The stock market remained lousy last week, posting a not-so-pretty week, month and quarter all in one fell swoop. The S&P 500 and Dow Jones industrials hit new lows. The Nasdaq Composite, meanwhile, held above its mid-June low, as did the Russell 2000 small-cap gauge. These provide starting points for a potential rally attempt in the coming week. An OPEC meeting, a payroll report in September, Made by Google Day and a host of auto sales numbers will all be on investors’ radar.
Stocks to watch: five stocks showing their strength
It’s a bear market, and most stocks are hammered. Now is the time to look for stocks that are holding up relatively well. Vertex Pharmaceuticals (VRTX), Cardinal Health (HAC), World wrestling entertainment (WWE), Carlisle Cos. (CSL) and Cameco (CCJ) all have relative strength lines just at the treble level. Vertex broke above its 50-day line and a trendline on Wednesday, then held steady on Thursday. This would be a clear early buy signal in a flat basis, but market conditions are gloomy. Cardinal Health is trying to break a downtrend, bouncing off its 50-day line and the top of an earlier base. WWE is trying to get back above its 50-day line, near an early entry into its new consolidation. Carlisle is below its 50-day line, but has found support at the top of a previous base. The Cameco Uranium Producer is in a cup base with handle.
Economic Calendar: A Decisive Payroll Report
With odds slightly favorable for a fourth consecutive 75 basis point rate hike at the Fed’s November 1-2 meeting, 1-2, Friday’s jobs report will play a major role in deciding whether to the next decision. Wall Street expects September payroll growth to be moderate at 250,000. Even that would be far too strong for the Fed, which wants to see unemployment rise. The jobless rate climbed to 3.7% from 3.5% in August as more people joined the labor force. However, there seem to be some big seasonal quirks, with an increase in labor force participation among 16-19 year olds. Part-time jobs jumped, while full-time employment fell. If these seasonal vagaries reverse, September’s data could be weaker than expected.
On Tuesday at 10 a.m. ET, we’ll get data from the August job postings and labor turnover survey. It’s also an important report for the Fed, which is trying to balance labor supply and demand. In July, there were still job offers for every unemployed person.
The other big report of the week is the Institute for Supply Management’s Manufacturing Survey, released Monday at 10 a.m. Factory activity is likely to head into contractionary territory before the Fed nears a pivot.
The Fed panicked when the labor market had already cooled; here is the proof
Stock Market View: October’s Bear Hunt
September was a terrible month as the Nasdaq fell over 8% and the S&P 500 fell almost as much. And it wasn’t even the worst month so far this year. Both indexes capped the worst three-quarter performance dating back to the first quarter of 2009, according to Dow Jones Market Data. During the last week of the month, the S&P and the Dow Jones hit new lows for the year. With growth stocks still out of favour, the Innovator IBD 50 ETF broke through 2009 bear market lows and hit the lowest since December 2016. Historically, September has been a bad month for stocks. But October is better, with an average historic increase of 0.8% and 2.7% in a midterm election year like this, says the Stock Trader’s Almanac. October also saw the end of bear markets in 1957, 1960, 1974, 1987, 1990, 2002 and others. One of the main reasons for the market crash is rising interest rates. The 10-year Treasury yield just posted its biggest three-quarter rise since the third quarter of 1987. The yield retreats after hitting the 4% mark, the Fed says it will watch the data to decide on future hikes rate. Key reports for the week ahead include Monday’s manufacturing data and Friday’s unemployment report,
Energy Markets: Weak Oil Ahead of OPEC Conference
Oil prices fell almost 24% in the third quarter, the first quarterly loss since 2020. Prices could be influenced by the Organization of the Petroleum Exporting Countries, which is discussing a possible reduction in quotas ahead of its Wednesday meeting. Meanwhile, the United States has extended until November its deadline to end its sales of strategic oil reserves, which have totaled 160 million barrels since March.
