Bears Roam Wall Street As Middle East Conflict, Earnings Outlook Raise Concerns Despite Strong Q3 US Economic Growth: This Week In Markets

It has been another week of volatility in the stock market, characterized by mounting fears of a wider Middle East conflict and a more cautious fourth-quarter earnings outlook announced by U.S. corporations.

Investors absorbed the latest economic data, which revealed stronger-than-expected growth in the third quarter and inflation in line with expectations in September, solidifying forecasts of unchanged interest rates at the upcoming Federal Open Market Committee Meeting next week.

US GDP Growth Beats Expectations, Fueled by Strong Consumer Spending: The U.S. economy exceeded expectations in the third quarter, recording a robust 4.9% growth rate, according to advance estimates. This result outperformed economist projections of a 4.3% growth rate. The primary driver behind the number: robust  consumer spending, which increased at an annualized rate of 4%.

Bill Ackman Exits Treasury Shorts, Cites Growing Economic Concerns: Renowned hedge fund billionaire Bill Ackman took to social media platform X to announce that he closed his short positions in U.S. Treasury bonds. Ackman attributes this decision to expectations the economy is slowing down more rapidly than recent data indicates and expressed his concern about the level of risk in the world.

Bitcoin Rallies As ETF Approval Nears: Bitcoin BTC/USD had a robust week of gains, marking a double-digit return and reaching its highest level in over five months. The D.C. Circuit Court of Appeals settled a dispute between the U.S. Securities and Exchange Commission and Grayscale, instructing the SEC to review its rejection of Grayscale’s application to transform its Bitcoin Trust into a spot Bitcoin ETF. Furthermore, BlackRock has registered the iShares spot Bitcoin ETF under the ticker "IBTC" with the Depository Trust & Clearing Corporation.

Major US Companies Beat Earnings Estimates, But Warn of Q4 Slowdown: Major U.S. corporations surpassed earnings expectations in the third quarter, with the exception of major oil companies. Nevertheless, there were notable warnings that the forthcoming quarters may not be as optimistic as anticipated, particularly from Meta Platforms Inc. META.

Amazon Roars In The AI Race, While Google Faces Cloud Challenges: Amazon.com, Inc. AMZN emerged as the top performer for the week among tech titans, rising 1.9%, propelled by stellar third-quarter results. Analysts lauded Amazon’s performance and its growing commitment to artificial intelligence investments.

Conversely, Alphabet Inc. GOOGL, the parent company of Google, had one of its toughest weeks of 2023, tumbling 10%. Alphabet exceeded profit and revenue expectations for the third quarter, but disappointing performance in the cloud business took a toll.

Market Highlights: The SPDR S&P 500 ETF Trust SPY fell 2.5% this week, hitting the lowest levels since mid-May 2023. Tech-heavy Invesco QQQ Trust QQQ slipped 2.6% and blue-chip shares in the Dow Jones Industrial Average ETF DIA by 2.1%. Bonds rose, with the iShares 20+ Year Treasury Bond ETF TLT up 1.4%. Gold closed above $2,000, rising 1.3% for the week.

Chinese-based stocks PDD Holdings Inc. PDD and JD.com Inc. JD emerged as the top performers within the Nasdaq 100 this week, with both witnessing a 5% increase in value as Beijing undertakes a robust policy stimulus initiative. The best-performing stocks within the S&P 500 were Willis Towers Watson Public Limited Company WTW and Rollins, Inc. ROL, up 11% and 9%, respectively.

Align Technology Inc. ALGN and Whirlpool Corp. WHR were the laggards, falling 29% and 21%, respectively.

What To Watch In The Week Ahead: The spotlight will be on the two-day Federal Reserve Open Market Committee meeting, culminating in the interest rate decision to be revealed Wednesday. While the markets have already fully factored in an interest rate hold, there will be heightened attention on Chair Jerome Powell‘s comments during the press conference. Wednesday will also include the release of the ISM Manufacturing Purchasing Managers’ Index, and Friday will bring the eagerly awaited October jobs report, along with the ISM Services Purchasing Managers’ Index.

Upcoming Earnings To Watch: On Monday, McDonald’s Corp. MCD will take the spotlight among mega-cap companies. Tuesday will feature earnings from Pfizer Inc. PFE, Advanced Micro Devices Inc. AMD, Amgen Inc. AMGN, and Caterpillar Inc. CAT.

Wednesday's lineup includes Qualcomm Inc. QCOM, Mondelez International Inc. MDLZ, CVS Health Corp. CVS, and Airbnb Inc. ABNB.

Thursday will bring the highly awaited Apple Inc. AAPL quarterly report, along with Eli Lilly and Company LLY, ConocoPhillips COP, S&P Global Inc. SPGI, Starbucks Corporation SBUX and Booking Holdings Inc. BKNG.

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