After enduring much volatility throughout this year, the major U.S. equity indices finally delivered substantively positive performances. Primarily, the benchmark S&P 500 index gained 2.5% on Friday, contributing to an overall return of 3% for last week. On the other hand, the technology-centric Nasdaq Composite gained almost 3% heading into the weekend, resulting in an overall 2.2% gain for the trailing week.

According to data from Barchart.com, nearly 87% of all S&P 500 stocks moved above their five-day moving average. For the 50 DMA, more than 63% of S&P 500 stocks moved above this key nearer-term threshold. However, for the 200 DMA, slightly less than 37% of stocks in the benchmark index traded above the longer-term threshold, reflecting significant work ahead for the bulls.

Looking at the ETF yardstick S&P 500 SPDR (SPY), technical indicators provided by Barchart.com indicates a consensus 56% sell rating. While certain nearer-term indicators suggest that bullish contrarians may have an upside opportunity on their hands, the longer-term assessments suggest that skepticism may be the order of the day.

Before you make your final decision, investors should consider the below five themes to watch in the week ahead.

Musk Takes Over Twitter and Possible Problems

After much debate and wrangling, billionaire entrepreneur Elon Musk finally acquired social media giant Twitter for $44 billion. Immediately, Musk made his ideological influence known, firing the platform’s top executives. Per the Associated Press, this included the woman in charge of trust and safety at the platform, Vijaya Gadde.

Labeling himself a free speech absolutist, Musk assured wary advertisers that Twitter will not devolve into a “free-for-all hellscape.” However, as the AP reported, the richest man in the world can’t have it both ways.

“Lightly moderated ‘free speech’ sites such as Gab and Parler serve as cautionary tales of what can happen when the guardrails are lowered. These small, niche sites are popular with conservatives and libertarians fed up with what they see as censorship of their viewpoints on mainstream platforms like Facebook. They are also full of Nazi imagery, racist slurs and other extreme content, including calls to violence.”

Per the AP, the main problem is that “Advertisers don't want to promote their products next to disturbing, racist and hateful posts — and most people don't want to spend time on chaotic online spaces where they are barraged by racist and sexist trolls.”

Unless Musk can somehow spark an improbable balance, the Twitter takeover could be a mistake, facilitating a lifeline for competing social media platforms.

Questions Surround Future Fed Policy

Undoubtedly, one of the catalysts bolstering the U.S. equity indices – among other asset classes – centered on the forward implications of the Federal Reserve’s monetary policy. Throughout this year, the central bank focused on unwinding the excesses of the past. But now, there’s a debate about curbing some of the hawkish magnitude.

As Barchart’s Rich Asplund stated, “The markets are discounting a 100% chance that the U.S. Federal Open Market Committee (FOMC) at next week’s meeting on Tuesday and Wednesday will raise its federal funds target range by another +75 bp to 3.75%/4.00% from the current range of 3.00%/3.25%, according to the federal funds futures curve (ZQZ22).”

“The question then becomes whether next week’s +75 bp rate hike will be the last and whether the FOMC will instead revert to smaller rate hikes to provide time to assess whether the Fed’s rate-hike regime will cause a major U.S. recession.”

Many investors anticipate that the Fed will let off the gas pedal regarding its interest rate hikes, thus bolstering momentum for risk-on sentiment in the stock market. However, investors also need to consider the massive increase in the money stock (more than 21% between February 2020 and September 2022).

If the central bank gets too soft, it may not be able to control the inflation it originally targeted as its top goal.

Suspended Grain Deal Pressures Global Food Supplies

According to another AP report, “Russia announced Saturday that it will immediately suspend its implementation of a U.N.-brokered grain deal that has seen more than 9 million tons of grain exported from Ukraine during the war and has brought down soaring global food prices.”

In turn, Ukraine fired back, accusing the Kremlin of creating a world “hunger games.”

Per the AP, “The Russian Defense Ministry cited an alleged Ukrainian drone attack Saturday against Russia’s Black Sea Fleet ships moored off the coast of occupied Crimea as the reason for the move. Ukraine has denied the attack, saying that the Russians mishandled their own weapons.”

While it’s difficult to assess circumstances objectively in the fog of war, it’s fair to point out that the Russian government lost an incredible amount of credibility. For instance, in January of this year, the New York Times reported that following negotiations with the U.S., Russia’s deputy foreign minister, Sergei A. Ryabkov stated that “we have no intention to invade Ukraine.”

Therefore, investors have reasonable expectations to anticipate that the conflict in Ukraine will continue, exacerbating associated flashpoints of the crisis, including disruptions to global food supplies.

Cryptos May Present a Bull Trap

Along with enthusiasm in the U.S. equities sector, the cryptocurrency market received a much-needed jolt to keep their hopes of a near-term revival alive. About one week ago, the total market capitalization of all cryptos pinged at around $923 billion. At time of writing, the sector crossed slightly above the $1 trillion level.

Obviously, the bullish swing represents a significant immediate-term victory. Presumably, investors took encouragement at speculation that soon enough, the Fed will scale back its hawkish monetary policy. However, gambling on this thesis presents great risks for crypto investors. It comes down to looking at longer-term data.

For instance, at the start of this year, the total crypto market cap stood at approximately $2.19 trillion. Thus, reaching the $1 trillion is a small step among many to confidently right the ship. As well, the Fed too has several long steps ahead to get inflation under a manageable level. With so many challenges on the horizon, investors must think carefully before biting on this crypto rally, which might turn into a bull trap.

Earnings in Focus

Moving into the heart of the third-quarter earnings season, investors have several financial disclosures to digest. First up, semiconductor specialist Advanced Micro Devices (AMD) will disclose its results on Tuesday, with analysts targeting earnings per share to hit 70 cents. Investors will likely tune into the conference call to hear comments about broader supply chain dynamics.

Also on Tuesday, Marathon Petroleum (MPC) will release its quarterly earnings report. Analysts anticipate that the company will deliver EPS of $6.97. Market observers will be keen to learn about its forward projections, particularly in light of production cuts from OPEC+ and overall geopolitical instability.

Finally, on Thursday, Yelp (YELP) will disclose its financials for the last three months. Analysts anticipate that the company will bring in EPS of 21 cents. Becoming integral to how people make choices regarding their expenditures, the company can provide a real-time look at the sentiment for the consumer economy.

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