This article first appeared in the Morning Brief. Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET. Subscribe
Monday, October 3, 2022.
The fourth quarter for the stock market could be as cold as the third quarter — after all, what is there to be excited about at the moment?
Interest rates are rising. Housing affordability is rapidly declining. The Federal Reserve is deliberately not helping. Big tech names such as Meta are doing hiring freezes. Industrial giants like Fedex are canning people before the holidays. VF Corp. and Nike dropped warnings on the heads of battered investors. And Apple is reportedly cutting iPhone production.
Given this backdrop, here are a few things I am watching with the fourth quarter officially underway:
Consumer Earnings: This week will bring results from Conagra, Constellation Brands, McCormick and Levi's. These reports will provide much-needed insight into the mindset of a consumer who is still being hurt by inflation and is now seeing their 401ks shredded. Does Conagra's frozen food business see a lift from consumers trading down from eating out? How is Constellation's Corona brand doing with restaurant traffic showing more mixed trends of late? Will Levi's — a rare retail winner in 2022 — follow peers VF Corp. and Nike by warning about the holidays? I think all of these reports could be mixed at best, and inject the latest dose of fear into an already nervous market.
Market Action: With markets down a lot, pay careful attention to how stocks react to bad news. I found it interesting that shares of chipmaker Micron went up the day after it issued sales guidance almost $2 billion below consensus forecasts. If we get more reactions like this, then it would be OK to begin considering a short-term bottom in the markets. Worthwhile to ponder on this front: The forward price-earnings ratio for the S&P 500 is 15.4 times, below the five-year average of 18.6 times and below the 10-year average of 17.1 times according to FactSet.
5 other events to watch for: (1) Who is the first Fed member to signal a pause in rate hikes is not too far out into the distance? (would be bullish); (2) Does Friday's jobs report blow away estimates again? (would be bearish); (3) Does UPS warn on earnings like rival FedEx? (definitely wouldn't be good); (4) Do investors brush aside third-quarter earnings reports being severely hurt by the surging U.S. dollar? (FX could be a big profit headwind for the rest of 2022); (5) What is the tone around 2023 business opportunities when discussed at the Yahoo Finance All Markets Summit on October 17?
What to Watch Today
9:45 a.m. ET: S&P Global U.S. Manufacturing PMI, September final (51.8 expected, 51.8 during prior month)
10:00 a.m. ET: Construction Spending, month-over-month, August (-0.2% expected, -0.4% during prior month)
10:00 a.m. ET: ISM Manufacturing, September (52.1 expected, 52.8 during prior month)
10:00 a.m. ET: ISM Prices Paid, September (52.0 expected, 52.5 prior month)
10:00 a.m. ET: ISM New Orders, September (50.5 expected, 51.3 during prior month)
10:00 a.m. ET: ISM Employment, September (53.0 expected, 54.2 during prior month)
WARDS Total Vehicle Sales, September (13.50 million expected, 13.18 million prior month)
No notable reports are scheduled for release.