Here are 3 things we're watching in the stock market in the week ahead
Wall Street is coming off a winning Friday thanks to a soft jobs report. As the market tries to keep the momentum going, a quiet calendar of earnings and economic reports awaits in the week ahead. The relatively slow week comes as we await the start of third-quarter earnings season and leave behind conference season. It also coincides with an air pocket in the economic data slate, in the shadow of last week’s cooler-than-expected inflation data and a goldilocks September payroll update on Friday. Even Jim Cramer joked about how little is penciled into the calendar, saying Friday that it’s a “peculiar week. … there’s nothing.” Make no mistake, though: just as there’s always a bull market somewhere, there is always something out there to fill the void and move the stock market. That includes the sphere of geopolitics, which the market interprets through the lens of oil prices and interest rates on government bonds. We certainly expect the oil and bond markets to continue their heavy influence on how stocks trade this week. In particular, new information on oil exports through the Strait of Hormuz and the broader Middle East region will be key. The same goes for updates on military activity in the region, as reports of the U.S. sending another aircraft carrier to the region last week caused oil prices and bond yields to jump . Where do we go from here? In recent weeks, we’ve seen equities — at the index level — hold up relatively well despite a steady and relentless march higher in the 10-year Treasury yield . In fact, the Nasdaq Composite even touched an intraday record high Friday. To be sure, market leadership has been remarkably narrow — punctuated by outperformance in some big tech names, including the biggest of them all, Nvidia , which also set an all-time intraday high Friday. Meanwhile, plenty of stocks have already been crushed. You can see this reflected in the S & P 500 , which weights stocks by their market cap, being down about 1% from its mid-August all-time high. By contrast, an equal-weighted version of the S & P is down almost 6% from its own mid-August peak. That divergence shows the top-heavy performance of the market lately. Higher bond yields pose multiple problems for the market. They make corporate financing more expensive (a funding issue); debt-reliant purchases more expensive (a consumer demand issue); and future earnings worth less in present value terms (a valuation issue). These issues have already impacted certain rate-sensitive parts of the market. Yet the index-level resilience cannot be ignored — and it certainly raises the risk for a broader pullback if yields take another leg higher. Conversely, if we see lower oil prices and Treasury yields, a broad-based rally may ensue . We are staying the course, despite the delicate setup with indexes in the ballpark of all-time highs and long-term bond yields at multi-decade highs. Interest rates help us figure out how aggressive to be, but the fundamentals dictate whether we want to stay invested. We haven’t seen the fundamentals break yet. At the same time, we’re mindful that the index-and-rate backdrop could inspire sellers to jump on any negative headlines as a reason to book profits. The S & P Short-Range Oscillator remained slightly oversold entering the weekend, so pullbacks may well prove short-lived, should interest rates start to top out. Our cash position currently stands at nearly 12% — not the highest we’ve maintained, but on the higher end for sure. We encourage all members to take some time ahead of Monday’s open to consider the setup as outlined above against their own cash positions. We certainly aren’t encouraging anyone to sell in anticipation of a correction. As Peter Lynch famously said, “Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.” However, we are saying you want to have enough cash on hand to take advantage of any weakness we may run into as we gear up for earnings season. A market near all-time highs is the perfect time to do so. With that, let’s get to the few notable updates investors will want to keep an eye on. 1. Marvell investor day: On Tuesday, Marvell hosts its much-anticipated investor day. Though we don’t own the name, the company is a direct competitor to Broadcom in the custom semiconductor space, and it has an exciting optical networking business that’s important for future generations of Nvidia technology and AI computing more broadly. In other words, Marvell sits at the heart of the AI infrastructure buildout and what the company says Tuesday figures to influence trading in many other AI stocks. Most importantly, Marvell has signaled it will provide updates to its longer-term financial targets at this investor day — and that’s key for a market constantly trying to figure out the sustainability of the AI investment cycle. 