Takeaways
- Earnings Strength Pushes Stocks Higher
- Economic Data Supports Soft Landing
- Disney Headlines This Week Of Remaining Earnings
Strong earnings sent stocks higher last week with the S&P 500 gaining nearly 6% and the Nasdaq Composite gaining over 6.5%. Bonds staged a rally as well, pushing yields lower. The 10-year yield closed Friday at 4.55% after hitting 5% just a week prior. A decision by the Fed to stand pat and some weaker than expected economic data to close out the week gave investors reason to be optimistic as we head into the final weeks of the year.
According to FactSet, as of Friday, earnings in the S&P 500 have increased 3.7% for the quarter. That is the first quarterly increase since 3Q 2022. Revenues are also on pace for a 2.3% gain. Communications and consumer discretionary companies have fared best. The communications sector which includes Google
GOOG
, Amazon
AMZN
, Netflix
NFLX
and Meta saw the greatest increase, up 42%. Companies such as McDonalds, Starbucks
SBUX
, Airbnb and Marriot International helped propel consumer discretionary earnings higher by 41%. The stronger than expected earnings show the economy continues to stay strong while other metrics are suggesting inflation may be under control, creating the “soft landing” many have hoped for, but questioned whether it was possible.
Last week was filled with economic data and a decision by the Federal Reserve on interest rates. The Fed announced on Wednesday they would leave interest rates alone. Then on Friday, the employment report for October came in weaker than expected, which may be the result of higher interest rates having their intended effect of slowing the economic pace of growth.
This week will be lighter on economic data; however, we will hear from multiple members of the Fed with Chairman Powell speaking Tuesday. It will be the first time since Friday’s employment report was released that he’ll be speaking and I’m curious to see how he views the slowdown vis-a-vis future rate decisions.
For earnings this week, some of the bigger names we’ll hear from are D.R. Horton, Uber
UBER
and Disney. I’m particularly interested in what D.R. Horton has to say and what they see in the housing market. I’m also eager to hear from Disney, whose stock hit a high of $203 earlier this year but has since fallen to $85. This morning, DISH Network
DISH
reported earnings that missed estimates and also announced their CEO was resigning. That news has the stock down nearly 7% in premarket.
Some other stocks making news this morning include Tesla
TSLA
, who announced plans to build a new, less expensive car that will be priced at 25 thousand euros as the company continues its push aimed at taking market share overseas. Shares of Shell PLC are up 1.5% premarket after the company announced a $6.5 billion stock buyback plan. Lastly, shares of WeWork are halted. That company is expected to file for bankruptcy.
As we head into the week, markets seem a bit relieved after getting through most of the earnings and the most recent Fed decision. The VIX closed Friday below 15 and this morning is just slightly higher in premarket. Bonds are down 0.5% premarket after last week’s impressive rally. Finally, oil is up premarket by just over 1%. With much of the obvious potential pockets of turbulence now in the rearview mirror, I am a bit on guard for the unexpected. When volatility gets low like this and complacency sets in, I tend to become a bit guarded. Still, there is no denying last week was a good week for investors. Both the S&P 500 and Nasdaq Composite are back up above their 21-, 50- and 200-day moving averages. Hopefully, they can continue strong through the holidays. As always, I would stick with your investing strategy and long term plans.
tastytrade, Inc. commentary for educational purposes only. This content is not, nor is intended to be, trading or investment advice or a recommendation that any investment product or strategy is suitable for any person.
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