U.S. markets shook off the weekend’s news of Israel’s bombing of Iran and looming political gridlock in Japan and embarked on an incredibly busy earnings and economic data-packed last full week before both the election and the next Fed interest rate decision on a positive note at the open on Monday. Oil prices suffered their biggest one-day fall in over two years on the back of an apparent lack of damage to Iranian oil facilities during Israel’s attack.

This hit the energy sector but most stocks generally got a boost from the retreat in recently-extended oil prices and at least a temporary dip in the geopolitical temperature and the indexes finished the session higher, although off the highs of the day.

Old school names Ford, McDonalds, Xerox, Black & Decker and Jet Blue all issued rather troubling earnings reports which weighed on markets on Tuesday morning. While the Job Openings and Labor Turnover Survey (JOLTS) showed a lower number of open job positions than expected, the Consumer Confidence Index showed a long overdue major leap in how confident consumers feel about what is clearly a really strong U.S. economy.

Stocks liked that and the indexes, led by the NASDAQ, recovered from their early losses to move into the green zone, but in the end the gains were relatively small as traders kept their powder dry ahead of the real business end of the week with the slew of big dog earnings and economic data starting after Tuesday’s closing bell.

Alphabet/Google kicked things off by solidly beating analysts' estimates for earnings and revenue but showed an alarming increase in capital expenditure, much of it AI-related. AMD’s results disappointed and Eli Lilly’s forward guidance was unimpressive. The bigger picture, however, remains vigorous, with Q3 Gross Domestic Product (GDP) coming in at +2.8%, pointing to an economy that’s humming along nicely, with strong consumer spending supported by a robust labor market, and business investment that remains solid.

The net effect on stocks on Wednesday ended up being minimal with the indexes floating around either side of unchanged most of the day, eventually ending the session with light losses.

After hours, we learned that Microsoft’s cloud-computing business and Office software fueled stronger-than-projected revenue growth in Q3 but the company is struggling to bring data centers online fast enough to keep up with demand for AI services. Meta/Facebook failed to beat estimates on revenue despite a decent earnings number and its wearables division (headsets and glasses) continues to rip through ridiculous amounts of cash with apparently very little sign of any light at the end of the tunnel.

The Bank of Japan held interest rates unchanged but the Microsoft and Meta reports gave the broad market no chance and dragged stock prices significantly lower on Thursday and things only got worse when the Fed’s favorite inflation measure, the Core Personal Consumption Expenditures (PCE) price index showed some unexpected stickiness in the rate of inflation.

This further hurt the narrative of imminent outsized Fed interest rate cuts. Stocks in general had a bad day (all of the S&P 500’s gains for the month of October were wiped out in the final session of the month) but tech and AI names did even worse, suffering something of a Halloween massacre.

After Thursday’s close Amazon reported better-than-expected earnings and revenue, with Amazon Web Services the standout performer. These days, Wall Street has become accustomed to the Magnificent Seven and other tech and AI-related names not just beating forecasts but absolutely smashing them. This proved to be Apple’s downfall as it reported slightly higher-than-expected earnings and revenues, but the word “slightly” proved to be a problem for the market which sent the stock tumbling in after-hours trading.

On Friday morning before the opening bell, the jewel in the crown of what was a very crowded week of data, the Jobs Report, was released. It showed a heavily-reduced payroll number of just +12k jobs added in October but with the huge caveat that the studied period was very distorted, including two massive hurricanes and significant labor strikes. Big revisions and corrections can be expected in next month’s report. September’s number was revised downwards but the unemployment rate remained unchanged at 4.1%.

Wall Street saw nothing here likely to derail a quarter point rate cut this week and interest rates fell back and stocks moved higher at the open and held onto those gains all day, but still ended up lower on the week. For the NASDAQ it was the first weekly loss in the last two months.

This week will be absolutely pivotal for markets. The world could be a very different place by the next time you read one of my reports. Or not. The U.S election is on a knife edge and, despite a bit of vocal pro-Trump bravado, Wall Street has absolutely no idea what the result will be. There is a scenario by which the outcome will be vociferously challenged both in the courts and in the streets and Wall Street’s most implacable enemies, uncertainty and disorder, could reign for weeks or possibly even months.

Meantime, the Fed this week needs to read the messy tealeaves of economic data recently tainted by hurricanes and strikes as well as trying to stay out of political trouble with its interest rate decision-making. I don’t envy Powell his job this week.

OTHER NEWS ..

All Change .. Nvidia will finally make an appearance in the Dow Jones Industrial Average, replacing Intel in the index this week. The swap reflects the reversal of fortunes of the two firms within the tech industry. Sherwin-Williams will replace Dow Inc. as well.

S&P Dow Jones Indices, which manages the 30-stock benchmark, said the changes were made to ensure a more representative exposure to the semiconductors industry and the materials sector. They take effect on November 8th.

Democracy Burning? .. Fires deliberately set at ballot boxes in Washington and Oregon destroyed hundreds of ballots in counties with very close races and are being investigated by the FBI and U.S. Attorney’s Office. Law enforcement has identified a vehicle suspected of being used by the firestarter. Meanwhile, conspiracy theorists who still believe Trump won the 2020 election are using Telegram to monitor and film polling places in swing states in an effort that officials say risks intimidating voters and suppressing voter turnout.

Crash! .. Super Micro Computer (SMC) admitted on Wednesday that Ernst & Young (E&Y) had resigned as its auditor. E&Y said in a statement; "We are resigning due to information that has recently come to our attention which has led us to no longer be able to rely on management's and the Audit Committee's representations and to be unwilling to be associated with the financial statements prepared by management".

This information was likely that provided by analyst firm Hindenburg Research which recently disclosed a major short position resulting from claims of rampant "accounting manipulation", which were strongly denied by SMC at the time. The company’s stock (SMCI), already beaten and battered by the Hindenburg report, promptly lost close to half of its remaining value and is now down over 78% from its high recorded just last March.

ARTICLE OF THE WEEK ..

Sorry, Your Insurance Bill Probably Isn’t Coming Down Much. Here’s Why ..

THIS WEEK’S UPCOMING CALENDAR ..

This week's presidential election will be followed two days later by a Federal Reserve interest-rate-setting decision. There could very well still be some doubt about the outcome (at least in the minds of some people) of the election by the time Fed chairman Jerome Powell steps up to the podium to give his press conference on Thursday. Markets are overwhelmingly pricing in a quarter-point reduction in the federal-funds rate.

Around 100 S&P 500 companies will release quarterly results during the week including CVS, Moderna, BioNTech, Monster Energy, DuPont, Novo Nordisk, Airbnb, Marriott International, Wynn Resorts, Qualcomm, Toyota, Paramount, Warner Bros, Marathon Petroleum and troubled Super Micro Computer.

LAST WEEK BY THE NUMBERS ..

Last week’s market color courtesy of finviz.com

Last week’s best performing U.S. sector: Communications Services (two biggest holdings: Alphabet/Google, Meta/Facebook) - up 0.7% for the week.

Last week’s worst performing U.S. sector: Utilities (two biggest holdings: NextEra Energy, Southern Co.) - down 3.3% for the week.

* SPY, the S&P 500 Large Cap ETF, tracks the S&P 500 index, made up of 500 stocks from among the largest U.S. companies. Its price fell 1.4% last week, is up 20.1% so far this year and ended the week 2.3% below its all-time record closing high (10/18/2024)

* IWM, the