Markets soared on Monday, just one day after the S&P 500 index landed in correction territory, ending the prior week 10% off its July zenith.
But Monday’s optimism could be short lived. Traders face a multitude of potentially scary market surprises lurking in the shadows this Halloween week.
Wall Street is clearly spooked: The S&P 500 is still down by about 2.9% for October, and pacing toward its third negative month in a row. It would be the longest losing streak since the start of the pandemic in 2020.
The Dow is also on pace to end the month 1.6% lower. The Nasdaq Composite is 2.7% lower.
CNN’s Fear and Greed Index, which tracks seven indicators of market sentiment in the United States, remained in the “fear” zone despite Monday’s market rally.
Here’s what’s causing the market fears:
High bond yields
Surging yields have contributed to one of the worst periods for bond market performance in history and pressured equity markets.
10-year Treasury yields are flirting with 5% for the first time since 2007, before the global financial crisis.
Although rates have retreated a bit from recent highs, it’s clear that we’re in the middle of a paradigm shift, said Rob Almeida at MFS Investment Management. It’s unlikely that yields will return to pre-pandemic lows, he said.
For American consumers, an elevated 10-year Treasury yield means financial pain, because it serves as a benchmark rate for a variety of consumer borrowing. That means more costly car loans, credit card rates and even student debt. It also means more expensive mortgage rates.
Like an evil witch, yields have mounted “a broom to the moon,” said Jason Pride, chief of investment strategy & research at Glenmede.
Higher yields on Treasuries put pressure on equity markets. Additionally, he wrote, “elevated yields are economically restrictive for businesses, as returns on new projects and expansions must be sufficient to cover the increased cost of funding.”
The Fed
The Federal Reserve will announce its next interest rate decision Wednesday, Nov 1.
Inflation has begun to stabilize, with annual consumer price growth falling to 3.7% from the 9.1% high it hit last year, but the labor market has remained stubbornly resilient.
The majority of investors don’t believe the Fed will raise rates this week, but until the labor market has cooled considerably more and inflation rates drop back to the Fed’s 2% target, the option of future rate hikes remains on the table, haunting investors.
Mixed economic data has left the Fed in a holding pattern, said Erik Weisman, chief economist at MFS Investment Management, and so it’s unlikely investors will hear anything this week that leaves them satisfied.
“While the market would be delighted to learn something new concerning the expected timing and scope of future rate cuts or the ‘end-game’ for quantitative tightening,” he said, “this meeting is unlikely to provide much illumination on these fronts.”
Geopolitical strife
The Israel-Hamas war, which began in early October, initially rattled global financial markets, sending stocks tumbling, the Israeli shekel sliding and oil prices climbing.
Although immediate worries appear to have subsided, investors remain on edge. A prolonged war could drive prices higher and hurt the global economy.
“While geopolitics typically has a short-lived direct market impact, the indirect impacts via inflation and economic growth can be more persistent,” said Seema Shah, chief global strategist at Principal Asset Management.
Continuing war between Russia and Ukraine and growing tensions between the US and China are also spurring fear among investors.
Oil prices fell on Monday but analysts at LPL Research wrote in a note on the same day that “the current geopolitical landscape is as dangerous as it has been in decades, and the risk of a spike in oil prices has increased.”
The note echoes the warnings issued by JPMorgan Chase CEO Jamie Dimon during his company’s earnings call earlier this month. “Now may be the most dangerous time the world has seen in decades,” he said.
Mixed tech earnings
Investors will pore over Apple’s third-quarter earnings report on Thursday for any information about the outlook for Big Tech, especially after tech stocks have had a decidedly mixed bag of earnings so far this quarter.
Amazon was a huge winner. The e-commerce giant reported revenue last week of $143.1 billion for the quarter ending in September, marking a 13% increase from the same period last year and beating analysts’ estimates.
The company reported quarterly profits of $9.9 billion, also beating estimates.
But others weren’t so lucky.
Shares of Meta slid last week after the Facebook parent company reported that advertising revenue had been soft this quarter. While Meta beat expectations and posted significant year-over-year quarterly revenue gains of 23%, Wall Street worried about its Reality Labs division, which lost $3.7 billion.
Google-parent Alphabet reported last week that it fell short in its cloud business, causing shares of the company to drop precipitously. Alphabet notched its largest stock decline since March 2020 on the news.
CVS and Walgreens pharmacy staff begin 3-day walkout
Employees at some of the largest drugstore chains in the United States staged a new series of walkouts across the country Monday to demand the companies fix what employees say are harsh working conditions that make it difficult for them to safely fill prescriptions, and which could put the health of their customers at risk.
Walgreens and CVS employees are mostly not unionized, which makes a largescale walkout difficult to execute. Staff and organizers in multiple states confirmed to CNN that the walkouts have begun and will take place through November 1, but it remains unclear how widespread the action is.
Workers at Walgreens and CVS have previously staged walkouts in Arizona, Washington, Massachusetts and Oregon in September and early October. Those work actions closed a handful of pharmacies briefly, and slowed business at several others. At the time, Walgreens told CNN the impact has been “minimal.”
Shane Jerominski, an independent pharmacist in Southern California who used to work for Walgreens and is one of the walkout’s organizers, told CNN on Monday that organizers are already overwhelmed by calls about closed pharmacies.
During prior walkouts, pharmacy staff feared retaliation from their bosses and corporate leadership, said Jerominski. But there was no reported reprisal from leadership, which, he says, has emboldened more staff to participate.
Jerominski told CNN that there have been at least 25 store closures.
Fraser Engerman, a Walgreens spokesperson, told CNN that just two stores closed on Monday and no more than 12 pharmacists walked out across the entire country. He did not immediately clarify whether that included pharmacy staff.
Jerominski said that many employees who may still be concerned about a company reprisal are calling out sick instead of walking out, and those absences wouldn’t be counted as official walkouts by Walgreens.
He expects momentum to build over the next three days and culminate Wednesday with a planned demonstration outside Walgreens’ headquarters in the Chicago suburb of Deerfield.
Jerominski also said that a GoFundMe page, initially started to help unionization efforts among pharmacy staff, had raised more than $60,000 and was being used as an emergency relief fund for workers who needed financial help in order to participate in the walkout.
Apple unveils its fastest iMac and MacBook Pro models yet
Apple’s MacBook Pro lineup and colorful iMacs just got even faster.
At an event livestreamed on Monday night, the company introduced its next-generation family of custom-made processors — the M3, M3 Pro and M3 Pro Max — and along with it, a handful of new computers.
The event’s tagline — “scary fast” — was an apparent nod to the unveiling of the next-generation silicon chip series, as well as the Halloween holiday Tuesday. In the beginning of the pre-recorded presentation, CEO Tim Cook appeared wearing all black within a dimly lit spot inside Apple’s Cupertino, California-based headquarters, standing in front of an apparent smoke machine.
Although unveiling a new processor may not sound sexy, it will serve as the backbone to Apple’s latest products, enabling faster speeds and more capabilities than ever. For example, Apple said the M3 speeds are now up to 2.5x faster than on the M1 family of chips, and its core processing performance is up to 50% faster. The chips are built with 3 nanometer technology, which can support advanced graphics and artificial intelligence.
“It will bring a whole new level of graphics to the Mac,” an Apple executive said during the event. “They are the most advanced chips ever built for a personal computer.”
