Dow rises 800 points as Apple shares rise – but ‘impending recession’ could still fuel markets, BlackRock warns

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Major stock indices extended a stunning October rally on Friday after tech giants Apple and Intel broke a series of dismal third-quarter earnings reports with results that shattered expectations, but analysts aren’t convinced the hiatus will be long-lasting as the Federal Reserve’s ongoing tightening campaign threatens to slow the economy into at least next year.

The year-end optimism may not be justified as the Fed continues its aggressive tightening… [+] campaign this year.

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The Dow Jones Industrial Average rose 828 points, or 2.6%, to 32,861 Friday — extending the index’s best-ever run ever in October, up 14% — while the S&P 500 and tech-heavy Nasdaq, respectively, were about 2. 5% and 2.9% climbed.

At the head of Dow earnings, shares of tech giants Intel and Apple rose 11% and 8% each after they reported gains Thursday night that beat Wall Street expectations, with investors touting Intel’s efforts to cut costs next year. $3 billion and as much as $10 billion to be cut by 2025 to defend against “deteriorating economic conditions”.

Other mega-cap companies rallying Friday included oil giant ExxonMobil, which rose 2.7% after reporting a record-breaking quarterly profit of $19.7 billion, thanks in large part to skyrocketing natural gas prices and “rigorous” cost cutting.

Positive gains helped improve sentiment after a spate of disappointing tech results this week saw Alphabet, Amazon and Meta stocks plunge 6%, 13% and 24%, but analysts aren’t entirely convinced the resilient gains will be long lasting.

“Profits are holding, but risks are mounting,” said Bank of America’s Savita Subramanian, who warns that more companies will lower their earnings estimates in the coming weeks as economic momentum continues to slow, especially as some of the weaker sectors suffer. year (such as consumer discretionary like Disney) will not report earnings until mid-November.

Tangent

Stocks tend to jump modestly the day and month after the midterm elections — with the S&P rising an average of 1.2% in the following month and stocks rising about 75% of the time, according to research firm DataTrek. However, BlackRock analysts said in a recent note that they are not as optimistic this year. “We see a bigger problem for equities than all the possible positives of the midterm election: an impending recession,” wrote a team led by Wei Li. They argue that the Federal Reserve won’t stop walking until “after the economic damage of interest rate hikes is apparent,” and that a recession will extend “in time” beyond the housing market.

What to watch out for

In the event that the economy enters a recession, Goldman expects the S&P to fall another 13% to 3,400 points by the end of the year and from 19% to 3,150 in the next six months, taking a full year to make up for his losses.

Read further

Here’s how major tech stocks performed in 2022 as FAANG softens its bite (Forbes)

Dow on pace for best October ever, second best month in 30 years (Forbes)

Consumer prices rose even faster last month – here’s what that means for the next rate hikes (Forbes)

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