November Pullback Underway: Here's What to Know

Market Overview - Stocks are expected to erase several weeks of gains as November begins, despite historically being a strong month for the S&P 500, which averages about a 1% gain since 1927 [1] - A potential pullback could lead to a correction of about 10% from October highs, but the broader uptrend would remain intact, with major support levels for the S&P 500 [2] Earnings and Economic Data - The third-quarter earnings season shows corporate resilience, with 389 S&P 500 members reporting a total earnings increase of 14.6% year-over-year and an 8.3% rise in revenues [8] - Over 83% of reporting companies exceeded EPS estimates, and more than 75% surpassed revenue estimates, indicating strong performance [8] - Expectations for Q3 earnings growth stand at 13.8% with revenue growth of 8.1% [9] Federal Reserve and Economic Signals - Fed officials are divided on the possibility of another interest rate cut in December, with a 70% chance of further easing priced in by market participants [10] - Recent economic data presents mixed signals, including a private-sector employment increase of 42,000, but also the worst October for layoffs since 2003 [11] Market Sentiment and Valuations - Despite concerns over high valuations in certain AI stocks, earnings continue to support these valuations, emphasizing that valuations are not reliable timing tools [6][7] - The market has recently reached all-time highs after a significant correction, and fear of a deeper correction should not deter long-term investment strategies [5] Conclusion - Negative earnings reactions are occurring, which were anticipated after a strong start to the Q3 earnings season, and a pullback may present buying opportunities [13]