ND&S Weekly Commentary (10.28.19) – Earnings Season in Full Swing

October 28, 2019

Strong earnings pushed stocks higher last week. With approximately 40% of companies having reported, reports generally have been better than expected outside of a few disappointments. Blended earnings are currently at -0.4% year over year versus expectations of a 3.25% decline. Revenues are up 3.0% from the same quarter a year ago. There are a number of companies scheduled to report this week which includes Alphabet, Mastercard, Apple, Facebook, and AT&T.

US equity markets closed the week very close to their all-time highs. For the week, the S&P 500 increased 1.23% while the DJIA finished up 0.70%. Smaller US companies represented by the Russell 2000 rose 1.53%. International equities were also positive with developed (MSCI EAFE) and emerging (MSCI EM) closing higher by 1.27% and 1.17%, respectively. Bonds gave a little back last week with the benchmark Barclay’s US Aggregate Index declining 0.15% on the week. The 10 Year U.S. Treasury yield closed at 1.80%, which is up from 1.76% the week prior.

Economic data released last week was a mixed bag. Flash U.S. manufacturing Purchasing Manager’s Index (PMI) released last week beat expectations with a reading of 51.5 (a PMI reading above 50 represents an expansion). Manufacturing PMIs in Europe and Japan also stabilized as most countries had month over month increases. Durable goods orders fell 1.1% month over month missing estimates. According to the National Association of Realtors, existing home sales declined 2.2% in September missing estimates of a 0.7% decline.

Earnings reports will accelerate this week with 230 companies comprising the S&P 500 scheduled to report. Investor attention will also key on the Federal Open Market Committee (FOMC) meeting announcement set for Wednesday. The futures market is putting the odds of a 25 basis point cut by the FOMC at 90%. Expect the conversation around the sustainability of economic growth to ratchet up in the coming days. Let’s make it a good week!

“Life is 10% what happens to you and 90% how you react to it.”Charles R. Swindoll