying everything Fed Chairman Jerome Powell says 30 minutes later at his post-meeting news conference. The big question is whether there is another 25 in December and what the rate path looks like next year. Last time around, the Fed made it clear that they are starting to equally weigh the rate of inflation and the state of the job market, a shift from what we saw previously as the job market was holding up and central bankers’ were more concerned about bringing down inflation. Earnings After analyzing earnings reports from 14 of our portfolio companies last week, there is only one Club name on the docket this week. DuPont will report quarterly results before Tuesday’s opening bell. We’re not expecting much improvement out of China given what we heard from our other industrial names operating in the region. However, commentary on when the company expects stimulus measures in the world’s second-largest economy to start converting into new orders will be key to thinking about 2025. Sluggishness in China since Covid is what’s largely been holding back DuPont’s Water & Protection segment. The Street expects Water & Protection to be down slightly year-over-year but flat on a sequential basis. Electronics & Industrial, on the other hand, is expected to be up year-over-year, benefiting from the consumer electronics refresh cycle and demand for artificial intelligence chips. Aside from the results, we’ll also be listening out for any update on the planned breakup of DuPont into three separate companies, which we continue to believe will prove a materially positive catalyst at some point next year. As of Friday, the Street is looking for DuPont sales in the third quarter of $3.2 billion and earnings of $1.03 per share. Week ahead Monday, Nov. 4 10 a.m. ET: Factory Orders Before the bell earnings: Constellation Energy (CEG), Marriott (MAR), 21St Century Fox Class B (FOX) After the bell: Palantir (PLTR), Cleveland-Cliffs (CLF), Hims & Hers Health (HIMS), Wynn Resorts (WYNN), Goodyear Tire (GT), Cirrus Logic (CRUS), Diamondback Energy (FANG) Tuesday, Nov. 5 10 a.m. EST: ISM Services Before the bell: DuPont (DD), Archer-Daniels-Midland (ADM), Apollo Global Management (APO), GlobalFoundries (GFS), Ferrari (RACE), Restaurant Brands International (QSR), Emerson Electric (EMR) After the bell: Super Micro (SMCI), Devon Energy (DVN) Wednesday, Nov. 6 Before the bell: Celsius Holdings (CELH), Novo Nordisk (NVO), CVS Health (CVS), Howmet Aerospace (HWM), Teva Pharmaceutical Industries (TEVA), Cedar Fair Entertainment (FUN), Toyota (TM), American Electric Power Company (AEP), Johnson Controls (JCI), Dine Brands Global (DIN) After the bell: Arm Holdings (ARM), AMC Entertainment (AMC), Qualcomm (QCOM), e.l.f. Beauty (ELF), Duolingo (DUOL), Take-Two Interactive Software (TTWO), Zillow (Z), Lyft (LYFT), Coty (COTY), Match Group (MTCH) Thursday, Nov. 7 8:30 a.m. ET: Initial Jobless Claims 2 p.m. ET: FOMC two-day meeting ends with rate decision 2:30 p.m. ET: Fed Chairman Jerome Powell news conference Before the bell: Vistra Energy (VST), Moderna (MRNA), Barrick Gold (GOLD), Halliburton (HAL), Hershey (HSY), Air Products & Chemicals (APD), Tapestry (TPR), Warner Bros. Discovery (WBD) After the bell: DraftKings (DKNG), Arista Networks (ANET), Block (SQ), Rivian Automotive (RIVN), Unity (U), Trade Desk (TTD), Affirm Holdings (AFRM), Fortinet (FTNT), Pinterest (PINS), Airbnb (ABNB) Friday, Nov. 8 Before the bell: Icahn Enterprises (IEP), Canopy Growth (CGC), Bloomin’ Brands (BLMN), Sony (SONY) After the bell: Paramount Global (PARA) (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Specialist traders work inside a post on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., October 23, 2024.

Brendan McDermid | Reuters

The major stock benchmarks rallied Friday but were lower last week, with the Nasdaq leading the way lower after reaching new highs.

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