US equities recover after Trump-fueled rally lost steam last week
Several big companies report third quarter earnings this week, likely moving markets
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US stocks were once again on the rise Monday, recovering some of the losses posted late last week. Crypto assets — mostly insulated from the selloff — were largely maintaining their post-election rally.
Let’s start with what caused last week’s dip in equities. In my view, it was a bit of a perfect storm.
The GOP sweep, as expected, sent share prices higher. When Trump won in 2016, the S&P 500 gained about 6% between election night and Inauguration Day, a slightly bigger bump than the index saw when George W. Bush won in 2000 (+4%).
The market is, apparently, once again betting on Trump’s plans (lower corporate taxes, fewer regulations, etc.) as being good for business. Or, at least the market felt this way until last Thursday.
Let’s face it: Trump’s cabinet picks thus far have been controversial. The process, in just two weeks, has been chaotic and dramatic — likely reminding investors that while a red sweep is typically advantageous for shareholders, a Trump presidency is still, well, a Trump presidency.
These past couple weeks have not exactly been reassuring for those hoping for smooth-sailing politics over the next four years. Couple that with increasing concerns over the economic impacts of Trump’s planned tariffs and mass deportations and it’s no wonder markets pulled back.
Enter perfect storm condition number two: Inflation is still rising while the job market is proving remarkably resilient. Initial jobless claims for the week ended Nov. 9 came in at 217,000 vs. the expected 224,000. Core CPI for October showed prices are 3.3% higher than a year ago; that was in line with expectations, but still a far cry from the Fed’s 2% target.
This combination makes the Fed’s job more difficult. Chair Jerome Powell told us as much last week when he cautioned the central bank is in no hurry to lower interest rates and will continue to evaluate the data. This week’s data will be telling (but more on that later).
Doom and gloom aside, stocks were looking up today. The S&P 500 was up 0.4% while the Nasdaq Composite had gained 0.7% as of 2 pm ET. Bitcoin, which seemed to hit a new all-time high almost everyday last week, was holding steady, hovering around $90,300 Monday afternoon.
Looking ahead, several big companies report third quarter earnings this week, likely moving markets.
As the largest publicly listed company by market cap in the world, Nvidia on Wednesday will be the highlight. Investors will be looking for signs that the recent AI boom is still paying off for the chipmaker.
Walmart and Target also report this week, on Tuesday and Wednesday, respectively. As retail powerhouses, their numbers will give us a different look at consumer health.
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