Stock Market Analysis for October 12, 2024

As we approach the trading day on October 12, 2024, it is essential to reflect on last week’s market activities and the potential direction for next week.

Recent Market Overview

Last week, markets experienced significant volatility driven by geopolitical tensions in Eastern Europe, rising oil prices due to OPEC’s production cuts, and mixed economic data indicating a slowdown in consumer spending. The S&P 500 closed the week down 1.5%, while the Nasdaq Composite fell 2.3%.

Big tech stocks, including Apple and Amazon, saw pressure from concerns over their earnings outlook, particularly as rising interest rates are expected to hinder consumer spending. Meanwhile, energy stocks demonstrated resilience last week due to climbing oil prices, with the Energy Select Sector SPDR Fund (XLE) gaining 3%.

Key Events Impacting The Market

1. Geopolitical Tensions: Ongoing tensions in Eastern Europe are causing uncertainty in international markets.
2. Oil Prices: Brent Crude surged above $95 per barrel, sparking concerns about global inflation.
3. Consumer Sentiment Index: Mixed results from the latest consumer sentiment index suggested signs of strain in consumer spending due to higher costs of living.
4. Tech Earnings Reports: The upcoming earnings season for technology companies is likely to influence stock movement, causing potential volatility.

Upcoming Events to Watch

• Earnings Reports: Major companies like Netflix and Tesla are set to report earnings next week. Analysts will be keenly watching these numbers, especially for guidance on forward-looking statements.
• Inflation Data: The Consumer Price Index (CPI) report scheduled for next Thursday could influence Federal Reserve policy going forward, making this a critical event for investors.
• Federal Reserve Meeting: The minutes from the Fed’s last meeting will also provide further insights into monetary policy outlook.

Recommendations

Buy:

• XLE (Energy Select Sector SPDR Fund): Energy stocks have been performing well and may continue to benefit from rising oil prices. Consider a position if not already invested.
• VGT (Vanguard Information Technology ETF): With the tech sector expected to rebound post-earnings, this ETF is well-positioned for a potential upswing.

Sell:

• Higher Valuations in Tech Stocks: Consider trimming positions in higher valuation tech stocks that are expected to report disappointing earnings or are showing signs of slow growth.

In summary, the market outlook for next week is cautious but hopeful, depending significantly on inflation data and tech earnings. Diversification into sectors like energy may provide a hedge against market volatility. Investors should remain vigilant and prepared for rapid changes due to ongoing geopolitical and economic issues.