2. Earnings: While there are no Club names set to report, we will hear from Corona and Modelo brewer Constellation Brands on Tuesday evening; denim maker Levi Strauss on Wednesday evening; soft drink and snack maker PepsiCo on Thursday morning; and Delta Air Lines on Friday morning. Of the four, Delta Air Lines likely has the most valuable information for investors without any direct stake in any of the reporting companies. Given the dynamics in the Middle East, it’s no secret that fuel costs are crunching margins everywhere. Airlines are uniquely exposed because fuel is such a big expense in daily operations. In Delta’s case, it is actually a bit more insulated than peers thanks to its company-owned refining operation, the Trainer refinery in Pennsylvania, which it owns through its wholly owned subsidiary Monroe Energy. We’re also interested in what Delta has to say about consumer flying demand in the face of higher ticket prices. Business travel tends to be more resilient, so it’s really the leisure traveler where there’s the biggest question mark. Though not an earnings report, Club name Costco is set to release its September monthly sales on Wednesday evening. 3. Macro updates: The week starts out Monday with the Institute for Supply Management’s Services PMI for the month of September. The report, which measures the health of the U.S. services sector, provides insight into 18 industries by tracking business activity, new order trends, employment, and supplier deliveries. The market is hyper-sensitive to new data on the economy, as we saw Thursday, when inflationary signals inside the ISM’s Manufacturing PMI for September caused a spike in bond yields. These ISM reports show the rate of contraction or expansion in the manufacturing and services sector, measured by the distance from a 50-level benchmark. The further below 50, the faster the contraction; the further above 50, the faster the rate of expansion. As of Friday, economists are looking at the September Services PMI to come in at 55.9, an acceleration versus the 55.4 reading we saw last month, according to FactSet. Our favorite part of the report is underneath the headline number. In the “what respondents are saying” section, we find direct quotes from industry sources across the covered sectors on what they’re experiencing on the ground. ISM readings may not direct our buy or sell decisions. However, tracking the trends in the report helps in our understanding of the economic backdrop in which our companies are operating, along with official government data and companies’ results and commentary. We’ll see some Fed-related headlines this week, most notably New York Fed President John Williams speaking on Tuesday morning. He had some market-moving comments last week about the central bank not needing to act with urgency on its next rate move, so we’ll see where he stands following Friday’s jobs report. On Wednesday, the Fed will release the minutes of the Federal Open Market Committee’s September meeting, where the policymaking arm hiked rates for the first time in three years. An important thing to keep in mind about these minutes: they’ll cover a meeting that took place before we saw last week’s cooler August inflation data and the weak employment number. Finally, the University of Michigan consumer sentiment index will be out Friday, which will provide us with some insight into the mind of the everyday consumer. Though the survey inputs are more qualitative than quantitative (asking consumers subjective questions about how they feel about their finances and the economy), it is important to monitor as a leading indicator of consumer spending intentions. Remember, private consumption amounts to about two-thirds of U.S. gross domestic product. Week ahead Monday, Oct. 5 S & P Global PMI Composite (final) at 9:45 a.m. ET ISM Services PMI at 10 a.m. ET No earnings reports of note Tuesday, Oct. 6 Census Bureau’s trade balance at 8:30 a.m. ET Before the bell: RPM International (RPM), Lamb Weston (LW) After the bell: Constellation Brands (STZ), Worthington Steel (WS), Penguin Solutions (PENG) Wednesday, Oct. 7 FOMC meeting minutes at 2 p.m. ET Before the bell: No earnings reports of note After the bell: Levi Strauss (LEVI), Applied Digital (APLD) Thursday, Oct. 8 Initial jobless claims at 8:30 a.m. ET Before the bell: PepsiCo (PEP) Friday, Oct. 9 University of Michigan consumer sentiment survey (preliminary) at 10 a.m. ET Before the bell: Delta Air Lines (DAL) (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. 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