Wall Street pulled back this week as investors focused more on higher bond yields, tensions in the Middle East, and energy price dynamics than they did corporate earnings. Even where quarterly results were strong, we saw selling pressure hit the stocks as investors jumped on any and every negative comment as an excuse to book profits and raise cash. Negative as the price action has been, we don’t think all the negativity is warranted. Yes, risks are elevated. Yes, things a getting dicey in the Middle East. But in the end, it’s fundamentals that drive earnings and earnings that drive stock prices. And, the earnings from our portfolio companies have largely been holding up. In fact, according to FactSet, with about half of the S & P 500 companies already reporting third-quarter results, 78% reported upside earnings surprises while 62% reported better-than-expected revenue. How about the economy? The first look at third-quarter U.S. gross domestic product (GDP) was better than expected — a seasonally adjusted 4.9% annualized compared to the unrevised 2.1% advanced in Q2. Inflation? Sure, it needs to come down more. But the Federal Reserve’s favorite inflation gauge — the core PCE price index — showed a reading in line with expectations for last month. With expectations for another Fed interest rate hike before year-end fading (big FOMC meeting next week) and company fundamentals intact, you might think the market would be rallying not selling. But it’s not. So, we see opportunities and will continue to be on the lookout as the earnings season continues. The market was oversold during this past week, according to the S & P 500 Short Range Oscillator , which meant small buys as our discipline mandates in oversold conditions. Looking ahead to next week, we’ll get several important macroeconomic updates along with nine Club earnings reports. Economic releases Next week is Jobs Friday when we get the government’s monthly nonfarm payrolls report. As members know, aside from the headline number, which is predicted to see a gain of 175,000 positions in October, it’s the unemployment rate and wage inflation that we’ll really want to watch. The Fed will use these numbers as it weighs the need for additional any rate hikes. The unemployment rate is currently expected to hold steady at 3.8%. The Street sees annual wage gains slow to 4%, down from the 4.2% we saw in September. On Wednesday, the ADP’s October look at hiring trends at U.S. companies is out. Private-sector payroll growth of 135,000 jobs is expected. It’s an important report that can certainly move the market as investors try to read through to Friday’s numbers. However, we would caution against that. Recall, last time around, ADP missed expectations — 89,000 versus 145,000 expected — and everyone got worried about what nonfarm payrolls had in store. That worry proved unwarranted as we got 336,000 job additions in September compared to 162,000 expected. Outside of the jobs, which will certainly carry the most weight, we’ll get the ISM’s October report on manufacturing activity on Wednesday and the government’s September data on factory orders Thursday. Together, these numbers provide insight into the state of the manufacturing economy, which accounts for about 12% of GDP. An ISM reading of 49 is expected, indicating contraction. Factory orders are seen increasing 1.9% compared to the prior month’s 1.2% gain. Club stock earnings Club name Caterpillar (CAT) reports third-quarter results before the opening bell Tuesday. As has been the case in recent quarters, the backlog will be a key focus along with any information management can provide in regard to U.S. infrastructure spending. GE Healthcare (GEHC) also reports Tuesday morning. Recall the imaging technology manufactured by GEHC is key to supporting emerging Alzheimer’s treatments. On Wednesday, before the bell, we’ll hear from Humana (HUM) where Medicare Advantage membership growth will be a key watch item. The benefits expense ratio, which had investors on edge earlier in the year, is the other key metric to focus in on here. Remember, lower is better. It was a good result last time around but we’ll want to see that expenses remain under control. DuPont (DD) is set to report earnings. We initiated the name after the company last