Market Insights: S&P 500 Resilience and Earnings Projections
The S&P 500 index has had an eventful week, showcasing the resilience of the stock market in the face of various challenges. This article delves into the recent performance of the S&P 500, key earnings reports, and upcoming market events that are poised to shape the financial landscape.
S&P 500's Remarkable Resilience
Despite a turbulent week that included a significant sell-off on Thursday and Friday, the S&P 500 managed to gain 0.45%. This marks its second consecutive positive week, demonstrating the index's ability to withstand market volatility. Investors closely watched the S&P 500 as it recovered from the sell-off, which was primarily driven by a spike in oil prices and US Treasury yields. These price fluctuations were fueled by heightened concerns surrounding the Israel-Gaza hostilities, which prompted a market downturn.
On a more positive note, the Dow Jones index managed to edge out a gain thanks to the impressive earnings reports from several major banks, including JPMorgan (JPM), Citigroup (C), and Wells Fargo (WFC). These reports served as a timely reminder of the importance of corporate earnings in influencing market sentiment.
Earnings Season Takes Center Stage
The upcoming week promises a slew of noteworthy earnings reports, with several major companies set to unveil their third-quarter results. This robust earnings calendar is expected to be a significant factor influencing market dynamics. Here's a snapshot of the key players and their reporting dates:
Tuesday: Johnson & Johnson (JNJ), Bank of America (BAC), and Goldman Sachs (GS)
Wednesday: Tesla (TSLA), Morgan Stanley (MS), and Netflix (NFLX)
Later in the week: Union Pacific (UNP), American Express (AXP), and Taiwan Semiconductor (TSM)
The market will also pay close attention to Federal Reserve Chair Jerome Powell's speech on Thursday. Investors are keeping a keen eye on US Treasuries, particularly the longer duration bonds, as their yields continue to rise.
Here's a look at the consensus earnings forecasts for some of the companies reporting this week:
Johnson & Johnson is expected to report $2.52 in adjusted EPS on $21.06 billion in sales. Analysts revised their earnings forecasts lower for Q3, following the spin-off of Kenvue (KVUE).
Goldman Sachs is expected to report $5.54 in adjusted EPS on revenue of $11.13 billion, though analysts are largely skeptical of the large investment bank this quarter.
Lockheed Martin (LMT) is expected to earn $6.62 in EPS on $16.72 billion in sales. However, 75% of analysts revised profit lower for the quarter.
Netflix is expected to post consensus adjusted earnings of $3.48 per share on $8.54 billion. Most analysts raised their forecasts on EPS for the quarter.
Tesla is expected to earn $0.74 in adjusted EPS on $24.22 billion in sales, although 19 of 22 analysts revised earnings lower this quarter.
Morgan Stanley is expected to report adjusted EPS of $1.31 on revenue of $13.22 billion. Seven of nine analysts lowered their earnings outlook for this quarter.
Philip Morris International (PM) is expected to release earnings of $1.62 on revenue of $9.22 billion.
Union Pacific is expected to report earnings of $2.44 on revenue of $6 billion.
AT&T (T) is forecast to release adjusted EPS of $0.62 on sales of $30.24 billion, with mixed opinions among analysts.
CSX (CSX) is expected to report EPS of $0.43 on $3.58 billion in sales, and analysts unanimously cut their forecasts on CSC this quarter.
Taiwan Semiconductor is expected to earn $1.17 in adjusted EPS on revenue of $16.67 billion.
American Express is expected to post earnings of $2.95 per share on revenue of $15.36 billion. It's worth noting that analysts' earnings forecast cuts outnumber upward revisions more than two to one.
Economic Indicators and Market Impact
This week, the focus isn't solely on earnings; we also have some important economic indicators on the horizon. US Retail Sales for September are a significant data drop, expected to show 0.3% growth from the August figure. However, this is a dip from August's 0.6% month-over-month growth. Retail Sales ex Autos are anticipated to grow at 0.2% in September, compared with August's 0.6% reading.
US Building Permits and Housing Starts for September will be released on Wednesday. Building Permits are expected to decline by about 90K compared to August's figures, while Housing Starts are projected to exceed the August reading by about 100K.
Additionally, several Federal Reserve officials, including Waller, Williams, Bowman, Cook, and Jefferson, are scheduled to deliver speeches throughout the week. These speeches will precede Federal Reserve Chair Jerome Powell's highly anticipated speech on Thursday, which is expected to have a notable impact on the markets. Currently, the CME Group's FedWatch Tool assigns a 90% chance that the central bank will keep interest rates unchanged at its November 1 meeting.
For investors and market enthusiasts, here's a handy summary of the earnings calendar for this week:
Monday, October 16: Charles Schwab (SCHW)
Tuesday, October 17: Johnson & Johnson (JNJ), Bank of America (BAC), Lockheed Martin (LMT), Goldman Sachs (GS)
Wednesday, October 18: Tesla (TSLA), Procter & Gamble (PG), Abbott Laboratories (ABT), Netflix (NFLX), Morgan Stanley (MS)
Thursday, October 19: Philip Morris International (PM), Union Pacific (UNP), AT&T (T), CSX (CSX), Taiwan Semiconductor Manufacturing (TSM), American Airlines Group (AAL)
Friday, October 20: American Express (AXP), Schlumberger (SLB)
S&P 500 Forecast
The S&P 500's recent close near support at 4,328, which stems from the low on June 26, is a crucial level to watch. A breach of this support could lead the index down to the new support level created in early October between 4,216 and 4,225. This range has proven significant, halting downward price action for four consecutive sessions.
On the upside, resistance set in around the 4,380s last week. The descending trendline that started on July 27 is the primary obstacle. This week, that trendline is situated near 4,450.
In conclusion, the S&P 500's performance and earnings reports are key factors shaping the financial landscape. As we navigate through a week filled with corporate results and economic indicators, market participants will closely monitor these events for their potential impact on stock prices. The stock market's ability to weather recent challenges underscores its resilience, making it an area of continued interest for investors.
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