Stocks Slip, Earnings Outlook Brightens, and IPO Buzz Grows

Instacart's IPO Plans and Hostess Merger Talk Stir Market Speculation

• Stocks dip, but optimism grows with higher earnings forecasts and Tesla's robust performance.
• Instacart eyes an IPO, merger rumors circulate and the market awaits key economic reports and auto industry labor dispute.
• Low volatility suggests calm; a moment of reflection for 9/11 anniversary

In this weekly market update, we'll delve into the recent stock market performance, upcoming economic indicators, corporate news, and a moment of remembrance.

Last week saw a dip in the stock market, with the S&P 500 dropping 1.3% and the Nasdaq Composite slipping 1.9%. However, the week ended on a slightly positive note as both indices posted modest gains on Friday, breaking a three-day losing streak for the S&P and a four-day slide for the Nasdaq. Notably, this came despite significant losses from Apple and Nvidia, both of which tumbled by 6%.

Forecasts: 0.5% increase in earnings

Analysts are revising their expectations for the third-quarter earnings season, with forecasts now anticipating a 0.5% increase in earnings. This positive outlook is welcome news for market fundamentalists who have been closely monitoring the market's price-to-earnings multiple, currently at 18.7, slightly above its 10-year average of 17.7. Adding to the optimism, Morgan Stanley upgraded Tesla (TSLA) to an overweight rating, setting a price target of $400. In premarket trading, Tesla shares surged by 6%.

Instacart, the grocery delivery giant, is eyeing a possible initial public offering (IPO), potentially as early as next week. Despite its previous valuation of $39 billion, the company is now targeting a valuation range of $8.6 to $9.3 billion. While this reflects a significant drop in valuation, it marks a noteworthy development in the IPO market. In related merger news, J.M. Smucker (SJM) is said to be in talks to acquire Hostess Brands (TWNK), the maker of Twinkies, in a deal valued around $4 billion, sparking curiosity about the potential for grape jelly-filled Twinkies.

This week promises important economic reports. On Wednesday, the latest consumer price index (CPI) will be released, with forecasts anticipating a 0.5% month-over-month increase and a 0.2% year-over-year rise. Additionally, Thursday will see the release of both the producer price index (PPI) and retail sales reports. PPI is expected to show a 0.4% month-over-month increase, while retail sales are forecasted to have risen by 0.2%.

Auto strike is possible

The strong economy juxtaposed with a slowdown in inflation faces a potential challenge this week as the United Auto Workers threaten to strike as early as Friday when their current contract expires. A strike involving 146 thousand workers from Ford (F). General Motors (GM), and Stellantis (STLA) could halt the auto industry, which accounts for about 3% of the U.S. GDP. Such a strike could have significant repercussions for Michigan's economy, as reported by Bloomberg.

For today, there isn't a significant economic agenda. However, Oracle (ORCL) is set to report earnings after the close, and investors will be keen to see their forward-looking guidance. In premarket trading, the S&P 500 showed a 0.5% gain, while volatility dipped by nearly 1.5%. It's intriguing that despite last week's market downturn, volatility remains low at around 14, signaling that markets may not be overly concerned at this moment.

We remember 9/11

In closing, it's essential to take a moment to remember the tragic events of Sept. 11, 2001, when nearly 3,000 lives were lost in a devastating attack on American soil. We will never forget the impact of that fateful day.

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