Stocks rallied this week as the earnings season picked up steam and is off to a better-than-expected start so far. With 20% of the S&P 500 reporting earnings year-to-date, year-to-date sales performance has been 1.4% above expectations while earnings performance is 5.4% above expectations, overall. Although estimates have fallen in recent weeks, it could signal that investors are getting a little too bearish in the short term. This could set us up for more upside should subsequent results also come in better than feared. The three grand averages are done for the week. The S & P 500 and Dow Jones Industrial Average rose more than 4%, while the Nasdaq Composite rose 5.2%. However, the bond market is still in the driver’s seat. Rising 2-year Treasury yields, which hit a 15-year high of 4.6% on Friday, weighed on equity prices. The inverse correlation between bond yields and stocks was powerful enough to trump positive earnings reports. As a result, we took a relatively flat week heading into Friday. But the averages bounced after a report in The Wall Street Journal suggested the Federal Reserve may slow the pace of hikes beyond the expected 75 basis points at its next meeting on Nov. 2, reducing the potential for a sharper and longer decline. While not exactly a pivot, it would represent a shift away from the hawkish stance the Fed has maintained all year. On Thursday, according to the CME FedWatch Tool, investors were counting on a 75% probability of a 75 basis point hike in December. It fell to 45% on Friday. Whether any of this talk of future hikes will be enough to cover the rise in Treasuries, stabilize the major stock averages and spark some recovery remains to be seen. But regardless of the short-term trajectory for stocks, as we discussed last Friday, we believe a well-balanced and diversified portfolio will position investors for whatever comes next. Under the hood, there was a broad rally with all sectors higher for the week, led by energy, technology and materials. At the same time, the US dollar index hovered around the 112 level. Gold is holding at $1,660 an ounce. WTI crude oil prices remain in the mid-$80s and the yield on the 10-year Treasury note rose to 4.2%. Looking back 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 was reported to have risen 0.4% in September, beating expectations for a 0.1% monthly gain, while capacity utilization came in at 80.3%, above expectations of 80%. On Wednesday, housing starts were reported to have fallen 8.1% monthly to a seasonally adjusted annual rate (SAAR) of 1.439 million in September, below the 1.47 million the Street expected. Building permits rose 1.4% in September, less than expected progress of 1.5%. On Thursday, initial jobless claims for the week ended Oct. 15 came in at 214,000, down 12,000 from the previous week and below expectations for 232,000. On Thursday, existing home sales were also reported to have fallen 1.5% on a monthly basis and 23.8% annualized in September to a SAAR of 4.71 million, as rising mortgage rates take their toll on affordability. What’s ahead The revenue season ramps up next week for the club. Within the portfolio, we’ll hear from 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 ) on Wednesday after the bell; from Linde ( LIN ) and Honeywell ( HON ) on Thursday before the bell; from Amazon (AMZN), Apple (AAPL) and Pioneer Natural Resources on Thursday after the closing bell; and from AbbVie (ABBV) on Friday before the opening bell. Here are some other earnings reports and financial numbers to watch in the week ahead: Monday, October 24 Before the bell rings: Royal Philips (PHG), Dorman Products (DORM), Bank of Hawaii (BOH), Schnitzer Steel (SCHN), Kirby Corp (KEX) After the Clock: 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 clock: 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-Myers (BMY), Hilton (HLT), Kraft Heinz (KHC), Harley-Davidson (HOG), Otis (OTIS), General Dynamics (GD), Thermo Fisher (TMO), Seagate (STX), Boston Scientific (BSX), ADP (ADP) After the clock: Teledoc (TDOC), ServiceNow (NU), 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 a.m. ET: New Home Sales Thursday, October 27 Before the Clock: 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 clock: 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 AM ET: Initial Jobless Claims 8:30 AM ET: Durable Goods Orders 8:30 AM ET: Gross Domestic Product Friday, October 28 F penny watch: Chevron (CVX), E xxon (XOM), Colgate-Palmolive (CL), Booz Allen (BAH), LuondellBasell (LYB), DaVita (DVA) 8:30 am ET: Personal Expenses (See here for a full list of the stocks in Jim Cramer’s Charitable Trust .) 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A trader works on the floor of the New York Stock Exchange (NYSE) in New York on October 7, 2022.
Brendan McDermid | Reuters
Stocks rallied this week as the earnings season picked up steam and is off to a better-than-expected start so far.
