Friday Bounce Can't Save Stocks from Weekly Losses

Wall Street also witnessed the start of third-quarter earnings season

Oct 12, 2018 at 1:10 PM
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Wall Street took a big hit this week as concern over rising interest rates -- a subject President Donald Trump was quick to weigh in on -- sent traders heading toward the exit en masse. The major benchmarks plunged below key technical levels, with the Dow tallying a two-day loss of 1,377 points between Wednesday and Thursday, the S&P 500 Index (SPX) notching its worst daily losing streak since before the 2016 U.S. presidential election, and the Nasdaq logging its biggest one-day drop since Brexit.

Amid this sharp sell-off in the equities market, the Cboe Volatility Index (VIX), or the stock market's "fear gauge," climbed to an eight-month high on Thursday, bringing its October gain to 106.1%. And though bargain hunters rushed in at the end of the week to help stocks bounce, all three major market indexes are set for substantial weekly losses.

Stock Market Signals

This week's bloodbath sent up an onslaught of stock market signals. While this S&P signal -- which previously preceded the "Trump rally" -- suggests stocks are on sale, this VIX indicator flashed for the fifth time this year, the most of any going back to 2000. And while these are the best and worst stocks to buy after a sell-off, this rare iShares Russell 2000 ETF (IWM) occurrence could be signaling a buying opportunity for small caps.

Analysts Target Buying Opportunities in Tech

While this week's selling was broad, the tech sector in particular saw significant losses. Intel (INTC), for instance, is pacing for a nearly 5% weekly drop -- though one option bear bet nearly $4 million on bigger losses. Snap (SNAP), meanwhile, hit a new record low after Goldman Sachs slashed its price target on the Snapchat parent. Analysts targeted plenty of buying opportunities amid the pullback, though, including in streaming giant Netflix (NFLX) and payments processor Square (SQ), while video game maker Activision Blizzard (ATVI) just flashed a bullish signal.

Earnings Season Kicks Off

Earnings season was also in focus this week, with RBC setting a lofty price target for Walgreens Boots Alliance Inc (WBA) ahead of the drugstore chain's turn in the earnings confessional on Thursday. While WBA fell on a fiscal fourth-quarter revenue miss, fellow Dow stock JPMorgan Chase (JPM) saw an initial pop after the big bank reported a third-quarter profit beat. Bank stocks Wells Fargo (WFC) and Citigroup (C) also gained ground after earnings.

Weed Stocks Could Be Volatile Next Week

The volatile price action could continue as earnings season heats up next week. In addition to quarterly results from several Dow components -- including Goldman Sachs (GS) and UnitedHealth (UNH) -- Netflix kicks off FAANG earnings on Tuesday. And in addition to an onslaught of speeches from U.S. Fed officials, Canada legalizes marijuana on Wednesday, which could impact weed stocks ahead of October options expiration.


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