The Bottom Line
Key focuses this week are on third quarter results released by some of the largest U.S. companies including:
- Ford on Monday
- Alphabet, McDonalds and Pfizer on Tuesday
- Microsoft and Eli Lily on Wednesday
- Apple and Amazon on Thursday
- Exxon Mobil and Chevron on Friday
Volatility in U.S. equity markets (measured by the VIX Index) is expected to remain elevated until after the U.S. elections on November 5th. Current election polls show a “dead heat” in seven key states for the President race (with a slight momentum increase favouring Trump). Polls also show a “dead heat” for Senate seats (with Republicans leading by two additional seats).
Consensus for Earnings and Revenues by S&P 500 companies
Source: www.factset.com
Frequency of third quarter corporate reports peaks this week. Thirty seven percent (185 companies) have reported to date. Another 34% (169 companies) are scheduled to report this week. Results released to date have prompted analysts to raise their earnings and revenue estimate slightly. Consensus calls for a 3.6% year-over-year earnings increase (up from 3.4% last week) and a 4.9% year-over-year increase in revenues (up from 4.7% last week).
A word of caution! Consensus for third quarter earnings remain significantly lower than the 11.3% year-over-year earnings gain recorded in the second quarter.
Earnings and revenue gains accelerate in the fourth quarter, but at a slightly lower rate. than indicated last week. Consensus calls for a 13.4% earnings increase (versus a 14.0% increase last week) and a 4.9% revenue increase (down from 5.0% last week).
For all of 2024, consensus calls for a 9.3% earnings increase (versus a 9.4% increase last week) and 5.0% revenue increase.
Earnings gains remain elevated in 2025, but at a slightly lower rate. First quarter earnings are expected to increase 13.4 % on a year-over-year basis (versus a 13.8% increase last week) and revenues are expected to increase 5.4% (versus a 5.5% increase last week). Second quarter earnings are expected to increase 12.6% (versus a 13.0% gain last week) and revenues are expected to increase 5.3% (versus 5.4% last week). For all of 2025 earnings are expected to increase 15.2% (versus a 15.1% increase last week) and revenues are expected to increase 5.8% versus 5.9% last week).
Economic News This Week
Bank of Canada Governor Macklem speaks at 1:30 PM EDT on Monday
U.S. third quarter annualized GDP released at 8:30 AM EDE on Wednesday is expected to grow at a 3.0% rate versus a 3.0% rate in the second quarter.
September Core PCE Price Index is released at 8:30 AM EDT on Thursday.
September U.S. Personal Income released at 8:30 AM EDT on Thursday is expected to increase 0.4% versus a 0.2% gain in August. September U.S. Personal Spending is expected to increase 0.4% versus a 0.2% gain in August.
August Canadian GDP released at 8:30 AM EDT on Thursday is expected to be unchanged versus a 0.2% gain in July.
Chicago October PMI is released at 9:45 AM EDT on Thursday
October Non-farm Payrolls released at 8:30 AM EDT on Friday is expected to drop to 140,000 from 254,000 in September. October Unemployment Rate is expected to remain at 4.1% set in September. October Average Hourly Earnings are expected to increase 0.3% versus 0.4% in September.
September U.S. Construction Spending is released at 10:00 AM EDT on Friday
October ISM Manufacturing PMI is released at 10:00 AM EDT on Friday is expected to improve to 47.6 from 47.2 in September.
Selected Earnings News This Week
Trader’s Corner
Equity Indices and Related ETFs
Daily Seasonal/Technical Equity Trends for October 25th 2024
Green: Increase from previous day
Red: Decrease from previous day
Source for all positive seasonality ratings: www.EquityClock.com
Commodities
Daily Seasonal/Technical Commodities Trends for October 25th 2024
Green: Increase from previous day
Red: Decrease from previous day
Sectors
Daily Seasonal/Technical Sector Trends for October 25th 2024
Green: Increase from previous day
Red: Decrease from previous day
Changes Last Week
Notes developed for “Wolf on Bay Street”
Don Vialoux was a guest on “Wolf on Bay Street” on Corus Radio 640 released on Saturday October 26th at 7:00 PM. Following are notes developed for the interview:
Frequency of third quarter results released by major North American companies reaches a peak this week. A word of caution! Consensus for third quarter results by S&P 500 index companies calls for significantly lower than the 11.3% year-over-year earnings gain recorded in the second quarter. Consensus for third quarter earnings on a year-over-year basis calls for only a 3.6% increase. Most third quarter reports released last week were greeted with “sell on news” responses. Share prices for S&P 100 companies, that reported less than consensus third quarter results, were particularly hard hit. Examples included GE Aerospace, Danaher, Verizon, Lockheed Martin, MMM, Union Pacific and Coca Cola. On the other hand, a few exceptions recorded upside gains when quarterly results surprised on the upside: Notable winners with positive surprises last week were Tesla, AT&T and General Motors
Fortunately, corporate news becomes more favourable after third quarter results are released. Consensus calls for earnings gains by S&P 500 companies to accelerate in the fourth quarter with a 14.0% year-over-year increase.
