Many events could roil the markets over the next two weeks and/or send them surging. Accordingly, it's worth summarizing the political, monetary, and economic schedule to prepare for market turbulence.
The intense schedule kicked off yesterday with the JOLTs report and Google earnings.
Today is the ADP jobs report and Microsoft and Meta earnings. Thursday features Apple and Amazon earnings and the critical PCE inflation report. Furthermore, the Bank of Japan, whose actions have recently caused volatility in global markets, will set interest rates. As seen in early August, hawkish signals from the BOJ could revive the market turbulence. The PCE and Friday's BLS employment report will go a long way to setting market expectations for next week's Fed meeting. Current expectations point to a high likelihood they cut by 25bps.
Market turbulence continues next week, with elections on Tuesday and the Fed meeting on Wednesday. If the election results are unknown and likely contested, the Fed will have a tough decision to make. As if the election and Fed weren’t enough for the bond market to digest, the Treasury Department will conduct ten- and thirty-year auctions. Consequently, with decent odds of increased market turbulence over the next two weeks, buckle up and manage risk, as it will be an exhausting two weeks.
What To Watch Today
Earnings
Economy
Market Trading Update
As noted yesterday, the market continues to grind sideways below the broken rising trend line. However, the action remains bullish as investors anticipate good earnings from Microsoft, Meta, Ely Lilly, and Abbvie today. We hold long positions in all those stocks, so today's announcements after the bell will greatly impact portfolios tomorrow.
This earnings season has heavily rewarded companies that beat earnings estimates, but overall revenue beats have been roughly average. Such suggests the economy is slowing down, and earnings may become more challenging next year. However, that is a story we will discuss with you later.
The market continues to trend higher, holding support at key levels, namely the 20-DMA (not shown in the chart above). However, this is all positioning for earnings this week. Once those reports are finished on Thursday, we could see some derisking headed into Tuesday's election, given that no one is certain of the outcome. As such, continue to manage risk for now, and after next week's election and Fed meeting, we should have a better picture of how to position for the remainder of the year.
DHI Warns Of Weakening Housing Market
DR Horton (DHI) opened over 10% lower, dragging the rest of the homebuilder sector lower. DHI's earnings and revenue fell short of expectations. More importantly, its number of completed but unsold homes rose 17% over the quarter to 10,300. This is especially concerning as it is going into a seasonally slow selling period, and mortgage rates are up by over 0.50% over the last month. Further, making matters worse for shareholders, DHI reduced its revenue guidance from $39.4 billion to $36-37.5 billion.
Further weighing on DHI and other homebuilders are homebuyers with lower mortgage rate expectations. Per its CEO:
"While mortgage rates have decreased from their highs earlier this year, many potential homebuyers expect rates to be lower in 2025. We believe that rate volatility and uncertainty are causing some buyers to stay on the sidelines in the near term."
Lastly, the Case-Shiller housing index fell by 0.13% last month, with the year-over-year change running at 4.2%. For context, the 2022 peak was +5.5%. Moreover, flat to declining home prices support DHI's weaker earnings and forward-looking revenue shortfall.
Key Market Indicators For November 2024
The November outlook marks a critical period with macroeconomic and election uncertainties still in play. The Fed’s dovish tone remains encouraging for equity markets, but geopolitical risks and U.S. election developments could inject volatility. As we approach the year-end, investors must remain agile and ready to respond to sudden market shifts.
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