reported earnings, calling it an interesting industrial way to play the recovery in the semiconductor and electronics industries without paying a typically higher chip-stock multiple. Last quarter, management called the bottom in its semi-business, noting that it was setting up for a strong 2024. We’ll want to hear further confirmation of that this time around. Estee Lauder (EL) also reports Wednesday morning. Last time, the luxury beauty giant reported we explained how the combination of management’s fiscal 2024 first quarter (which will be reported) and full fiscal year guidance implied that its Q1 is a hump we need to get through before entering a more normalized environment and a return to growth. We need to see that such a trend is still the case. Eli Lilly (LLY) reports on Thursday morning — and as has been the case, Mounjaro sales momentum is the key watch item. We also hear from Bausch Health (BHC). The results will be interesting to see — but in the end, it’s all about the monetization of BHC’s Bauch + Lomb (BLCO) stake and the final court ruling in Xifaxan patent litigation. Any positive updates on each of these items will be welcomed by investors. Starbucks (SBUX) will also report Thursday morning. It will be important for the coffee company to show mid to high single-digit comparable sales growth in North America despite concerns of a slowdown in consumer spending. China is crucial too, and we’ll be closely listening for how sales are recovering in there. We also expect to hear an update on the company’s Reinvention plan, which is designed to increase the customer experience and improve margins. Apple (AAPL) is out Thursday evening. As always, Service sales will be key. Their stronger profitability versus Products means they carry outsized weight. We’ll also be interested to hear how things are going in China and are sure to hear some questions from analysts about the patent dispute with Masimo concerning the Apple Watch. Here’s the full rundown of all the important domestic data in the week ahead. Monday, Oct. 30 Before the bell earnings: McDonald’s (MCD), SoFi (SOFI) After the bell: Pinterest (PINS), VF Corp (VFC) Tuesday, Oct. 31 Before the bell: Caterpillar (CAT), GE HealthCare (GEHC), Pfizer (PFE), JetBlue (JBLU), Anheuser-Busch InBev (BUD), Stellantis (STLA). After the bell: Advanced Micro Devices (AMD), Caesars Entertainment (CZR), First Solar (FSLR) FOMC Meeting begins in the morning Wednesday, Nov. 1 8:15 a.m. ET: ADP Employment Report 10 a.m. ET: ISM Manufacturing FOMC Meeting ends at 2 p.m. ET, followed by Fed Chairman Jerome Powell news conference Before the bell: Humana (HUM), DuPont (DD), Estee Lauder (EL), Norwegian Cruise Line (NCLH), CVS Health (CVS), Wayfair (W), Kraft Heinz (KHC), Brinker International (EAT), Yum Brands (YUM) After the bell: PayPal (PYPL), Roku (ROKU), Qualcomm (QCOM), Airbnb (ABNB), Etsy (ETSY), e.l.f. Beauty (ELF), DoorDash (DASH), Mondelez International (MDLZ) Thursday, Nov. 2 8:30 a.m. ET: Initial jobless claims 10:00 a.m. ET: Factory Orders Before the bell: Eli Lilly (LLY), Bausch Health Companies (BHC), Novo Nordisk (NVO), Moderna (MRNA), Barrick Gold (GOLD), Penn Entertainment (PENN), Paramount Global (PARA), Marriott (MAR), Peloton Interactive (PTON), Wendy’s (WEN), Papa John’s (PZZA), Ferrari (RACE), Shell (SHEL), Molson Coors (TAP) After the bell: Apple (AAPL), Starbucks (SBUX), Block (SQ), DraftKings (DKNG), Coinbase Global (COIN), Pioneer Natural Resources (PXD), Booking Holdings (BKNG), WW International (WW), Monster Beverage (MNST) Friday, Nov. 3 8:30 a.m. ET: Nonfarm Payrolls 10 a.m. ET: ISM Services Before the bell: Cardinal Health, (CAH), EOG Resources (EOG), Bloomin’ Brands (BLMN), Church & Dwight Co. (CHD), Restaurant Brands International (QSR), Sempra Energy (SRE) (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.
Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., October 27, 2023.
Brendan Mcdermid | Reuters
Wall Street pulled back this week as investors focused more on higher bond yields, tensions in the Middle East, and energy price dynamics than they did corporate earnings. Even where quarterly results were strong, we saw selling pressure hit the stocks as investors jumped on any and every negative comment as an excuse to book profits and raise cash.