Accounting for sales of new models of electric vehicles in the third quarter in China
On October 1, Chinese EV startups Nio (NIO), Xpeng (XPEV) and Li Autho (LI) were to report sales for September and the third quarter. Chinese electric vehicle and battery giant BYD (BYDDF) and You’re here (TSLA) will also announce third-quarter sales in the coming week. Startups have all recently brought new electric SUVs to market, including Nio’s ES7, Li’s L9, and Xpeng’s G9 SUV. Nio has also just released the P5 electric sedan, its third new electric vehicle of 2022. The trio continues to grow after recent headwinds on both the demand and supply side. New electric vehicles are essential to this objective. Analysts expect the premium electric SUV segment in the Chinese market to be hotly contested. Meanwhile, BYD, which is also expanding its model lineup, will be looking for its seventh consecutive month of record sales.
Electric vehicle sales in China: Nio Stock rallies as start-up starts selling rival Model 3
S&P 500: Ready for a relief rally?
The S&P 500 made history this week, undercutting its June 17 low. According to CFRA Research’s Sam Stovall, it was the first time since World War II that the index exceeded the bottom by more than 20%, followed by a rebound that recouped at least 50% of the decline. However, the range between the 10-week and 40-week moving averages shows what would traditionally indicate a “very oversold” market. “The CFRA believes the S&P 500 and its constituent sectors and sub-industries are ripe for a relief rally,” Stovall wrote Monday. “The only question is whether the rally will have legs or be sold off.”
Detroit Seeks Strong Third Quarter Sales
On Oct. 3, automakers will release third quarter new vehicle sales after a large drop in sales in the second quarter. Year after year, General Motors (GM) and Ford (F) see their sales increase by double digits, while Toyota engines (MT) and Honda engine (HMC) are likely to see their sales drop. However, sales will be down for each of them from quarter to quarter. Production and inventory levels are slowly starting to improve after chip and part supply shortages, industry experts said. Industry-wide, third-quarter U.S. auto sales are expected to approach 3.4 million, roughly in line with the year-ago quarter. Sales of GM’s new Lyriq and Ford’s Lightning will be front and center as automakers bet big on the switch to electric vehicles.
Auto sales: CarMax warning continues to chill GM and Ford stocks ahead of Q3 reports
Made by Google: new Pixel handsets, watch
NOTNew hardware showcased at Thursday’s Made by Google event is expected to include the Pixel 7 and Pixel 7 Pro smartphones, the Google Pixel Watch, and possibly new Nest home devices. Pixel 7 and Pixel 7 Pro prices are expected to remain unchanged from previous generation phones. No big design leaps are expected, although the new units are powered by Google Tensor chips. Expectations are high for Google’s first smartwatch. Google also owns Fitbit, which suggests the watch could put a heavy emphasis on fitness features.
Brief stock market results
Weston Lamb (L.W.) announces first-quarter 2023 results on Wednesday ahead of market trading. Wall Street expects EPS growth of 145% to 49 cents per share. Revenue is expected to rise 14% to $1.1 billion for the frozen fries giant. The stock is looking to regain support in a six-week flat base.
Constellation Brands (ZST) is trading on a flat basis ahead of its Thursday morning earnings report. Analysts expect the beverage maker’s earnings to rise 18% to $2.81 per share and revenue to rise 5.7% to $2.5 billion.
ConAgra Brands (GAC) publishes the financial statements for the first quarter of 2023 on Thursday before the market opens. Analysts expect earnings to rise 4% to 52 cents a share in the first quarter for the packaged food company. Revenue is expected to rise 8% to $2.8 billion, according to FactSet.
Aehr test systems (AEHR) plans to release its fiscal first quarter results on Thursday evening. Wall Street expects the semiconductor equipment maker to earn a penny a share, down from a loss of 2 cents a year earlier, on sales of $8.5 million, up 51% . The relative strength rating for the stock is a mighty 98, and the stock is trading in a long and deep basis with a handle.
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