Analysis
Apple, Midterms, Payrolls: A Week That Tests the Sell-Off
Apple reports on Monday, Americans vote in the midterms on Tuesday and October payrolls, forecast at +55,000, arrive on Friday. The S&P 500 starts the week at its lowest close since mid-September.
Wall Street goes into November with the AI trade on the defensive and an unusually crowded calendar. The SPDR S&P 500 ETF closed Friday at $755.72, its lowest close since September 16, after a week in which Alphabet suffered its worst day on record and Intel its worst since 1974. StoneX analysts noted on Sunday that the index had broken support between 7,620 and 7,632 and slipped below its 21-day exponential moving average, and BTIG's Jonathan Krinsky sees a possible test of the 200-day average near 7,306. Three events in five days will decide whether that happens.
The first is Apple, after the close on Monday, November 2. It is the sixth of the seven largest technology companies to report this season, and the first since Alphabet, Amazon and Meta were punished for spending more cash on AI than investors wanted to see. Apple spends far less on data centres, so the test is different: iPhone demand, services growth and margins under higher memory prices. Bank of America's Wamsi Mohan removed the stock from his firm's US1 list, citing a more conservative outlook than the Street's, and the shares closed Friday at $344.63. Palantir also reports Monday, AMD on Tuesday and Qualcomm and Arm on Wednesday; 138 S&P 500 companies report during the week.
Tuesday is Election Day. Early polling and prediction markets give Democrats a chance at both the House and the Senate, and strategists have flagged defence spending, drug pricing and data-centre regulation as the policy areas most exposed to a change of control. History argues against expecting much from the vote itself: the Stock Trader's Almanac finds the Dow has gained 2.8% on average over the eight trading days around midterm elections since 1934, and November in midterm years has averaged gains of 3.5% for the Nasdaq and 2.7% for the S&P 500.
The data end with the October jobs report on Friday, November 6. The FactSet consensus is for 55,000 new jobs, after 29,000 in September, with unemployment steady at 4.2%. It comes after Monday's ISM manufacturing survey, Tuesday's job openings, Wednesday's ADP payrolls and ISM services index, and Thursday's productivity and unit labour costs. With the Fed's target range at 3.75% to 4%, two officials having voted for a hike last week and core PCE inflation at 3.1%, a strong report would harden bets on a December increase; a weak one would ease them.
The earnings picture helps explain the nerves. FactSet expects third-quarter profits to grow about 30%, but companies have been beating estimates by only 1.4% on average, against a five-year average of 7.5%. That leaves little cushion for disappointment, which is exactly what punished the AI spenders last week. Siebert Financial's Mark Malek expects volatility and said he is buying while adding protection against things that "go bump in the night". The sell-off has made valuations less stretched than a month ago; this week shows whether that is enough.