Market Insights

Stocks are under pressure as earnings fail to impress and investors brace for tomorrow’s election. Rising bond yields are another potential risk.

The S&P 500 fell 1.4 percent between Friday, October 25, and Friday, November 1. It was the second consecutive negative week, with almost two-thirds of the index’s members falling.

Most of the trillion-dollar growth stocks announced quarterly results, but none broke out. Amazon.com (AMZN) performed the best after earnings and revenue beat expectations. Microsoft (MSFT) fared the worst after guidance lagged expectations. Alphabet (GOOGL) showed significant growth in cloud computing, but gave up most of its gains.

There was lots of other economic news, but it had little importance. Third-quarter gross domestic product missed estimates by a narrow margin, but projections had risen sharply in the preceding month. Inflation continued to moderate toward the Federal Reserve’s target and initial jobless claims fell more than expected. Non-farm payrolls missed estimates by a wide margin, but the numbers were severely impacted by hurricanes and strikes.

Instead of paying attention to headlines, the market could be focused on two other catalysts. First is tomorrow’s election, which will determine control of the White House, the House of Representatives and Senate.

Second is the yield on the 10-year Treasury note, which just had its highest weekly close since early June. The increase potentially offsets the impact of Fed rate cuts. It could also hurt risk appetite over the longer run.

Super Micro’s Rough Week

Super Micro Computer (SMCI) had its worst week ever, shedding 45 percent of its value after Ernst & Young stepped down as its auditor. EY questioned “whether the Company demonstrates a commitment to integrity and ethical values,” according to an SEC filing. SMCI disagreed with the decision and said it would seek a replacement.

The move followed a bearish report by Hindenburg Research on August 27 that cited potential accounting irregularities. It’s also another milestone on a dramatic ride that saw the maker of AI servers rocket more than 1,000 percent between May 2023 and March 2024.

Qorvo (QRVO), another technology stock, had the second-biggest decline in the S&P 500 last week and a record weekly drop. The maker of wireless chips issued weak guidance as the Android phone market shifts toward cheaper models.

Huntington Ingalls Industries (HII) and Estee Lauder (EL) also had their biggest weekly drops ever. HII, a military ship builder, missed estimates and cited uncertainty about business with the U.S. Navy. Cosmetics company EL faces slow demand in China.

Real estate and utilities were the weakest sectors overall. Both are sensitive to higher interest rates and bond yields. Precious metals, homebuilders and semiconductors also struggled.

Reddit Breaks Out

Reddit (RDDT) had one of the biggest moves last week after earnings, revenue and guidance shot past expectations. The social-media company’s daily active unique users spiked by 47 percent and gross profit margins rose to more than 90 percent. The stock, which only went public in March and isn’t in the S&P 500, climbed 39 percent.

Communications was the only sector with a noteworthy gain last week. GOOGL, which enjoyed strong advertising growth, helped lift the group. Charter Communications (CHTR) and Comcast (CMCSA) also rallied after beating estimates. CMCSA additionally suggested it may spin off its cable-TV business.

All five of the biggest gainers in the S&P 500 last week rallied after announcing quarterly results. Paycom Software (PAYC) rebounded to its highest level since plunging a year ago. Garmin (GRMN) continued to enjoy demand for wearable devices. Waters (WAT) benefited from new products. Incyte (INCY) jumped after hiking guidance amid strong sales of its Jakafi cancer drug.

Charting the Market

Last week’s drop landed the S&P 500 back below its September high and its 21-day exponential moving average. It also broke a trendline along the lows of August and September. Those points could make some chart watchers think its uptrend is weakening after a year of steady gains.

Oscillators like moving average convergence divergence (MACD) and Wilder’s Relative Strength Index (RSI) may additionally provide some bearish signals. MACD turned negative and RSI made a lower high (versus July) when the broader index hit a new high in October. Those may reflect weaker momentum.

If volatility increases, traders may watch for potential support around 5,680, which is near weekly lows in late September and early October. Below that, September’s trough around 5,400 could be eyed.

Regardless of the S&P 500, movements in the 10-year Treasury yield may have even more importance. That could be especially true if tomorrow’s election gives a clear signal on federal spending, deficits and tariffs.

The Week Ahead

This week has several important events, including a Fed meeting one session later than usual.

The first big item may surprisingly come from the other side of the world — in Beijing — where Chinese lawmakers are expected to develop stimulus plans. Palantir (PLTR) and Wynn Resorts (WYNN) report earnings in the postmarket.

The elections are tomorrow. The Institute for Supply Management also releases its service-sector index. Melco Resorts & Entertainment (MLCO), a potential beneficiary of Chinese stimulus, issues results.

Wednesday brings crude oil inventories, plus earnings from Qualcomm (QCOM) and Arm (ARM).

Thursday brings initial jobless claims in the morning and the Fed’s interest-rate decision at 2 p.m. ET. Chair Jerome Powell delivers a press conference 30 minutes later. (The central bank normally announces policy on Wednesday afternoons but moved because of the election this week.) The earnings roster includes Arista Networks (ANET), Airbnb (ABNB), Expedia (EXPE), Fortinet (FTNT) and Moderna (MRNA).

Consumer sentiment is on Friday morning.