Traders have a successful day at the Stock Exchange office
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A new bull market launch? No. Too soon. Furthermore, this sharp increase has flawed characteristics. However, positive developments could extend this happy moment until the end of the year. It is the pleasant pause described here...
How the five developments are progressing...
Completed developments:
First: Company results reports (October 30 to November 10) - Positive so far
During these two weeks, 42% of S&P 500 companies report profits. The companies are well diversified across economic sectors and industries.
The results of the first week (October 30 to November 3) showed a net positive result, judging by the performance of the companies' shares.
Number of S&P 500 companies reporting last week = 160 (32%)
Weekly performance results...
Companies that report...
- Average = 5.7%
- Median = 5.6%
- Weighted market capitalization = 5.5%
Second - Federal Reserve Announcements (November 1) - Positive
The Federal Reserve reassured investors with its inaction on interest rates. Additionally, the comment included the possibility of one or no rate increases remaining. Uncertainty persists due to the Fed's perpetual wait-and-see attitude toward future economic and inflation data.
Third โ Bureau of Labor Statistics (BLS) Employment Status Summary Report (November 2) โ Positive
This important report confirmed the continuation of good employment conditions with "fair" growth and a slight rebound in unemployment.
Upcoming developments:
First (continued): Company Earnings Reports (November 6-10)
Companies due to release results next week benefited from this week's stock market rally. Here are your performance results...
Number of S&P 500 companies reporting next week = 52 (10%)
Weekly performance results...
Companies that report...
- Average = 5.9%
- Median = 5.8%
- Weighted market capitalization = 6.0%
So, those stocks also outperformed the market. Could there be some improvement in earnings expectations driving them up? Next week should give us the answer.
Fourth: University of Michigan Consumer Sentiment Report (November 10)
The results of this survey are a widely followed measure of consumer sentiment, for both current and expected conditions. With the good retail sales and employment reports, this preliminary November report is expected to be positive.
Fifth: BLS Consumer Price Index (CPI) Report (November 14)
Key inflation data (particularly for "core CPI" which excludes food and especially variable energy prices) will likely show a trailing 12-month figure for October that is similar to September.
Bottom line: Enjoy this period, but don't assume this is a new bull market.
Last week's broad rise partially alleviates previous concerns about a "10% correction" and a "stock market crash." If next week also brings good news, that relief will increase. With the Christmas season approaching, the good feelings could extend until the end of the year. This possibility raises two elements to remember:
First, the negative aspects that produced the three-month sell-off persist. While some might heal or become irrelevant later, don't take their absence from media reports as a sign that they're gone forever.
Second, the stock market liquidation/reversal actions seem poor. There was no liquidation activity in the fund and the run-up to the rally saw old fads rise rapidly. That combination of dead cat bounces and favorite restocks of the past is a strong indication that another market sell-off is coming.
In other words, these current positive days are a welcome pause. However, by January 2024, reality will likely have returned. Therefore, it seems fine to speculate on short-term ideas as long as sell orders remain short.
