Stocks Keep Sliding as Inflation Spreads and Earnings Fail to Impress


Stocks keep falling as inflation remains high and earnings disappoint.

The S&P 500 fell 1.6 percent between Friday, October 7, and Friday, October 14. It was the fourth negative week in the last five as the index flirts with its lowest levels since late 2020.

Consumer prices rose 0.4 percent in September, twice the forecast amount. Housing and medical care fueled the increase as inflationary pressures continued to spread through the economy. That pushed borrowing costs to new multiyear highs and caused markets to firmly anticipate another 75 basis point increase by the Federal Reserve on November 2.

Earnings season also began last week. Companies like JPMorgan Chase (JPM) and Citi (C) beat estimates by narrow margins as management teams set aside more money for potential loan losses. Data-tracking firm FactSet observed that profits are exceeding forecasts by just 0.1 percent so far this quarter, versus the average beat of 6.5 percent in the last year. Analysts now see profit growth hitting a two-year low of 1.6 percent, according to FactSet.

Growth Stocks Fall

Biggest Gainers in the S&P 500 Last Week
Moderna (MRNA)+12%
Amgen (AMGN)+9.7%
Viatris (VTRS)+9.3%
Walgreen Boots Alliance (WBA)+8.9%
Kraft Heinz (KHC)+8.2%
Source: TradeStation Data

Growth stocks listed on the Nasdaq, which led the selling earlier this year, remained under pressure. Consumer discretionaries like (AMZN) and Tesla (TSLA), each declined more than 6 percent to their lowest closing levels in over a year. Technology companies including semiconductors and software also tumbled.

The best-performing groups were consumer staples and drug makers. Consumer stocks gained on strong results by PepsiCo (PEP) and a Goldman Sachs upgrade of Kraft Heinz (KHC). Moderna (MRNA) rose after Merck (MRK) moved to collaborate on personalized cancer vaccines. Amgen (AMGN) jumped on a Morgan Stanley upgrade. Walgreen Boots Alliance (WBA) also beat earnings estimates.

Charting the Market

The S&P 500 briefly touched 3492 last week, its lowest price since November 2020. The index has chopped near its June low but made lower highs and now a lower low. Some chart watchers may see risk of the downtrend continuing after a period of consolidation. Traders could now watch the falling trendline (see below) for signs of a bullish reversal or bearish continuation.

S&P 500, daily chart, showing key patterns.

The Week Ahead

This week brings more quarterly results, plus housing data.

Today’s big reports include Bank of America (BAC) and Charles Schwab (SCHW). In the evening, China will report important economic numbers like gross domestic product (GDP) and retail sales.

Tuesday morning brings Goldman Sachs (GS), Johnson & Johnson (JNJ) and NAHB’s homebuilder sentiment index. Netflix (NFLX) and United Airlines (UAL) follow in the postmarket.

Biggest Decliners in the S&P 500 Last Week
Wynn Resorts (WYNN)-12%
First Republic Bank (FRC)-9.7%
Las Vegas Sands (LVS)-9.3%
Etsy (ETSY)-8.9%
KLA Corp (KLAC)-8.2%
Source: TradeStation Data

Wednesday’s big economic reports are housing starts, building permits and crude-oil inventories. Earnings reports include Tesla (TSLA) and International Business Machines (IBM).

Initial jobless claims and existing home sales are due Thursday. American Airlines (AAL), AT&T (T) and Freeport McMoRan (FCX) issue results.

American Express (AXP), Verizon Communications (VZ) and Schlumberger (SLB) report Friday morning.

Trade in milliseconds

Explore the most actively traded options

Trade 600+ futures products on an advanced platform