Stocks shrug off tech’s troubles as the Street awaits key inflation data next week

Stocks shrug off tech’s troubles as the Street awaits key inflation data next week

Stocks shrug off tech’s troubles as the Street awaits key inflation data next week

The major indexes all posted gains this week despite a Big Tech beatdown, proving the market can rally without its most valuable stocks. The Dow Jones Industrial Average once again led the way, jumping 828 points on Friday and finishing up 5.7% for the week — its fourth positive week in a row. The Dow is on track for its best month since January 1976 . The S & P 500 rose 3.9% for the week , and the Nasdaq gained 2.2%. Indeed strength in other sectors — only communication services finished down — helped the overall market to shrug off disappointing earnings results from Microsoft (MSFT), Alphabet (GOOGL), Amazon (AMZN) and Meta Platforms (M ET A). Alphabet and Meta aren’t cutting costs enough. Amazon and Microsoft reported weakening demand for its cloud products. However, the top-line results of these companies still show the economy is chugging along. Alphabet’s results fell short of the Street’s expectations, but still managed to grow revenue 6% annually off a $65 billion base. Meta Platforms revenue declined 4% annually, but was still better than expectations, and engagement at the core business was largely in line; M ET A initially popped on the release before investors got to the eye-popping expense guide. Microsoft’s Azure managed to notch 42% constant currency growth , short of the 43% consensus, but significant growth nonetheless. The same can be said for Amazon’s AWS, which advanced 28% annually in constant currency and is now an $82 billion business. ( Apple defied the tech meltdown by beating on the top and bottom lines.) So does that mean the Federal Reserve is just gong to have to clamp down harder? Demand is down, but not enough? Add this week ‘s report on third-quarter GDP into the mix, and you can become a bit more constructive. While the headline print came in better than expected (2.6% annualized versus a 2.3% estimate) the PCE price index fell to 4.2%, down from 7.3% in the second quarter. Meanwhile, the core PCE price index — the Fed’s preferred measure of inflation — was 4.5%, down from 4.7% in the prior quarter. The economy showed better-than-expected growth in the third quarter, but the rate of inflation is ticking down. It’s also important to remember there is an estimated 12 to 18 month lag between Fed rate adjustments and their impact on the economy. Investors are therefore on watch for a minor pivot from the hawkish commentary we’ve become accustomed to at next week ‘s FOMC meeting on Nov. 2. (Canada’s central bank hiked rates less than expected this week , opting for a 50 basis point hike instead of the expected 75.) To be clear, the market still expects a 75 point hike at next week ‘s meeting and is pricing in a 44% chance for another 75 at the December meeting. The pace of hikes beyond 2022, however, is expected to slow materially and potentially come back down in the back half of 2023. Unfortunately, the Fed meeting is before the nonfarm payrolls report on Friday, Nov. 4. Don’t be surprised if the back half of next week has a different personality than the first half. Meanwhile, the U.S. dollar index pulled back slightly to the 110 level. Gold is holding at about $1,650 per ounce. WTI crude prices stand at $88 and the yield on the 10-year Treasury is roughly 4%. On Friday, we bought 75 shares of Starbucks (SBUX) and exited our position in AbbVie; The Charitable Trust now owns 750 shares of SBUX, increasing its weighting in the portfolio to 2.28% from 2.06%. Looking back We received earnings results from Halliburton (HAL), Microsoft, Alphabet, Meta Platforms, Ford (F), Linde (LIN), Honeywell (HON), Amazon, Apple, and Pioneer Natural Resources (PXD). On Wednesday, we learned that new home sales fell 10.9% monthly (down 17.6% annually) in September to a seasonally adjusted annual rate (SAAR) of 603,000. That was better than the expected drop to 593,000. On Thursday, initial jobless claims for the week ending Oct. 22 came in at 217,000, an increase of 3,000 from the prior week and below expectations of 220,000. Also Thursday it was reported that gross domestic product increased 2.6% in the third quarter on an annualized basis, ahead of the 2.3% expected. Perhaps more importantly, headline inflation rose 4.2%, down sharply from 7.3% rate seen in the second quarter. On Friday, it was reported that pending home sales fell 10.2% monthly (down 31% annually) in September, more than the 4% decline expected by the Street. Lastly, personal spending rose 0.6% monthly in September, more than the 0.4% consensus. The core PCE price index increased 