Cela's Weekly Insights - October 20, 2024

The stock market experienced a rollercoaster week, with strong momentum pushing key indexes to fresh records, followed by periods of volatility driven by sector-specific news and earnings reports. Despite some turbulence, particularly in the semiconductor sector, investors remained focused on the broader economic outlook and corporate earnings, leaving the market poised for further movement in the weeks ahead.

Tech Sector Drives Gains Amid Earnings Optimism

The week began on a high note as the Standard & Poor’s 500 and Dow Jones Industrial Average hit fresh all-time highs, supported by robust performances in the tech sector. Nvidia, in particular, surged to record highs, riding a wave of optimism around AI and chip demand. This bullish sentiment was further boosted by strong retail sales data, which painted a positive picture of the U.S. economy's resilience. Cryptocurrencies also benefited from the broader risk-on environment, with Bitcoin and Ethereum posting significant gains.

However, the market's fortunes turned midweek when semiconductor giant ASML delivered a disappointing earnings outlook, leading to a steep decline in chipmaker stocks, including Nvidia and AMD. The news sparked a broader market pullback, with major indexes, including the S&P 500 and Nasdaq, retracing some of their earlier gains. United Health Group also contributed to the downturn, falling sharply after missing its 2025 profit guidance. Despite this temporary dip, strong earnings reports from Goldman Sachs and Bank of America provided a partial offset, as both banks delivered robust results driven by dealmaking activity.

Banks and Commodities Bounce Back

As the week progressed, the markets staged a recovery, with the Dow Jones rebounding to record highs, thanks to positive earnings surprises from Morgan Stanley. The investment bank reported strong growth, fueled by increased dealmaking, and saw its stock rise by nearly 7%. This sparked renewed optimism in the banking sector, despite ongoing concerns about tech stocks.

Meanwhile, commodities played a notable role in market dynamics, with oil prices dropping sharply. This decline came after reports suggested that Israel might avoid targeting Iranian oil infrastructure, easing concerns about potential supply disruptions. Gold, on the other hand, rallied to near-record highs, driven by geopolitical uncertainty and upcoming U.S. elections, as investors sought safer assets amid rising risks.

Strong Retail Data and Big Tech Set the Stage for Earnings Season

Positive retail sales data underscored the strength of the U.S. consumer, boosting sentiment that the economy might continue to expand despite inflationary pressures. TSMC, a key chip supplier, reinforced this narrative with a stellar earnings report that helped lift semiconductor stocks, including Nvidia, which had taken a hit earlier in the week. TSMC’s strong performance and raised revenue forecasts eased concerns about demand in the AI sector, which had been weighing on markets.

Big Tech earnings kicked off with Netflix, which shattered Wall Street expectations by delivering stronger-than-expected subscriber growth and revenue projections. This set the stage for a highly anticipated earnings season, with investors now turning their attention to upcoming reports from giants like Apple, Amazon, and Google. Netflix's impressive performance helped the Nasdaq lead gains, while other major indexes also closed the week at or near record levels.

All in all, the markets wrapped up the week with notable gains across the board, despite some choppy trading sessions. The Dow Jones, S&P 500, and Nasdaq all posted weekly gains, with strong performances in both tech and financial sectors. However, uncertainty remains, driven by geopolitical tensions, upcoming U.S. elections, and ongoing concerns about inflation and Federal Reserve policy. With Big Tech earnings just getting underway, investors are eagerly awaiting more signals on whether the rally has further to run or if volatility will continue to dominate the market landscape in the coming weeks.

Last Week's Market Performance: A Global Overview

Cela’s Weekly Insights Indicator

That's all for today, folks. For more insights, be sure to join me every weekday morning on my podcast, Capital Markets Quickie, where I break down the most important events in the week ahead. And if you're looking for deeper insights, subscribe to our weekly German capital markets newsletter, Die Woche IM FOKUS, from AMF Capital AG. You'll receive 6 exclusive charts and updates on the fixed income, stock market, and global economy.

Cheerio!

Endrit Cela The Investment Fella - ECB, mm, 411 ??