Correction Territory – Monday Morning Market Memo – October 30, 2023

Correction Territory – Monday Morning Market Memo – October 30, 2023

The three major stock market averages all registered declines last week.  The Dow Jones Industrial Average fell 2.1% to 32,417, its lowest closing price since March.  The NASDAQ Composite shed 2.6% to 12,643.  The Standard & Poor’s 500 Index lost 2.5% to 4,117, falling four of five trading days last week.  The NASDAQ and S&P are now in correction territory, defined as a drop of 10% or more from a recent high.  The drop would likely have been worse last week, if not for, whose profit numbers blew past expectations.  The stock rose nearly 7% post earnings, providing a bit of a reprieve for the market.

Factors behind the stock market decline, both last week and of late, include rising interest rates and the higher for longer theme, war in the Middle East, a negative reaction to earnings from some key tech companies including Alphabet and Meta Platforms, concern over future earnings, and renewed worries over the possibility/likelihood of an upcoming recession.

Ironically, the initial print on 3rd quarter Gross Domestic Product out last week was exceptionally strong, showing growth of 4.9%.  Keep in mind, however, the financial markets are forward looking, and last quarter is in the rearview mirror/backwards looking.

Despite other positive economic data as well, investor conviction the U.S. economy is heading into a slowdown is increasing.  Many investors have been predicting a recession for quite a while now and have repeatedly been proven wrong.  Still, the belief that a recession is close in front for us, keeps being rekindled.  This mindset has been acting a headwind for the market.

Looking to the week ahead, it’s going to be another busy one……

Earnings season continues in full swing.  Notable companies reporting this week include Advanced Micro DevicesAmgenCaterpillarDuke EnergyExpediaStarbucksMcDonald’sPfizer, and PayPal Holdings.  The most anticipated report will be from Apple, which reports results Thursday after the closing bell.  Consensus estimates are Apple will report Earnings Per Share of $1.39.

Federal Open Market Committee – The Federal Reserve announces its policy decision Wednesday afternoon, with nearly unanimous opinion the Fed will leave rates unchanged.  According to the CME FedWatch Tool, the probability is 98.2% the central bank will not make any changes to its interest rates.

Jobs Report – The Bureau of Labor Statistics releases the October Jobs Report Friday morning before the opening bell.  Expectations are the U.S. economy added 175,000 jobs and the unemployment rate remained unchanged at 3.8 percent.  This report is widely followed by the markets and the Federal Reserve and is often market moving.

To conclude with a point on market corrections (drops of at least 10%) – remember they’re a normal part of the stock market and happen historically about once a year.  Corrections occur for what some investors may perceive as good reasons, bad reasons, overreactions, valid price adjustments, technical factors, market momentum, or for “no reason”.  Corrections are an inherent part of the stock market and should not throw people from their long-term financial and investment plan.  Investing is a marathon, not a sprint!

As always, please call us with any questions or if you would like to set up a meeting.


All the best – Southport Station Financial Management, LLC