- Investors expect earnings reports from nearly one-third of the S&P 500 companies.
- Analysts anticipate a 1.2% year-on-year growth in aggregate S&P 500 earnings.
- The Commerce Department will announce the third-quarter US gross domestic product on Thursday.
US equities fluctuated and closed with mixed results on Monday as benchmark US Treasury yields dropped from 5%. Investors turned their attention to high-profile earnings and closely watched economic data for the week ahead.
The S&P 500 index finished modestly lower, while momentum stocks sensitive to interest rates lifted the tech-heavy Nasdaq Composite Index higher. The Dow Jones Industrial Average had the fourth consecutive daily decline.
“The focus remains on interest rates and the shift from ‘higher for longer’ to ‘how much higher for how much longer?'” stated Oliver Pursche from Wealthspire Advisors in New York. “The market now accepts that the Fed won’t lower rates anytime soon.”
The upcoming week will be quite eventful for earnings, with reports from nearly one-third of the S&P 500 companies. Sam Stovall, chief investment strategist of CFRA Research in New York, said, “Investors hope the ‘magnificent seven’ companies will pleasantly surprise with their results.”
Currently, 86 S&P 500 companies have reported earnings and 78% have exceeded expectations, according to LSEG data. Analysts anticipate a 1.2% year-on-year growth in aggregate S&P 500 earnings for July-September. It is slightly below the 1.6% growth projected earlier this month by LSEG.
Meanwhile, the Commerce Department will announce the third-quarter gross domestic product on Thursday, expected to accelerate to 4.3%. On Friday, the widely-watched Personal Consumption Expenditures (PCE) report will likely show annual headline and core inflation easing to 3.4% and 3.7%, respectively.
Additionally, geopolitical concerns loom, with market participants monitoring potential developments in the Israel-Hamas conflict.
Bonds and European equities (Source: Bloomberg)
Rising government bond yields and worries about the Middle East conflict in European markets led to slight declines. However, Italy’s FTSE MIB index was among the top gainers in the region. Investors are preparing for the European Central Bank’s interest rate decision later in the week.
“European government bond yields have reached multi-year highs, similar to the situation in the US, despite differing growth and inflation patterns. Consequently, we anticipate the ECB to adopt a more dovish stance,” explained Laura Cooper, the senior macro strategist for iShares EMEA at BlackRock.