Here’s everything you need to know before the stock market open, including all of the economic data, earnings, and Fed speakers this week. If you want to know how to start investing in the stock market, start with this video, because knowing what stock market news is coming out can help you understand why stocks are rising and falling. Knowing how to invest in the stock market starts with knowing why stocks go up and down. Once you understand how the latest stock market news affects stocks, you’ll have a greater understanding of how to buy stock and how to invest in stocks.
This is going to be an extremely volatile week and the stock market. And if you want to make money this week, you need to know what’s going to move the markets this week. So grab a pen a paper and get ready to take some notes, because there is a lot that’s going to move the markets this week. Now, unfortunately, I’m not going to be here throughout the rest of the week to give you guys updates. I’m actually going to be at a conference in New Orleans, so this is going to be the only update I put out this week. I’m going to give you everything that you need to know for what’s going on this week, so get ready.
One of the biggest impacts to stocks this week is going to be oil prices. Now the good news is that US oil production is at an all time high. And that’s partly due to the fact that ExxonMobil’s $60 billion deal just went through, as well as the fact that drilling has recovered. And so higher oil output out of the United States is a good thing because it lowers oil prices. And as oil prices go down, that’s one of the things that helps push stock prices up.
However, there’s also something that’s pushing oil prices down. And that is the fact that Iran has warned of an escalation of the Israel-Hamas war. Now if Iran gets involved in this war in any way, this could seriously disrupt oil supplies coming out of the Middle East. And the Middle East produces far more oil than we have here in the United States. Any disruption of the oil supplies in the Middle East is going to cause oil prices to skyrocket. And if oil prices go up, that causes stocks to go down. That’s because the Israel-Gaza conflict has threatened to reawaken US inflation as oil prices go up. This causes inflation to go up. That, in turn hurts company profits because now they’re paying more in gas.
In addition to that, it also causes the Fed to have to raise interest rates higher and keep them higher for longer in order to fight the higher inflation, because it also causes consumers to have less money to spend, which in turn also hurts corporate profits. All of that is bad news for the US stock market. So in addition to oil prices, which are going to be one of the biggest factors for US stocks this week, we also have to keep our eye on the Federal Reserve. What is the Fed saying? Are they going to continue to raise interest rates? Are they going to lower them, keep them steady? What are they doing? We have to keep our eyes on that.
Now the good news is that last week saw a rise in Treasury prices and a decrease in yields for the first time in weeks, and that really helped push the stock market higher. And because of that, if this trend continues with Treasury yields going down, then stock prices should continue to go up. And that could signal a green light for a year end rally. Now the reason that we’re starting to see Treasury yields go down is because investors are getting a little bit concerned about the war in Israel, and they’re starting to move their money into safe haven assets like bonds. And the more investors buy bonds, this causes yields to go down. And that in turn could cause stock prices to go up. So all of that is good news.
Now, ultimately, if the Federal Reserve is going to lower interest rates, which could help the stock market even more, really, we need one of two things to happen here in the US. Either inflation has to get back down to 2%, and right now we are a long, long way away from that happening. Probably not until 2025 at the earliest. The second thing that could happen is we could enter a recession, and that could spook the fed into lowering interest rates. Right now, though, a recession is no longer the consensus among economists. In a recent Wall Street Journal survey, economists have lowered the recession probability below 50% for a recession occurring sometime in the next 12 months.
As you can see on this chart here, the probability of a recession occurring in the next 12 months, as far as economists believe, has dropped significantly over the past quarter. Now one thing to keep in mind this is not a stock chart. You can’t try to make any predictions from this. This just shows kind of how economists are. Notice that economists don’t really believe a recession is going to super duper occur, that is, their probability doesn’t really get closer to 100%, until we’re already in a recession. So the data is a little bit backward looking. And with backward looking data, certainly the economy has remained far more resilient for a lot longer than I think anybody was expecting.
No doubt the leading economic data still points to us entering a recession sometime in the next 12 months, but the leading economic data has been pointing to that for 13 months now, and it has yet to happen. So it’s kind of hard to say. Certainly, this economy has remained far more resilient than anybody expected. Not only that, but a lot of the banks thought that people were running out of savings just based upon how much they had deposited. Turned out people had just pulled their money out of savings accounts to put it into things like bonds, and people actually have a lot more savings than originally thought, meaning US consumers are actually in a better position now than economists thought last quarter. That’s one of the reasons why we see a decrease in economists beliefs that a recession will occur sometime in the next 12 months.
Now, moving beyond the fundamentals and taking a little bit of a look at the technicals that could affect the stock market this week, the small cap index, that is the Russell 2000, has just booked an historic second death cross in a row. Now as you can see on this chart, a Death Cross is when the 50 day moving average drops below the 200 day moving average. Now, I know that sounds scary. I know that sounds extremely bearish, But I want you to look at what happened in the middle of this chart slightly to the left. And what you’ll notice is back in April of this year, we also had a death cross. And what did the stock market do? The Russell 2000 traded flat for about one month, and then it turned around and went on a rally.
The fact is the Russell 2000 typically sees a strong rebound during the six months and 12 months following a death cross. While the Russell was down 0.2% on average one month after the previous death cross, the index managed to gain 6.7% six months later, and a 15% gain one year later. So if we follow the historical averages, the Russell 2000, and even the overall stock market, could trade flat or slightly down for the next month before bottoming out and going on an absolute rally for the next 12 months. Now, all of this is just technical analysis, historical analysis, no guarantees that it will actually occur this time. But it is very interesting to look at because very often in the stock market, history does repeat itself.
