Market performance and investor sentiment
The stock market concluded Friday with what seemed to be a relatively subdued trading day, even as the Standard & Poor’s 500 Index and the Dow Jones Industrial Average both closed at new all-time highs. The S&P 500 gained 0.4% to nearly 5,865, while the Dow saw an increase of just 0.09%, or 36 points, ending at 43,276. The Nasdaq Composite Index climbed 0.6% to 18,490, though it did not reach a new record. Nvidia, on the other hand, achieved a new high.
Investor confidence remains high, with forecasts indicating that the S&P 500 could rise to at least 6,200, marking a 5.7% increase from its current position. If realized, this would signify a 30% gain for the year, the most substantial annual rise since 1997. Positive predictions are also being made for the Nasdaq and technology stocks as a whole, highlighting the enthusiasm in the sector.
The leading indices have recorded gains for six successive weeks, and the markets may be poised to attempt breaking the record for the longest consecutive weekly advancements, which currently stands at nine weeks. This record was last reached between late October 2023 and the close of trading in 2023, and previously in a nine-week period that concluded in January 2004.
Looking forward, the foundations are set for a possible seventh week of increases. The third-quarter earnings season is nearing its height, job growth remains consistent, and oil prices are declining despite persistent tensions in the Middle East. Additionally, gasoline prices are also dropping, with rising mortgage rates currently keeping home sales stable.
All 11 sectors of the S&P 500 are firmly in the green for the year. Real estate has appreciated by 11.5%, partly due to anticipations that the Federal Reserve will continue to lower rates. Top performers include Information Technology with a 33% rise; Utilities up 29%; Communications Services increasing by 28.3%; and Financials climbing 26.5%.
Nevertheless, certain risks threaten the prevailing market optimism. A contested U.S. Presidential election might introduce uncertainty, and the crisis in the Middle East could escalate into a larger conflict. Furthermore, unforeseen events—those unpredictable occurrences that can disrupt markets—remain a point of concern. As Los Angeles money manager Julie Biel remarked on CNBC’s Fast Money show, “It makes me nervous.” The financial crisis of 2008-09 serves as a caution that markets can be caught off guard by risks that are not immediately visible.
Key earnings reports and economic indicators
This week, attention will be focused on several major corporations as they release their earnings reports, potentially shaping market trends in the upcoming weeks. Tesla and Amazon are among the most awaited, as both face distinct challenges and opportunities.
Tesla has faced significant pressure. Its shares fell 8.8% after unveiling its Cybercar, a futuristic taxi promised by CEO Elon Musk earlier this year. As of Friday, Tesla shares were down 7.6% since October 10 and have dropped 15.6% in October, closing at 0.70. Investors are eagerly awaiting Wednesday’s earnings report, anticipated to reveal earnings of 58 cents per share, compared to 53 cents a year earlier. Revenue is expected to reach .6 billion, reflecting an 8.8% growth, primarily driven by advancements in its solar power sector. However, the company’s vehicle sales have been sluggish, and competition in the electric vehicle market is intensifying, which could impact future performance.
Amazon is also on track to announce its earnings after Thursday’s market close. The consensus forecast is for earnings of .14 per share, boosted from 86 cents from last year, with revenue projected to hit 6.2 billion, a 10% rise from the prior year. Amazon’s stock has surged 24.4% in 2024, yet it has stagnated recently, gaining merely 1.4% in October after a 3.6% drop in the previous quarter. The company faces increasing rivalry in the e-commerce sector, especially from Walmart and Chinese competitors Temu and Shein. Additionally, there are worries about how Amazon Web Services (AWS) might adapt to the growth of artificial intelligence, particularly with Microsoft making notable advancements in the AI domain.
Besides Tesla and Amazon, Boeing will also take center stage this week. The aerospace leader’s 33,000 striking employees are scheduled to vote on a new contract proposal on Wednesday. The suggested agreement includes a 35% wage increase over four years, yet it does not reinstate Boeing’s former pension plan, a crucial demand from the union. Boeing’s shares have suffered significantly this year, down 40.5% in 2024, and the company is eager to have its workforce return to stabilize its finances. A favorable vote could deliver a much-needed uplift to the stock.
Other important earnings reports to monitor this week include those from GE Aerospace, 3M, General Motors, Coca-Cola, ServiceNow, IBM, and United Parcel Service. GE Aerospace is anticipated to report earnings of .13 per share, rising from 82 cents last year, while 3M is forecasted to post earnings of .93 per share, decreasing from .68. General Motors is expected to report earnings of .50 per share, an increase from .28, while Coca-Cola’s earnings are projected to remain unchanged at 74 cents per share. ServiceNow is expected to report earnings of .66 per share, an increase from .21, and IBM is projected to post earnings of .25 per share, up from .20. United Parcel Service is expected to report earnings of .65 per share, compared to .57.
In addition to corporate earnings, several significant economic reports will be unveiled this week that could sway market sentiment. The Federal Reserve’s Beige Book, providing a narrative overview of the U.S. economy, will be published on Wednesday. The National Association of Realtors will present data on existing home sales for September, likely indicating flat sales at best. On Thursday, the weekly jobless claims report will be released, which has consistently remained low, suggesting that the U.S. economy is still robust. The Census Bureau will also disclose its new-home sales report for September, which will offer further insights into the housing market’s condition.