The U.S. stock market’s record-setting rally could face its scariest stretch of 2024 in the week ahead, with a dizzying array of risks on the docket.
A lot will be riding on earnings reports from big technology companies, volatility in U.S. debt markets, Friday’s monthly jobs data for October and the home stretch of a contentious presidential election.
“It’s a tossup that’s definitely bothering the rates market,” said Dec Mullarkey, head of investment strategy and asset allocation at SLC Management, of the election. “The 10-year has really zipped up in the past month.”
Election anxieties have been pronounced in the Treasury market and in gold GC00 ahead of the Nov. 5 election, Mullarkey said, especially with polling data indicating a very tight presidential race.
See: Gold hasn’t been acting like it normally does. What that means for investors.
The S&P 500 index SPX was higher Monday, despite Tesla Inc.’s TSLA dip after its roughly 22% weekly gain after it wowed Wall Street with third-quarter earnings and an upbeat outlook.
The focus now turns to earnings due from Alphabet Inc. GOOG on Tuesday, followed by Microsoft Corp. MSFT and Meta Platforms Inc. META on Wednesday, and by Apple Inc. AAPL and Amazon.com Inc., AMZN on Thursday. AI chip maker Nvidia Corp NVDA reports results on Nov. 20.
“It’s a big week, with the ‘Magnificent Seven’ being very important earnings reports,” said Eric Beiley, executive managing director, wealth management at Steward Partners. “We need to see those companies produce strong results, because stocks are trading at extremely high valuations.”
Megacap tech stocks appear back in vogue, despite a broadening of the rally earlier this year to include midcap and even small-cap stocks that could benefit from the Federal Reserve’s pivot to interest rate cuts.
The Russell 2000 index RUT of small-cap stocks fell 3% in the past week, while the S&P 500’s information technology sector XX:SP500.45 gained 0.2%, according to FactSet.
See: Fed rate cuts were supposed to buoy small-cap stocks. What’s holding them back?
“Big tech could be a trick or a treat,” said Keith Lerner, co-chief investment officer at Truist Advisory Services.
If the stakes weren’t high enough, Apple and Amazon’s third-quarter results also coincide this year with Halloween, which can be among the more volatile days of the year since it falls within the typical month-end portfolio rebalancing period.
“Stocks are getting into the teeth of earnings season,” said Matt Stucky, chief portfolio manager, equities, at Northwestern Mutual Wealth Management.
Fed officials still hope the labor market can walk a fine line by not cooling too much, nor reheating in ways that rekindles inflation worries.
Friday’s monthly jobs report for October will bring that debate back in focus, even if Wall Street analysts have been warning the data could be skewed by striking workers at Boeing Co. BA and by two powerful recent hurricanes.
Surprisingly strong jobs data in September helped sooth earlier concerns about a potential sharp downward spiral for the economy. But a lingering fear has been that higher wages, while supportive overall, could also stoke inflation and throw cold water on the Fed’s plans to cut rates in a meaningful way.
“It will have some impact, unless it’s like a big negative or big positive reading,” Lerner at Truist said. “I think the jobs report will be the only thing that matters for one day — then it’s all about the election.”
While the U.S. economy has been a bright spot in 2024, not all households have emerged from the COVID crisis with the same degree of financial resilience.
Read: The U.S. economy has not only avoided recession. It’s growing faster.
The sharp selloff in U.S. government debt since September can be attributed to a resilient economy, which forced the bond market to eliminate earlier expected Fed rate cuts. Concern about the looming election has been another growing factor.
The 10-year Treasury yield was up modestly to 4.25% on Monday, days after it logged its biggest 26-day gain since last October, according to Dow Jones Market Data. Higher yields make it more expensive for consumers, businesses and the government to borrow.
On that front, Wall Street sees little hope of either Vice President Kamala Harris or former President Donald Trump tackling the large U.S. government deficit. A number of billionaire investors, including Paul Tudor Jones, recently raised alarms about America’s debt load, and the potential impact of import tariffs and tax cuts if Trump regains the White House.
Read: Trump tariffs: Why stock-market investors are underrating impact
For now, election jitters are contained to U.S. debt and the gold market, Mullarkey at SLC Management said. While not a “gold bug,” he said the increased buying from global central banks that helped push gold prices to record highs in October warrants attention.
Trump’s campaign has included threats about import tariffs, but also about penalizing countries that abandon the dollar. “Gold is a well-respected alternative or hedge against tail risks,” Mullarkey said, adding that the precious metal could see another leg up in value if postelection results bring more tension.
The three major U.S. stock indexes were higher Monday. The Nasdaq Composite Index COMP was up 0.7%, while the Dow Jones Industrial Average DJIA was 0.6% and the S&P 500 was 0.5% higher.
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