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'Trump Trade' Heats Up as Presidential Election Nears: Stocks to Watch
The next few weeks are some of the most eventful of the year.
The third-quarter earnings season is well underway and will continue to ramp up this week with more than 900 companies set to report results, including five of the ‘Magnificent 7’ stocks. But investors remain on edge as markets have stalled a bit at all-time highs.
Expectations of slower interest rate cuts by the Fed have fueled a sell-off in longer-term US Treasuries in recent weeks, with the 10-year benchmark yield reaching 4.3% on Monday – its highest level since July.
Overly bullish sentiment coincided with a spike in volatility last week as the upcoming election brings a sense of uncertainty. The Dow lost ground every day last week, while the S&P 500 closed lower in four out of the five sessions and also broke a 6-week winning streak. The Nasdaq has had trouble breaking above its former peak from July, getting rejected at key resistance levels again on Monday.
Q3 Earnings Season Hits Pivotal Moment
Through the end of last week, we have collected third-quarter results from 182 S&P 500 members, or more than 36% of the index’s total membership. Total earnings for these 182 companies that have reported are down 2.1% from the same period last year on 4.5% higher revenues. On a ‘blended’ basis that includes the still-to-come companies, total S&P 500 earnings in Q3 are expected to be up 1.5% from the year-ago period on 5% higher revenues.
We’ll hear from another 168 S&P 500 members this week; needless to say, we’re at a crucial point in the season.
PayPal (PYPL - Free Report) was an early mover this morning, with the stock shedding more than 5% in the first few minutes of trading after a surprise revenue miss. While PayPal posted an earnings beat of $1.20 per share (an 11.1% beat versus the $1.08/share consensus estimate), sales of $7.85 billon fell just short of projections.
Image Source: StockCharts
PayPal is currently a Zacks Rank #3 (Hold) stock.
On the bright side, total payment volume came in ahead of estimates, rising 9% from a year earlier to $422.6 billion. The figure speaks to the increasing importance of digital payments in the broader economy and bodes well for the company’s payments app Venmo.
Google-parent Alphabet (GOOGL - Free Report) is on deck this evening and will be the second of the ‘Mag 7’ to deliver Q3 results after Tesla (TSLA - Free Report) posted a beat last week.
Are Markets Anticipating a Trump Victory?
It appears that markets are beginning to price in a greater possibility of a second Trump presidency. Shares of Trump Media & Technology Group (DJT - Free Report) soared more than 20% on Monday following former President Trump’s sold-out rally at Madison Square Garden. DJT stock gained more than 11% in early trading Tuesday morning.
Image Source: StockCharts
Betting markets and swing-state polls are showing momentum for the former president and have prompted investors to consider the impact of his policies including deregulation, lower taxes and immigration restrictions.
The deregulation theme was evident in the ‘Trump Bump’ that occurred in late 2016 after the former president was first elected to office. Financial stocks in particular responded favorably; the Financial Select SPDR ETF (XLF - Free Report) soared nearly 18% in the month following Trump’s victory eight years ago. Fast forward to today, and the XLF ETF has broken out to all-time highs ahead of the election:
Image Source: StockCharts
Crypto stocks have also gained steam after Trump repositioned himself heading into the election. A more favorable stance toward crypto became evident after the former president attended the Bitcoin 2024 conference and publicly endorsed crypto project World Liberty Financial.
Trump has laid out several policy proposals that appear friendly to the crypto community, including creating a government stockpile of Bitcoin along with a crypto advisory council. Senator J.D. Vance, Trump’s vice-presidential running mate, has made his positive outlook toward crypto known as well.
With Bitcoin breaking above the $70,000-price level just days before the election, one stock that has been taking full advantage is MicroStrategy (MSTR - Free Report) . The company provides AI-powered enterprise analytics software and services. Co-founded by Michael Saylor, MicroStrategy has invested heavily in Bitcoin; MSTR shares are breaking out in October and are up more than 300% this year:
Image Source: StockCharts
Bottom Line
Along with Big Tech earnings, this week brings a major inflation update in the form of September’s Personal Consumption Expenditures (PCE) inflation data as well as a critical jobs report.
Keep in mind that despite some recent volatility, we are about to enter a very favorable seasonal period. The November-January holiday phase has been dubbed the “bull zone,” as this 3-month period tends to witness above-average gains. Even better, the November-April stretch is the best 6-month span for stocks from a historical perspective.
Market participants will be watching closely to see how stocks react leading into the election. Be sure to take advantage of all that Zacks has to offer as we head into the final two months of the year.