So between Treasury yields coming down and the fact that the Russell 2000 just had a death cross, both of those are actually pretty bullish indicators that could point to the stock market going higher. The only real downward pressures that we have is the war in Iraq, the possibility for oil prices to spike once again, and the possibility for last week’s rally in the bond market to have been just a one week glitch or a one week relief rally, if you will, only to see the bond market turn around and start falling again this week. So just from those indicators alone, we really don’t have a lot of clear direction as far as which way the stock market’s going to go.
But we do have a lot of economic data coming out this week, including Fed speakers and earnings, that we can look at to try to make a determination on how the stock market might perform this week. Taking a look at this week’s major US economic reports and Fed speakers Monday, we have two Fed speakers speaking and we also have the Empire State Manufacturing Survey. Now, the manufacturing survey is expected to have dropped to negative six for October, and if that does in fact come in, that means that manufacturers are extremely worried about an upcoming US recession and they’re cutting back on manufacturing spending. And that is really bad for the US economy. Again, this would be more of a leading indicator. Then on Tuesday, we get the retail data for September, which is expected to have shown a significant decline in consumer spending in the retail sector. In addition to that, we have a lot of Fed speakers. Then on Thursday, we get our housing data and we have more Fed speakers. On Thursday, we get that all important US leading economic data, which is expected to have shown a 14th month in a row decline in the economy, and we have more Fed speakers. And finally, we wrap things up on Friday with another Fed speaker.
So there’s a lot of important economic data that could move the markets this week. But more importantly, there are an insane number of Federal Reserve members who are speaking this week. And with all eyes focused on interest rates and what the Fed might do in the future, if they’re going to raise rates, if they’re going to keep them steady, if you have any indication whatsoever on when they might actually cut, what are they going to do with their balance sheet? All of those are questions that the market has. And with some 15 Fed members speaking this week, we should get a lot of information which will help clarify what the Fed might do at their next policy meeting in November. And definitely a lot of eyes are going to be on the Federal Reserve this week to try to figure out how the market is going to perform for the next month or so.
Now, in addition to that, we also have earnings season, which we are right in the full swing of. And we’ve got a lot of big companies reporting this week. We’ve got some banks wrapping up on Monday and Tuesday, as well as some airline companies wrapping up on Tuesday. And then on Wednesday we get into some Dow companies as well as Tesla and Netflix, and then following things up the rest of this week with more financial companies as well as some airlines. Now the banks are going to move the Dow and the Russell a lot. But obviously it’s going to be Tesla especially, and to a lesser extent Netflix, that’s going to move the Nasdaq and the S&P 500. And with both of those companies reporting Wednesday after the bell, that is really going to be a major market mover on Thursday.
Now the thing about Tesla, which is by far the biggest earnings we have this week, is that Tesla’s deliveries last quarter came up short. On top of that, we expect their margins to be even worse than they were in the prior two quarters due to the fact that they have cut the price of the cars in China in half. And all eyes are not going to be on really the profits of Tesla or the revenue, it’s really going to be on those margins. And if margins really do come in as bad as a lot of people think they’re going to, we could see a pretty significant sell off on Tesla’s stock. Now, it doesn’t guarantee Telsa stock is going to go down, because there is one huge bullish catalyst for Tesla’s stock, and that is the Cybertruck.
The Cybertruck is expected to be released soon, and investors are going to be paying very close attention to that earnings call for any indication that the Cybertruck is going to be launched. The other thing that we saw during the last deliveries numbers, is that a lot of investors have overlooked the prior delivery numbers because Tesla has been revamping their factories in order to get some newer models of their vehicles out. So a lot of investors remain extremely bullish about Tesla, regardless of the fact that their margins are going down, their deliveries are going down, their revenues are going down, their profits are going down. A lot of investors are ignoring all of that, saying it’s temporary. All of this is going to get fixed once their factory revamps are done. And the Cybertruck is going to be a tremendous catalyst, which is going to turn everything around for Tesla.
Now, personally, I think none of it matters. I think Tesla is still extremely overvalued. I personally feel like the Cybertruck and the revamp of the factory and everything is basically already priced in. But my belief is completely irrelevant. Because with people being so extremely bullish about Tesla, they are going to buy the stock no matter what the valuation is. Tesla is one of those companies that people buy because they really like the company; they don’t care about the valuation of the stock. So I would not at all be surprised to see Tesla report earnings on Wednesday to see the stock sell off initially, only to turn around and rally once the earnings call starts as investors sell off over the fundamentals being horrible, and then buy the stock over hopes of the Cybertruck coming out soon and whatever else that Elon Musk and the team can hype investors up over during the actual earnings call. So that’s my guess.
My prediction on Tesla is we see a big sell off when the earnings are actually announced, and then we see a big rally once the earnings call starts about an hour after that. Now which way the stock actually performs on Thursday – I have no clue. We’ll just have to wait and see. I’m not playing it. I’m not touching it. I’m sitting this one out. But it is going to be really interesting, and a major market mover.
Now I am actually going to be in New Orleans meeting with a lot of other content creators. We’re going to be doing some incredible collaborations, which you are going to be able to see right here on YouTube and Rumble and Twitter and other places as well. So make sure you subscribe, and get ready for some incredible collaborations with some extremely successful traders. We’re going to be meeting with some millionaires, talking to them about how they actually trade in the stock market, how they make their money. A lot of people we will be meeting with are making six figure incomes trading stocks. So if you want to learn from the best, pay attention, subscribe to the channel, and get ready for some incredible videos that are coming out over the next few weeks from some of the people I’m going to be meeting later on this week.