Hello again friends, 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: -19% sentiment, bearish🔴

• S&P 500 (large cap) news: -39% sentiment, bearish🔴

• Russell 2000 (small cap) news: +25% sentiment, bullish🟢

📉 Stocks finish uneven as Q3 earnings season begins ramping up

• The major US stock indexes had themselves a volatile week, with Thursday’s rocky inflation report ushering in one of the largest intra-day reversals in market history. On the whole, the S&P 500, Russell, and NASDAQ fell for the week, posting their seventh negative result out of the past nine weeks. The Dow was an exception, as it finished in positive territory.

• Third-quarter earnings got rolling this week as a handful of major US banks kicked off the season with mixed results. Entering this past week, analysts are forecasting earnings growth for companies in the S&P 500 to be among the lowest growth rate of the past two years.1

😬 September inflation comes out hotter than expected at 8.2%

• Despite five interest-rate increases this year from the US Federal Reserve (and counting), Thursday’s Consumer Price Index release showed that key drivers of inflation aren’t settling down; all but confirming that the current inflationary environment is anything but transitory.

• September’s annual rate came out at 8.2% — exceeding analysts’ consensus estimate for a reading of 8.1% — though slightly below the 8.3% reading from last month. Excluding volatile food and gas prices, core inflation rose to a higher-than-expected 6.6%—the biggest jump in four decades.

🌡️ Bonds: 10-year Treasury yield breaks 4% for 1st time since ‘08

• For the first time since October 2008, the yield of the U.S. 10-year Treasury bond eclipsed 4.00%. The yield climbed above that level briefly on Thursday in the wake of a monthly inflation report before rebounding to close at 4.01% on Friday. The 2-year Treasury yield also rose, reaching 4.50%—the highest since August 2007.

• Zooming out further, this year is set to finish as the fourth-worst year on record for world government bonds, eclipsed only by the years 1721 (George Washington hadn’t been born yet), 1865 (the end of the US Civil War) and 1920 (the end of WWI) — what a time to be alive:

📰 Other noteworthy headlines:

• The IMF scaled back its global economic growth projection for 2023 to 2.7%

• Former US Secretary of Defence estimates the probability of nuclear weapons being used in Ukraine has risen to 20-25%

• US crude oil fell 7% for the week to less than $86 per barrel on Friday.

• The UK economy unexpectedly shrank 0.3% sequentially in August due to a fall in industrial output.

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:

Roblox (RBLX) 🤖 bearish sentiment 🔴

this week: 🔻-92% news sentiment | 🔺+2.4% stock price | view news profile 📰

Mobile gaming platform developer Roblox ended this past week with highly bearish mood expressed in market news coverage, coming in at a sentiment score of -92%. The decline in Roblox optimism came primarily on Tuesday after Barclay's analyst Mario Lu issued a downgraded rating on the company's stock and lowered his price target to $20 per share (RBLX currently trades just above $35), citing lagging performance metrics and an overdrawn valuation relative to other social media companies.

While Roblox is still in its growth phase as a company, Lu sees future growth as a potential challenge for Roblox, since its highest-monetized regions like the US and Europe are already 30% penetrated; its revenue growth rates have already been declining since early 2021 (shown below). He also thinks Roblox's take rate of 71% hurts the company's ability to attract developers to the platform, which it relies on heavily to provide the content that brings in users. Even despite this outsized take rate — along with recent announcements to begin selling 3D ads on the platform — Roblox shows no meaningful signs of near-term profitability.

top Roblox articles this week:

Goldman Sachs (GS) 🏦 bullish sentiment 🟢

this week: 🔺+83% news sentiment | 🔻-1.4% stock price | view news profile 📰

Banking giant Goldman Sachs finished with high degrees of optimism expressed in news coverage this week at a sentiment score of +83%, stemming from rumblings about the firm’s plans to enact one of the most sweeping internal reorganizations in company history. According to a source familiar with the matter, Goldman will fold its biggest businesses into three divisions; combining its flagship investment banking and trading businesses into one unit, while merging asset and wealth management into another.

These plans are expected to be made official during the bank’s upcoming third-quarter report on Tuesday, October 18th. As for its earnings outlook, analysts are projecting Q3 earnings per share (EPS) of $7.47 with revenues of $11.26B; and while both of these would mark considerable declines from the previous year, the stock appears set to move higher if these key numbers are able to beat the estimates. Potential bright spots of the report could be net interest income — which is expected to grow +31% year-over-year — along with Goldman’s strategic growth initiatives, including its recent Apple Card partnership. More below:

top Goldman Sachs articles this week:

III. Market Mood™ Outlook 🔭

After another big week of considerably negative stock market news coverage, let’s take a quick roll call: the US stock market remains squarely in a bear market, consumer prices are still rising at an uncomfortable clip, government bonds are having one of their worst years of the past 3+ centuries, oh… and the risk of a full-out World War III continues to build.

Now, with the fear-mongering out of the way, let’s take a deep breath and consider the potential for upside on the horizon — first a look at the reality of what last week’s CPI actually suggests, and then at the bigger picture of how our little ol’ bear market compares to the last few:

CPI: how bad is inflation, really?

• Thursday’s Consumer Price Index came out at 8.2%, continuing to hover near a 40-year high. And while last week’s report exceeded analyst’s expectations, the market’s reaction was perhaps pretty encouraging; after falling hard on Thursday morning, the S&P 500 mounted one of its biggest intraday rallies of all-time, finishing the day up +4.8% from its morning low — that’s some serious resilience, even by this market’s standards.

• The important thing to keep in mind here is that the CPI is a backward-facing metric; it reflects how today’s prices compare to September 2021 (which is a pretty long time ago). On a month-to-month scale, CPI last month rose only 0.4% and just 0.1% in August, suggesting that inflation could be peaking; and perhaps not far off from where the Fed would like it to be:

• According to Genevieve Roch-Decter (author of the Grit Capital newsletter), last week’s inflation numbers are equivalent to a +4.7% annual rise, much closer to the Fed’s 2% target. In fact, the 3-month average annualized inflation rate is almost exactly 2% — she writes about this in the following Twitter thread; an absolute must-read:

Bear Markets in history: how do we currently compare?

• Whether or not consumer prices are inching toward the Fed’s intended range, if we just look solely at the stock market’s performance thus far in 2022, there’s an argument to be made that we’re currently progressing through the bottom part of what analysts are calling a “U-shaped” recovery — perhaps closer to the end of the tumult than the beginning.

• Given the sizable volatility in stock market performance over the past few weeks, we are seeing some of the largest down days on the markets occur in close proximity to big up days; a signal that the news landscape may be becoming less one-directional than it was in previous months. The last 10 trading days alone have included 3 days in which the S&P 500 rose more than 2.5% and the Dow gained more than 750 points.2

• Lastly, considering the typical length of a bear market in recent decades, there are signs to suggest we could be approaching a turnaround point in the coming months. The average length of a bear market over the previous 7 instances was roughly 13 months; meaning our current 10-month bear market may not be far off from the end by historical standards:

Anyways, that’s all for this week. This week we look ahead to a jam-packed slate of Q3 earnings reports from the likes of Tesla, Netflix, IBM, United Airlines, Johnson & Johnson, and plenty more. The full schedule can be seen here from @eWhispers on Twitter.

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: