Welcome to this week’s Market News Roundup 🗞️ — here’s the agenda for today’s quick stock market news review:

1. 🖼️ big picture: this week’s overall market sentiment

2. 📊 interesting set-ups: a few stocks worth watching

3. 🔭 Market Mood™ outlook for the week(s) ahead

I. Overall News Sentiment 🖼️

• Overall news: -8% sentiment, slightly bearish🔴

• S&P 500 (large cap) news: -13% sentiment, bearish🔴Russell 2000 (small cap) news: -67% sentiment, bearish🔴

⏸️ Markets hit pause on gains streak, falling back again

• After climbing the past two weeks, US stocks fell to end this week. The S&P 500 lost more than -3%, the Russell 2000 lost -2%, and the NASDAQ dropped nearly -6%; The Dow saw a relatively modest setback of -1%, snapping a four-week winning streak.1 

• For the most part, value stocks — from the energy and banking industries in particular — outperformed their growth & tech counterparts on the week.

🦅 The Fed stays hawkish on inflation, raising rates by +75 bp’s

• As we projected last week, this week’s FOMC meeting ended with the US Federal Reserve announcing a fourth-consecutive +0.75% interest rate hike — one of the steeper trajectories on record. This week’s hike brings the Fed funds rate to 4%

• Looking ahead to its December meeting, we’ll expect Jerome Powell and the Fed to announce another hike between 50 and 75 bp’s, with Fed Fund Futures now pricing in a peak terminal rate in July 2023 at 5.18% overall.2

☀️ Jobs report shines, exceeding growth expectations in October

• With the Fed’s hawkish tone putting a (somewhat expected) damper on the markets this week, October’s monthly employment report released Friday was perhaps a reason for optimism. US jobs growth continued to exceed expectation last month, generating +261,000 new jobs (vs. the government’s original forecast of around 200,000)

• In addition, a separate monthly report issued on Tuesday showed that job openings rose to 10.7 million — also above expectations. And while a payroll growth of +261,000 last month was higher than projected, note that we’re currently at the lowest level of jobs since Biden took office, and trending downward:

📰 Other noteworthy headlines:

• Eurozone’s October inflation climbed to 10.7% YoY, up from 9.9% in September

• Chinese stocks rally amid re-opening economy rumors

• 10-year US Treasury yields reversed course and climbed to 4.16% on Friday

• Earnings season continues to be carried by energy stocks, accounting for nearly all of the S&P 500’s net gain in corporate profits year-over-year

• Tomorrow marks mid-term elections in the US

II. Stocks to Watch 🔥🧊

Now, a quick look at two notable stocks to keep an eye on based on their sentiment detected in stock market news coverage this week:

Roku (ROKU) 📺 bearish sentiment 🔴

this week: 🔻-97% news sentiment | 🔻-13% stock price | view news profile 📰

Streaming platform Roku finished as one of the most bearish stocks in market news coverage this week after reporting third-quarter earnings after market close on Wednesday. Despite beating analysts estimates and growing considerably year-over-year in terms of both revenus and earnings (which are still at a net loss), Roku shares took a hit after the company announced shorter than expected projections for the remainder of the year. 

In their downbeaten outlook, the company cited slowing advertiser spending and an adverse macro-economic environment heading into the holiday season. Admittedly, given the high degree of uncertainty with our current economic backdrop, advertisement budgets tend to become the first thing company’s cut — a tough reality for Roku and other streaming services who rely on ads as their major revenue contributor. Roku’s post-earnings price dip brought the stock to its lowest levels since 2019; following suit, at least three analysts lowered their ratings on Roku stock — more here:

top Roku articles this week:

HSBC (HSBC) 💱 bullish sentiment 🟢

this week: 🔺+98% news sentiment | 🔺+7.1% stock price | view news profile 📰

Europe’s largest bank by total assets, HSBC ended this week with highly bullish sentiment expressed in market news coverage. The British banking company — whose largest investor is Chinese insurance giant Ping An — saw a spike in stock price along with other China-adjacent companies after rumors appeared mid-day Friday over the easing of Covid restrictions in China and Hong Kong. As Hong Kong's biggest lender, HSBC vowed this week to help reboot the economy as the city reopens for business in the coming months.

Aside from Covid speculation, more direct news out of HSBC this week came after Ping An released a statement Friday urging the company to reduce costs by cutting jobs and divesting its peripheral non-Asian businesses (particularly in Canada) in an effort to turn around its lagging performance as of late. With HSBC’s Asian lending divisions accounting for the vast majority of the company’s profits, Ping An’s support in potentially spinning off part of the company carries a lot of weight. More here:

top HBSC articles this week:

III. Market Mood™ Outlook 🔭

Finally, a quick look at what’s on the horizon:

🚧 Interest rate outlook: the long view

After this week’s FOMC meeting ended with a 4th consecutive rate hike — bringing the Fed funds rate from near zero to 4.0% in about eight months (an unprecedented pace of interest-rate hikes in the US economy) — the big question is how far away from the end are we? A few takeaways from Powell’s comments this week:

• Rate hikes may move at a more gradual pace going forward, but a pause in rate hikes is unlikely any time soon. If inflation remains near its current trajectory, we may even expect two more +0.75% hikes at the upcoming December and February FOMC meetings

• Zooming out further, we can likely expect a terminal fund rate at or above 5.25%, which would take at least three more meetings and corresponding hikes to achieve — that means interest rates likely will not peak until at least March of 2023; according to the futures market, perhaps not until July:

📝 This week’s Consumer Price Index report

All of this interest rate effort is in the interest of driving down inflation over the near term, to preserve the value of the US dollar both domestically and relative to other world currencies. A big test will come this Thursday, as the government releases its monthly Consumer Price Index report on the state of inflation in October:

• Looking back at September’s reading, inflation slipped to an annual 8.2% rate from 8.3% the previous month — although core inflation (excluding food & fuel prices) rose to a higher-than-expected 6.6% year-over-year increase.

• Analysts are expecting October’s report to come in somewhere between 8.0% and 8.1% year-over-year; anything below would likely send stocks upward on the week, and anything above that would all but solidify a peak fund rate above 5%.

🗳️ Midterm elections on Tuesday

Market futures are already pricing in a bump from this week’s midterm US elections on Tuesday, with the Dow, S&P 500, and Nasdaq 100 futures all gaining +0.6%, respectively.

• Tuesday’s midterm election will determine which party will control Congress, and impact the direction of future spending. Democrats currently control the House, and have a majority in the Senate.

• Judging from the past, US investors could take a bullish cue from the historical playbook which indicates that stocks tend to experience above-trend gains of 13-14% on a median/average basis in years that have a Democratic President and a split or Republican Congress.3

🗓️ Yet another big week of Q3 earnings

Finally, this week marks one of the last big cohorts of third-quarter corporate earnings to be released — the full schedule for the coming week is shown here:

As always, the future remains to be seen — let us know if there’s anything we missed by commenting below, replying to this email, or emailing us directly at [email protected]. And if you liked this post, please support us by clicking the like button! Best of luck to all of you in the markets this week, stay safe out there, and thank you for reading. 😎

Disclaimer: This is not financial advice or recommendation for any investment. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Credit to the respective teams cited below: