On Monday, U.S. equities escalated as traders anticipated the forthcoming wave of important corporate earnings. The S&P 500 rose by 0.77%, settling at 5,859.85, whereas the Dow Jones Industrial Average increased by 201.36 points to reach 43,065.22. Both benchmarks achieved record highs, with the Dow closing above the significant 43,000 threshold for the first time.
#MarketAlert | US: DJIA finished with a 0.1% gain on Friday; S&P 500 saw a 0.4% increase; Nasdaq climbed 0.6%#DowJones #Nasdaq #UnitedStatesofAmerica pic.twitter.com/CdOn2iZRsj
— ET NOW (@ETNOWlive) October 19, 2024
Tech shares were the driving force behind the S&P 500’s climb, maintaining their positive momentum. Investors are keenly observing the impending earnings announcements, with several prominent firms set to disclose their results this week.
#USMarketAtOpen | S&P 500, Nasdaq 100 starting off flat and other key updates #CVSHealth #Netflix #IntuitiveSurgical @Nasdaq pic.twitter.com/I08yITQrT2
— ET NOW (@ETNOWlive) October 18, 2024
Initial indications of recovery in banking profits have contributed to the overall market reaching new peaks, with the S&P 500 closing above 5,800 for the first time last Friday.
S&P 500 bulls propel the longest weekly winning streak in 2024. On the 37th anniversary of “Black Monday,” the index has increased for the sixth consecutive week. (BBG) pic.twitter.com/4ZwtjmGWpR
— Holger Zschaepitz (@Schuldensuehner) October 18, 2024
To date, 30 companies within the S&P 500 have revealed their earnings, exceeding consensus predictions by an average of about 5%, according to Bank of America. This marks an upturn from the previous quarter’s 3% exceedance. Nonetheless, some analysts, including those from Bernstein, project that the earnings per share growth rate will be lower year-over-year compared to the last quarter.
The ratio of US equities to international equities reached a new record this week, extending its outperformance streak beyond 16 years. This is the longest period of US supremacy we’ve ever witnessed.
Video: https://t.co/uXDwE4VDQ5 pic.twitter.com/dDA8ZqanNh
— Charlie Bilello (@charliebilello) October 19, 2024
Even with the market’s robust performance recently, investors are remaining vigilant due to various uncertainties, including a tightly contested presidential race, increasing Treasury yields, decisions from the Federal Reserve, and rising geopolitical tensions in the Middle East. “All-time highs sentiment might be slightly overextended, so it wouldn’t come as a surprise — particularly in the last three or four weeks leading up to an election — to witness a return of volatility,” stated Ross Mayfield, an investment strategist at Baird. “Over the longer term, we retain a bullish outlook based on the premise of lower rates for justifiable reasons, a gentle landing for the economy, and earnings growth.”
The S&P 500 has achieved nearly a 23% increase this year, not accounting for reinvested dividends, and the benchmark has surged approximately 63% since it touched a closing low last October.
Stocks ascend on earnings expectations
Treasury yields have also seen an uptick, with the benchmark 10-year note yield surpassing 4.1% last week. The bond market remained closed on Monday in observance of Columbus Day.
According to Oppenheimer, the S&P 500 may maintain its record-setting surge as the third-quarter earnings season unfolds. “Our experience suggests that monetary policy, economic conditions, along with corporate revenue and earnings growth typically influence market directions more than political debates during election cycles,” they noted. Oppenheimer’s chief investment strategist, John Stoltzfus, further mentioned, “The S&P 500’s 45th record closing this year indicates a market backed by economic resilience and solid earnings growth with potential for further increases.”
Bank of America Securities anticipates that the forthcoming September retail sales data could reinforce the “no landing” narrative, highlighting ongoing economic growth even amidst high inflation.
Equity and quant strategist Ohsung Kwon believes the figures will likely surpass expectations, further boosting investor sentiment. “The ‘no landing’ narrative could gain strength with outstanding retail sales this week,” Kwon stated. “In a stable inflation backdrop, the connection between rates and stocks should provide positive outcomes.”
Meanwhile, Deutsche Bank’s macro strategist, Henry Allen, cautioned about escalating inflation risks stemming from factors like imminent monetary easing by central banks, rising commodity prices, robust U.S. economic indicators, a higher-than-anticipated September CPI, and increasing money supply growth.
UBS keeps a positive perspective on U.S. stocks, forecasting strong growth in third-quarter earnings, even if it falls short compared to the second quarter’s performance. The bank predicts S&P 500 earnings per share growth of 5-7% for the September quarter, down from 11% in the second quarter, primarily due to decreasing oil and gasoline prices. UBS’s full-year 2024 earnings growth projection of 11% remains unchanged.
In conclusion, as the market continues to reach fresh peaks, investors are navigating a landscape rich with both potential rewards and risks, which include corporate earnings results, inflationary pressures, and geopolitical uncertainties.