5.1% annually (up 0.5% monthly), slightly below the 5.2% expected. What’s ahead Earnings kick off next week . Within the portfolio, we will hear from Eli Lilly on Tuesday, before the opening bell; from Advanced Micro Devices and Devon Energy on Tuesday, after the closing bell; from Humana and Estee Lauder on Wednesday, before the opening bell; from Qualcomm on Wednesday, after the closing bell; from Bausch Health Companies on Thursday before the opening bell; and from Starbucks and Coterra Energy on Thursday, after the closing bell; Here are some other earnings reports and economic numbers to watch in the week ahead: Monday, October 31 Before the bell: ON Semiconductor (ON), Global Payments (GPN), Alliance Resources (ARLP), CNA Financial (CNA), XPO Logi ( XPO ) After the bell: NXP Semiconductor (NXPI), Avis Budget (CAR), Goodyear Tire (GT), Arista (AN ET ), American Water Works (AWK), Trex (TREX), Hologic (HOLX), AFLAC (ALF), Vornado (VNO) Tuesday, November 1 Before the bell: SONY (SONY), SoFi (SOFI), Uber (UBER), BP (BP), Marathon Petrol (MPC), Enterprise Products (EPD), SYSCO (SYY), Newmont (NEM), Fox Corp (FOXA), Molson Coors (TAP), Arconic (ARNC) After the bell: AirBnB (ABNB), Energy Transfer ( ET ), Electronic Arts (EA), Mondelez (MDLZ), MicroStrategy (MSTR), Caesars (CZR), Clorox (CLX), Match Group (MTCH), Chegg (CHGG), McKesson (MCK), American Internatinoal Group (AIG) 10:00 a.m. ET : ISM Manufacturing 10:00 a.m. ET : JOLTS Job Openings Wednesday, November 2 Before the bell: CVS Health (CVS), Progressive (PGR), Generac (GNRC), Canada Goose (GOOS), Paramount (PARA), Ferrari (RACE) Yum! Brands (YUM), Dynatrace (DT), Bausch + Lomb (BLCO) After the bell: Roku (ROKU), Marathon Oil (MRO), ET SY ( ET SY), eBay (EBAY), Booking Holding (BKNG), Fastly (FSLY), MGM Resorts (MGM), Fortinet (FTNT), Robinhood (HOOD), Zillow Group (ZG), EVgo (EVGO), Realty Income (O) 8:15 a.m. ET : ADP Employment 2:00 p.m. ET : FOMC Meeting Thursday, November 3 Before the bell: ADT Corp (ADT), Air Products (APD), AmerisourceBergen (ABC), Aptiv (APTV), Arrow Electric (ARW), Barrick Gold (GOLD), CIGNA (CI), ConocoPhillips (COP), Crocs (CROX), Cummins (CMI), CyberArk (CYBR), Datadog (DDOG), Penn National (PENN), Stem (STEM), STORE Capital (STOR) After the bell: Air Lease Corp (AL), Amgen (AMGN), Appian (APPN), Atlassian (TEAM), Block (SQ), Carvana (CVNA), Cloudflare (N ET ), Coinbase (COIN), Corteva (CTVA), DoorDash (DASH), Illumina (ILMN), Kratos Defense (KTOS), MercadoLibre (MELI), MP Materials (MP), Motorola (MSI), PayPal (PYPL), Progyny (PGNY), Skyworks (SWKS), Twilio (TWLO), Universal Display (OLED) 8:30 a.m. ET : Initial Jobless Claims 10:00 a.m. ET : Factory Orders 10:00 a.m. ET : ISM Services Friday, November 4 Before the bell: Adient (ADNT), AES Corp (AES), Arbor Realty (ABR), Cardinal Health (CAH), Cboe Global (CBOE), Cinemark (CNK), Dominion Energy (D), DraftKings (DKNG), Enbridge (ENB), EOG Resources (EOG), Flour (FLR), Magna (MGA) 8:30 a.m. ET : Nonfarm Payrolls (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) 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Stocks shrug off tech’s troubles as the Street awaits key inflation data next week. Before the bell: ON Semiconductor (ON), Global Payments (GPN), Alliance Resources (ARLP), CNA Financial (CNA), XPO Logi (XPO) After the bell: NXP Semiconductor (NXPI), Avis Budget (CAR), Goodyear Tire (GT), Arista (ANET), American Water Works (AWK), Trex (TREX), Hologic (HOLX), AFLAC (ALF), Vornado (VNO) Tuesday, November 1 Before the bell: SONY (SONY), SoFi (SOFI), Uber (UBER), BP (BP), Marathon Petrol (MPC), Enterprise Products (EPD), SYSCO (SYY), Newmont (NEM), Fox Corp (FOXA), Molson Coors (TAP), Arconic (ARNC) After the bell: AirBnB (ABNB), Energy Transfer (ET), Electronic Arts (EA), Mondelez (MDLZ), MicroStrategy (MSTR), Caesars (CZR), Clorox (CLX), Match Group (MTCH), Chegg (CHGG), McKesson (MCK), American Internatinoal Group (AIG) 10:00 a.m. ET: ISM Manufacturing 10:00 a.m. ET: JOLTS Job Openings Wednesday, November 2 Before the bell: CVS Health (CVS), Progressive (PGR), Generac (GNRC), Canada Goose (GOOS), Paramount (PARA), Ferrari (RACE) Yum! Brands (YUM), Dynatrace (DT), Bausch + Lomb (BLCO) After the bell: Roku (ROKU), Marathon Oil (MRO), ETSY (ETSY), eBay (EBAY), Booking Holding (BKNG), Fastly (FSLY), MGM Resorts (MGM), Fortinet (FTNT), Robinhood (HOOD), Zillow Group (ZG), EVgo (EVGO), Realty Income (O) 8:15 a.m. ET: ADP Employment 2:00 p.m. ET: FOMC Meeting Thursday, November 3 Before the bell: ADT Corp (ADT), Air Products (APD), AmerisourceBergen (ABC), Aptiv (APTV), Arrow Electric (ARW), Barrick Gold (GOLD), CIGNA (CI), ConocoPhillips (COP), Crocs (CROX), Cummins (CMI), CyberArk (CYBR), Datadog (DDOG), Penn National (PENN), Stem (STEM), STORE Capital (STOR)