4 Key Factors Shaping a Critical Week for U.S. Stocks

As we head into the last week of October 2024, U.S. stocks might be facing their scariest moment yet this year. With so many factors at play, investors are feeling anxious.

Let’s break down what to expect this week.

1. Election Anxiety and Its Impact

The upcoming presidential election on November 5 is causing jitters in the market. Polls show that the race between Vice President Kamala Harris and former President Donald Trump is extremely close. This uncertainty has made the Treasury market jumpy, affecting borrowing costs.

The yield on the 10-year Treasury note, a key indicator, rose to 4.28%—its biggest increase since last October. Higher yields mean higher borrowing costs for consumers and businesses, which can slow down economic growth.

Betting Markets: A New Indicator?

As the election nears, some investors are turning to betting markets to gauge outcomes. These markets have recently shown a higher chance of Trump winning compared to Harris.

Betting odds give Trump a 57% to 62% probability of victory. This trend is impacting stock market bets and could increase Treasury yields even more.

However, there are concerns about the reliability of these markets. Critics argue that the demographics of bettors may not represent the general electorate, making the results questionable. Yet, some believe that betting markets react faster to changes than traditional polls.

2. The Big Tech Earnings

A lot of attention this week will be on earnings reports from major tech companies, often called the "Magnificent Seven."

Here’s the schedule:

• Alphabet Inc.: Tuesday, 29 October

• Microsoft Corp.: Wednesday, 30 October

• Meta Platforms Inc.: Wednesday, 30 October

• Apple Inc.: Thursday, 31 October

• Amazon.com Inc.: Thursday, 31 October

These companies are critical because they make up a large portion of the S&P 500 index, and their performance can heavily influence stock prices.

Last week, Tesla’s impressive earnings helped lift the market, but overall, the S&P 500 fell slightly. Analysts are hoping for strong reports from these tech giants, as stocks are currently trading at high prices.

3. Jobs Data and Its Importance

Another significant event this week is the monthly jobs report for October, set to release on Friday.

This report will provide insights into the labor market and its impact on interest rates. Analysts expect the data could be skewed due to recent strikes and natural disasters.

However, strong job numbers could calm fears about inflation, while weak numbers might raise more concerns.

Experts are divided on how much weight the jobs report will carry compared to the upcoming election. "I think the jobs report will matter for one day," says Keith Lerner, an investment officer. After that, the election will be the main focus.

4. Small Caps and Market Trends

Interestingly, while big tech stocks have been doing well, small-cap stocks have not fared as well lately.

The Russell 2000 index of smaller companies fell 3% last week, while the S&P 500’s tech sector managed to gain 0.2%. This divergence highlights how the market is reacting differently to various sectors.

Conclusion: A Volatile Week Ahead

In summary, this week could be pivotal for U.S. stocks as earnings reports, job data, and election outcomes loom large. Investors are on edge, watching closely as the market navigates through this perfect storm of factors. Whether it’s a trick or a treat for stocks remains to be seen, but this week will be one to remember.

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