Stocks’ Scary Good October

There was a lot of international news today and over the weekend, so let’s quickly recap. 📰

First, Hong Kong’s economy shrank 4.5% YoY in Q3, which is a scary picture for China and APAC-region economies. The region continues to struggle with political and economic instability but blamed weak external demand and cross-boundary land cargo operations disruptions for the slowdown. It’s also dealing with offshoots from China’s property market, which remains in crisis.

Meanwhile, COVID shutdowns continue to hamper China’s factory and service activity, with a prime example this week as workers leave Foxconn’s iPhone plant amid lockdown fears. The trend of onshoring production by Western countries continues as political tensions heat up and global supply chains remain in a vulnerable state. 🏭

The Bank of Japan spent a record $42.8 billion in October to prop up the Yen. Given its efforts had mixed results, one can only imagine how low the Yen would’ve fallen without any intervention.

Eurozone inflation hit a new record of 10.7%, as its preliminary Q3 GDP reading recorded a marginally positive reading of +0.2%. Rising food and energy prices remain a major concern, especially as the region heads into a winter season without clear long-term solutions for its reliance on Russian energy. ❄️

And lastly, Brazil’s presidential election ended in a major upset. Lula da Silva will return as the country’s president after beating Jair Bolsonar’s far-right administration by a narrow margin. 🗳️

The Dow Jones Industrial Average may be the most boring and unloved of the major U.S. indexes. But in October, it gave people a lot to cheer about.

Below is a monthly line chart from the early 1900s, with a bar chart below showing the percentage gains and losses.

As we can see, October’s 14% gain was the largest going back to 1976 and one of the biggest in the index’s history. With that said, it’s also worth noting that many of the largest bars in that graph came during market drawdowns, as this one did.

It’s also interesting to see what drove this rally. It wasn’t the large tech stocks moving the needle this month. Instead, it was “real economy” type companies and defensive names like McDonald’s.

We’re still in one of the market’s largest drawdowns as we head into the end of the year’s final two months. So we’ll just have to wait and see whether or not this month’s rally was the start of a meaningful bottom or just another bear market rally that’ll eventually fade.

Hop on over to the $DIA stream and let us know your thoughts! 💭

The pressure is $ON for companies like On Semiconductor. The company reported 26% revenue growth in Q3, with strength in its electric vehicle and industrial end markets. ⚡

However, like many other companies in the space, it saw guidance fall short of expectations. It now expects Q4 revenue between $2.01 to $2.14 billion vs. the $2.10 billion expected. Its non-GAAP earnings per share expectation are $1.18 to $1.34 vs. the $1.25 consensus expectation.

While certain segments of the semiconductor industry are seeing solid demand, there’s clearly a broader slowdown in progress. The magic question remains how deep will the downturn be and how long will it last… 🤷

For now, investors send $ON shares down 8.97% today due to its weak guidance.