Stocks rallied this week as the earnings season gathered pace and is so far from having a better than expected start. With 20% of the S&P 500 having released financials so far, sales results have so far been 1.4% better than expected while earnings results are 5.4% better than expected. expectations, overall. Although estimates have fallen in recent weeks, this could signal that investors are getting a bit too bearish in the short term. This could set us up for more upside if subsequent results were also better than expected. All three major averages are complete for the week. The S&P 500 and Dow Jones Industrial Average gained more than 4%, while the Nasdaq Composite rose 5.2%. However, the bond market remains in control. The rise in 2-year Treasury bills, which hit a 15-year high of 4.6% on Friday, weighed on stock prices. This inverse correlation between bond yields and equities was powerful enough to outweigh the positive earnings reports. As a result, we were expecting a relatively flat week before Friday. But averages rebounded following a Wall Street Journal report that suggested the Federal Reserve may slow the pace of increases after the 75 basis points expected at the next meeting on November 2, reducing the potential for a more marked and longer slowdown. While not exactly a pivot, it would represent a change from the hawkish stance the Fed has maintained all year. On Thursday, according to the CME FedWatch Tool, investors were pricing in a 75% chance of a 75 basis point hike in December. That fell to 45% on Friday. It remains to be seen whether this chatter about future upsides will be enough to limit the rise in Treasury yields, stabilize major stock averages and get some bounce back. However, regardless of the short-term trajectory of stocks, as we discussed on Friday, we believe that a well-balanced and diversified portfolio will position investors for the future. Under the hood, it was a broad-based rally with all sectors up for the week, led by energy, technology and materials. Meanwhile, the US Dollar Index has been hovering around the 112 level. Gold is holding at $1,660 an ounce. WTI crude prices remain in the mid-$80s and the 10-year Treasury yield rose to 4.2%. Review On the earnings front, we got results from Johnson & Johnson (JNJ), Procter & Gamble (PG) and Danaher (DHR). On the macroeconomic front: On Tuesday, industrial production is estimated to have increased by 0.4% in September, beating expectations for a monthly advance of 0.1%, while capacity utilization stood at 80.3% , above the expected 80%. On Wednesday, housing starts were reported to have fallen 8.1% per month to a seasonally adjusted annual rate (SAAR) of 1.439 million in September, below the rate of 1.47 million the street expected. Building permits rose 1.4% in September, below the expected 1.5% advance. On Thursday, initial jobless claims for the week ending Oct. 15 came in at 214,000, down 12,000 from the previous week and below expectations of 232,000. Also on Thursday, existing home sales were reportedly fell 1.5% m/m and 23.8% y/y in September to SAAR 4.71m as rising mortgage rates impacted affordability. What to expect The results season heats up next week for the Club. Within the portfolio we will hear Halliburton (HAL) on Tuesday before the opening bell; from Microsoft (MSFT) and Alphabet (GOOGL) on Tuesday after the closing bell; from Meta Platforms (META) and Ford (F) Wednesday after the bell; from Linde (LIN) and Honeywell (HON) Thursday before the bell; from Amazon (AMZN), Apple (AAPL) and Pioneer Natural Resources on Thursday after the closing bell; and AbbVie (ABBV) on Friday before the opening bell. Here are some other earnings reports and economic numbers to watch in the week ahead: Monday, October 24 Before the Bell: Royal Philips (PHG), Dorman Products (DORM), Bank of Hawaii (BOH), Schnitzer Steel (SCHN), Kirby Corp (KEX) After the bell: Logitech (LOGI), Brown & Brown (BRO), Range Resources (RRC), Packaging Corp (PKG), Crane (CR), Discover Fin (DFS), Zions Bancorp (ZION), Qualtrics (XM), Crown Holdings (CCK) Tuesday, October 25 Before the bell: United Parcel (UPS), Coca-Cola (KO), General Motors (GM), Cleveland Cliffs (CLF), General Electric (GE), 3M ( MMM), Jet Blue (JBLU), Valero (VLO), Raytheon (RTX), Synchrony (SYF), Archer-Daniels (ADM), Kimberly-Clark (KMB), Centene (CNC), Novartis (NVS), Sherwin- Williams (SHW), Biogen (BIIB), SAP (SAP) After the Bell: Visa (V), Enphase (ENPH), Chipotle (CMG), Spotify (SPOT), Texas Instruments (TXN), Mattel (MAT), Chemours (CC) Wednesday, October 26 Before the bell: Boeing (BA), Waste Management (WM), Bristol-My ers (BMY), Hilton (HLT), Kra ft Heinz (KHC), Harley-Davidson (HOG), Otis (OTIS), General Dynamics (GD), Thermo Fisher (TMO), Seagate (STX), Boston Scientific (BSX ), ADP (ADP) After the Bell: Teledoc (TDOC), ServiceNow (NOW), Quantumscape (QS), Upwork (UPWK), KLA Corp (KLAC), O’Reilly Auto (ORLY), EQT Corp (EQT), Align (ALGN), VF Corp (VFC), Agnico-Eagle (AEM), Netgear (NTGR) 10:00 a.m. ET: New Home Sales Thursday, October 27 Before the Bell: Shopify (SHOP), Caterpillar (CAT), McDonalds (MCD) , Matercard (MA), Southwest (LUV), Merck (MRK), Altria (MO), Western Digital (WDC), Comcast (CMCSA), American Electric Power (AEP), Stanley Black & Decker (SWK), International Paper ( IP), Textron (TXT) After the Bell: Intel (INTC), Pinterest (PINS), US Steel (X), T-Mobile (TMUS), Gilead (GILD), First Solar (FSLR), Capital One (COF) , Dexcom (DXCM), Zendesk (ZEN), L3Harris (LHX) 8:30 a.m. ET: Initial UI claims 8:30 a.m. ET: Durable Goods Orders 8:30 a.m. ET: Integrated Product Friday, October 28 Before the bell: Chevron (CVX), E xxon (XOM), Colgate-Palmolive (CL), Booz Allen (BAH), LuondellBasell (LYB), DaVita (DVA) 8:30 a.m. ET: Personal expenses ( see here for a complete list of Jim Cramer’s Charitable Trust stocks.) 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A trader works on the floor of the New York Stock Exchange (NYSE) in New York City on October 7, 2022.
Brendan McDermid | Reuters
Stocks rallied this week as the earnings season gathered pace and is so far from having a better than expected start.