Nasdaq Slides as Earnings Disappoint
Recap
The week began on a positive note as progress toward a potential U.S.-Iran ceasefire supported markets. The Fed held rates steady on a split vote while leaving the door open for another increase in December. Sentiment deteriorated after large-cap earnings disappointed and concerns over AI spending intensified. The Nasdaq Composite fell 2.0%, fueling a risk-off move that pushed the 10-year Treasury yield down to 4.93%, its lowest since early September.
Looking Ahead
With the Nasdaq down 2.9% last Friday and 5.3% in October, sentiment remains fragile. Apple reports Monday evening, and strong results could help restore confidence. Tuesday’s midterm elections are expected to result in divided government, with Democrats favored to win the House and likely the Senate while a Republican remains president. Renewed U.S.-Iran tensions could push crude prices higher, while Friday’s jobs report will also be in focus. After the economy added just 29,000 jobs in September, October payrolls are expected to rise by 75,000, though estimates may change ahead of the release.
Market Watch
Source: Cetera Investment Management, FactSet. Total returns used, which includes dividends and interest.
Chart of the Week: U.S. Economic Growth Accelerates
U.S. real GDP growth accelerated to 3.4% in Q3, topping expectations of 3.2% and marking the strongest pace in a year. Robust consumer spending, private fixed investment, and government spending were the key drivers last quarter.
Is Divided Government Good for Stocks?
The U.S. midterm elections take place November 3, with prediction markets favoring Democrats to win the House and, more narrowly, the Senate. Either outcome would produce divided government with a Republican in the White House, which could make major legislation more difficult to pass. Analysts often view this as a check on large changes to taxes, spending, and regulation, though gridlock can create near-term uncertainty. Since 1945, divided government has prevailed in 24 of 41 congressional sessions, or about 58%. During those periods, our analysis shows the S&P 500 averaged an annualized return of 11.4% over the following two years. The index has also been higher for 12 months after every midterm since 1946.
Did You Know?
Since 1950, November has been the S&P 500's best month, averaging +1.9% and finishing higher 70% of the time.
Economic Calendar
Monday, November 2
ISM Manufacturing PMI, Construction Spending.
Tuesday, November 3
Job Opening and Labor Turnover (JOLTs), Factory Orders, U.S. Midterm Elections.
Wednesday, November 4
ADP Employment Survey, Mortgage Applications, U.S. Balance of Trade, ISM Services PMI.
Thursday, November 5
Jobless Claims, Challenger Job Cuts, Nonfarm Productivity.
Friday, November 6
Non-Farm Payroll, Unemployment Rate, Michigan Consumer Sentiment.
This report is created by Cetera Investment Management LLC.
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