Tired of the Fed? Earnings Could Bring a Welcome Change to Markets in October

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September was another rough month for investors as the Federal Reserve kept pushing interest rates higher. But the focus is likely to change in October as major companies like Apple report earnings.

The S&P 500 slid 9.3 percent in September, its biggest monthly drop since the pandemic hammered markets in March 2020. The index also registered a 5.3 percent decline for the June-September period, its straight negative quarter. That’s the longest negative streak since the financial crisis between late 2007 and early 2009.

Every major sector declined last month, led by interest-rate sensitive groups like real estate and technology.

Big Earnings This Month

More than half the S&P 500 will report earnings this month, including nine of the index’s 10 biggest companies. Below are some of the more actively traded names with some points investors may be watching:

  1. Netflix (NFLX) reports after the closing bell on Tuesday, October 18. The streaming-video company is shifting toward an ad-based model to jump-start growth (beyond paying subscribers). Updates on the change could be especially important to Wall Street.
  2. Advanced Micro Devices (AMD) reports after the closing bell on Tuesday, October 25. Worries about the global economy and restrictions on sales to China have dragged the semiconductor stock down about 35 percent since its last quarterly report on August 3.
  3. Microsoft (MSFT) reports earnings after the closing bell on Tuesday, October 25. Investors may focus on the impact of foreign-exchange moves after the U.S. dollar’s big rally.
  4. Ford Motor (F) reports earnings after the closing bell on Wednesday, October 26. Supply-chain issues will likely the big item after parts shortages caused the automaker to cut guidance last month.
  5. Apple (AAPL) reports earnings after the closing bell on Thursday, October 27. The iPhone 14 could be a big story after several analysts saw evidence of strong demand for the new model. However, the stock fell on September 28 after Bloomberg reported weaker demand.
  6. Amazon.com (AMZN) reports earnings after the closing bell on Thursday, October 27. It also has Prime Day on October 11 and 12. The e-commerce giant is down 16 percent since rallying on strong results in July.
S&P 500, weekly chart, showing key levels.

Charting the Market

The S&P 500 ended last week at its lowest level since November 2020. While the index has declined sharply, it may not be giving many signs of stabilizing.

One potentially bearish pattern last week was Wednesday’s brief rebound above 3720. Prices had bounced there in July, so their inability to reclaim that level could suggest old support has become new resistance.

The next price area where chart watchers could next anticipate support is the pre-pandemic high from February 2020 around 3393.

Big Movers in September

Almost 95 percent of the S&P 500’s members declined in September. Below are some of the big movers and the reasons why.

Top Decliners in September
FedEx (FDX)-30%Warns of slower demand as inflation hits profitability.
VF (VFC)-28%Cuts guidance as weak demand hurts profits.
Lumen Technologies (LUMN)-27%Higher interest rates reduced the appeal of its dividends.
Ford Motor (F)-27%The automaker warned of supply-chain issues hurting profits.
Charter Communications (CHTR)-27%Weakness in the broadband market is weighed on the cable company.
Source: TradeStation Data
FedEx (FDX), daily chart, with key technical events.
Top Gainers in September
Biogen (BIIB)+37%The biotech’s Lecanemab compound showed progress against Alzheimer’s disease.
Regeneron Pharmaceuticals (REGN)+19%The biotech released positive data for its eye drug Eylea.
Twitter (TWTR)+13%The social-media company gained on hopes of a legal settlement with Elon Musk.
Eli Lilly (LLY)+7.3%Investors see potential in the company’s pipeline of weight-loss and Alzheimer’s drugs
Bristol-Myers Squibb (BMY)+5.5%The drugmaker gained after its Sotyktu psoriasis treatment was approved.
Source: TradeStation Data

Sector Watch

The table below shows sector performance last month.

Healthcare-2.9%
Financials-8.1%
Consumer Discretionary-8.4%
Consumer Staples-8.7%
S&P 500-9.3%
Materials-9.8%
Energy-11%
Industrials-11%
Utilities-12%
Communications-12%
Technology-12%
Real Estate-14%
Source: TradeStation Data

What Experts Are Saying

Below are some noteworthy commentaries.

  • Investment portfolios using the common blend of 60% stocks and 40% bonds are having their worst year since 1936, according to B of A. The strategy, intended to limit volatility, fell 19.4% through the end of August as interest-rate hikes weighed on both asset classes. (9/6)
  • Stocks will continue to decline through December because of the Fed’s hawkish policy, Morgan Stanley Chief Investment Officer Michael Wilson said. He expects the S&P 500 to bottom between 3,000 and 3,400 this year. (9/6)
  • Only 9% of respondents in a Deutsche Bank survey believe the market has bottomed. Most investors expect new lows in 2023. (9/12)
  • Deflation risks are rising, according to three prominent business leaders cited on CNBC. Tesla CEO Elon Musk noted falling commodity prices while DoubleLine Capital CEO Jeffery Gundlach said bonds were more attractive. Cathie Wood of Ark Invest said technological innovations will lower prices. (9/14)
  • The Federal Reserve should apologize to the U.S. for “such poor monetary policy … over the last few years,” according to Wharton Business School Professor Jeremy Siegel. He said rates stayed low too long in 2021 and now rapid hikes are risking a recession. (9/26)

Popular Futures Contracts

ProductCurrent
Month
ExpirationNext
Month
1-Mon%
S&P 500 E-Mini (@ES)ESZ22 (Dec)12/16/22ESH23-9.4%
Nasdaq-100 E-Mini (@NQ)NQZ22 (Dec)12/16/22NQH23-11%
Dow Jones E-Mini (@YM)YMZ22 (Dec)12/16/22YMH23-8.9%
Russell 2000 E-Mini (@RTY)RTYZ22 (Dec)12/16/22RTYH23-9.8%
Source: TradeStation Data

Newsworthy Events This Month

DateEventWhat to Watch For
Fri, 10/7Employment report for SeptemberNon-farm payroll changes and revisions, unemployment, wage inflation.
Wed, 10/12Federal Reserve minutesDetails of the last meeting could give clues on monetary policy.
Wed 10/12,
Thu 10/13
Inflation reports for SeptemberProducer prices are due October 12, followed by consumer prices on October 13.
Fri 10/14Earnings beginEarnings season begins as major banks like JPMorgan Chase and Citigroup report.
10/25 weekBig tech earningsMajor technology stocks like Apple (AAPL), Microsoft (MSFT), Amazon.com (AMZN) and Advanced Micro Devices (AMD) are projected to announce results.
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