Technology Stocks Decline as U.S. Equity Futures Fall
Major technology stocks are experiencing a downward trend, leading to a decline in U.S. equity futures. This drop marks the first time in 16 years that the Nasdaq has crossed the 5% threshold. Last week, the S&P 500 lost up to 2.4%, testing the key support level in the range of 4180-4200. A break below this zone could result in a significant bearish development, potentially pushing the S&P 500 below 4000 in the coming months.
P/E Ratio and Tech-heavy Index Fall
The forward 12-month P/E ratio for the S&P 500 currently stands at 17.7, which is below the 5-year average of 18.7 but above the 10-year average of 17.5. The Nasdaq Composite Index (IXIC) experienced a 3.2% loss, reaching its lowest levels since May. Tesla’s shares also contributed to the decline, closing over 15% lower due to a soft Q3 earnings report and cautious comments on the earnings call. Additionally, the Dow Jones Industrial Average (DJI) index fell 1.6% and closed below the 100-moving average.
Factors Influencing the Bearish Market
According to analysts at Vital Knowledge, the bears had the upper hand last week due to escalating geopolitical tensions, rising long-end Treasury yields, slower-than-expected underlying growth, and disappointing earnings reports. Despite some positive surprises, such as NFLX’s upside earnings report, the majority of surprises were on the downside.
Upcoming Earnings Reports
This week’s earnings calendar is packed with major companies reporting their Q3 results. Microsoft, Alphabet, Visa, and Coca-Cola are scheduled to report on Tuesday. On Wednesday, Meta Platforms, ServiceNow, and Boeing will release their earnings. Thursday will see reports from Amazon, Mastercard, and Intel, among others. Finally, Chevron and Exxon are set to report on Friday.
Analysts’ Perspectives on U.S. Stocks
Various analysts have weighed in on the current state of U.S. stocks:
- Citi’s analysts remain constructive on the fundamental setup for the S&P 500, acknowledging the presence of macro risks but highlighting several underlying trends.
- JPMorgan’s analysts note the historical correlation between a strengthening USD and global equity pressure.
- RBC’s analysts recognize that October can be a challenging month for stocks but acknowledge that the S&P 500 has historically seen gains during this period.
- Morgan Stanley’s analysts emphasize the focus on the Fed’s next move and S&P 500 price, highlighting the risks to the consensus 4Q rally view.
- Goldman Sachs’ analysts anticipate continued investor focus on balance sheet strength, particularly amid higher rates.
Overall, the market remains volatile, with multiple factors influencing its direction. The upcoming U.S. GDP Q3 print on Thursday will likely provide further insights into the state of the economy.