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'Trump Trade' Heats Up as Presidential Election Nears: Stocks to Watch
The next few weeks are some of the most eventful of the year.
The third-quarter earnings season is well underway and will continue to ramp up this week with more than 900 companies set to report results, including five of the ‘Magnificent 7’ stocks. But investors remain on edge as markets have stalled a bit at all-time highs.
Expectations of slower interest rate cuts by the Fed have fueled a sell-off in longer-term US Treasuries in recent weeks, with the 10-year benchmark yield reaching 4.3% on Monday – its highest level since July.
Overly bullish sentiment coincided with a spike in volatility last week as the upcoming election brings a sense of uncertainty. The Dow lost ground every day last week, while the S&P 500 closed lower in four out of the five sessions and also broke a 6-week winning streak. The Nasdaq has had trouble breaking above its former peak from July, getting rejected at key resistance levels again on Monday.
Q3 Earnings Season Hits Pivotal Moment
Through the end of last week, we have collected third-quarter results from 182 S&P 500 members, or more than 36% of the index’s total membership. Total earnings for these 182 companies that have reported are down 2.1% from the same period last year on 4.5% higher revenues. On a ‘blended’ basis that includes the still-to-come companies, total S&P 500 earnings in Q3 are expected to be up 1.5% from the year-ago period on 5% higher revenues.
We’ll hear from another 168 S&P 500 members this week; needless to say, we’re at a crucial point in the season.
PayPal (PYPL - Free Report) was an early mover this morning, with the stock shedding more than 5% in the first few minutes of trading after a surprise revenue miss. While PayPal posted an earnings beat of $1.20 per share (an 11.1% beat versus the $1.08/share consensus estimate), sales of $7.85 billon fell just short of projections.
Image Source: StockCharts
PayPal is currently a Zacks Rank #3 (Hold) stock.
On the bright side, total payment volume came in ahead of estimates, rising 9% from a year earlier to $422.6 billion. The figure speaks to the increasing importance of digital payments in the broader economy and bodes well for the company’s payments app Venmo.
Google-parent Alphabet (GOOGL - Free Report) is on deck this evening and will be the second of the ‘Mag 7’ to deliver Q3 results after Tesla (TSLA - Free Report) posted a beat last week.
Are Markets Anticipating a Trump Victory?
It appears that markets are beginning to price in a greater possibility of a second Trump presidency. Shares of Trump Media & Technology Group (DJT - Free Report) soared more than 20% on Monday following former President Trump’s sold-out rally at Madison Square Garden. DJT stock gained more than 11% in early trading Tuesday morning.
Image Source: StockCharts
Betting markets and swing-state polls are showing momentum for the former president and have prompted investors to consider the impact of his policies including deregulation, lower taxes and immigration restrictions.
The deregulation theme was evident in the ‘Trump Bump’ that occurred in late 2016 after the former president was first elected to office. Financial stocks in particular responded favorably; the Financial Select SPDR ETF (XLF - Free Report) soared nearly 18% in the month following Trump’s victory eight years ago. Fast forward to today, and the XLF ETF has broken out to all-time highs ahead of the election:
Image Source: StockCharts
Crypto stocks have also gained steam after Trump repositioned himself heading into the election. A more favorable stance toward crypto became evident after the former president attended the Bitcoin 2024 conference and publicly endorsed crypto project World Liberty Financial.
Trump has laid out several policy proposals that appear friendly to the crypto community, including creating a government stockpile of Bitcoin along with a crypto advisory council. Senator J.D. Vance, Trump’s vice-presidential running mate, has made his positive outlook toward crypto known as well.
With Bitcoin breaking above the $70,000-price level just days before the election, one stock that has been taking full advantage is MicroStrategy (MSTR - Free Report) . The company provides AI-powered enterprise analytics software and services. Co-founded by Michael Saylor, MicroStrategy has invested heavily in Bitcoin; MSTR shares are breaking out in October and are up more than 300% this year:
Image Source: StockCharts
Bottom Line
Along with Big Tech earnings, this week brings a major inflation update in the form of September’s Personal Consumption Expenditures (PCE) inflation data as well as a critical jobs report.
Keep in mind that despite some recent volatility, we are about to enter a very favorable seasonal period. The November-January holiday phase has been dubbed the “bull zone,” as this 3-month period tends to witness above-average gains. Even better, the November-April stretch is the best 6-month span for stocks from a historical perspective.
Market participants will be watching closely to see how stocks react leading into the election. Be sure to take advantage of all that Zacks has to offer as we head into the final two months of the year.