Look for higher than average volatility by U.S. equity prices prior to the U.S. Presidential Election on November 5th, prompted by uncertainty about election results. Not surprising, the VIX Index, better known as the “fear index”, is trading near 20%, up from its 15% average in 2024 year-to-date.
U.S. equity indices have a history since 1950 of moving higher from U.S. Presidential Election Day until at least January in the following year and frequently until June in the following year. Investors begin to anticipate introduction of new government programs that will fulfill the newly elected President mandate. Average gain per period for the Dow Jones Industrial Average from Presidential Election Day to end of the year was 3.0%.
Note an important exception to history: When President George Bush was first elected President against Al Gore, final results were not released until early January when the election count for Florida finally was confirmed (Remember the hanging chad controversy?) The S&P 500 Index was volatile, and moved lower by 9% from the election date until confirmation of Bush’s victory. Chances are higher than average this year that another controversy on the final state Collage Vote count for President will occur again. Current election polls show that at least seven key states are scoring a “dead heat”. Final congressional approval of the next President could be delayed until a scheduled meeting on January 6th 2025. (Remember what happened on January 6th 2021 when Congress first attempted to approve the last Presidential election results).
Short term stock market volatility has prompted investors to consider other investment prospects, notably commodities and their related equities and Exchange Traded Funds. Commodity prices (S&P Commodity iShares: symbol; GSG) recording short term technical bottoms last week included gold, silver, natural gas, corn and soybeans. Strength in Commodity prices was prompted by news that the Peoples Bank of China has taken monetary steps to rejuvenate the Chinese economy. Chinese demand for commodities is expected to strengthen.
S&P 500 from November 5th 2000 to January 5th 2001
Technical Notes for Friday
Canadian Dollar $XDC moved below US71.98 and touched US71.94, reaching a two year low.
NASDAQ Composite Index briefly moved above 18,671.07 on Friday to an all-time high extending an intermediate uptrend.
Consumer Discretionary SPDRs $XLY moved above $201.90 resuming an intermediate uptrend.
Capital One Financial $COF an S&P 100 stock moved above $167.50 to an all-time high extending an intermediate uptrend.
Colgate Palmolive $CL an S&P 100 stock moved below $97.36 extending an intermediate downtrend.
Capped REIT iShares $XRE.TO moved below $16.65 completing a double top pattern
Links offered by valued providers
The stock market is about to tell you who will win the election: Jon Najurian
The stock market is about to tell you who will win the election – YouTube
Expect the market to appreciate after the election, says Sand Hill’s Brenda Vingiello
Expect the market to appreciate after the election, says Sand Hill’s Brenda Vingiello – YouTube
Tesla Sparks Rally Ahead of Mag7 Earnings: Apple, Microsoft & Google Next To Report
https://www.youtube.com/watch?v=toeuiHhzyI8
Michael Campbell’s Money Talks for October 26th
Michael Campbell’s MoneyTalks – Complete Show (mikesmoneytalks.ca)
Why the S&P 500 Won’t Break 6000 (Yet): David Keller
Why the S&P 500 Won’t Break 6000 (Yet) | The Mindful Investor | StockCharts.com
Earnings Season? Trade Gaps Like a PRO: Mary Ellen McGonagle
https://www.youtube.com/watch?v=YEPHn23zwXc
Weekly Update with Larry Berman – Oct 26, 2024
https://www.youtube.com/watch?v=Czug3aV-boU
Should We Be Cheering Bank Rate Cuts? Bob Hoye
Should We Be Cheering Bank Rate Cuts? – HoweStreet
Trading Desk Notes for October 26, 2024: Victor Adair
Trading Desk Notes for October 26, 2024 – HoweStreet
This Week in Money: Ross Clark, Eric Hadik, Mark Leibovit
This Week in Money – HoweStreet
Technical Scoop for October 28th by David Chapman and www.EnrichedInvesting.com
https://enrichedinvesting.com/library/
S&P 500 Momentum Barometers
The intermediate term Barometer dropped another 5.20 on Friday and plunged 19.80 last week to 57.40. It changed from Overbought to Neutral on a drop below 60.00. Daily trend is down.
The long term Barometer dropped 0.60 on Friday and fell 7.40 last week. It remains Overbought. Daily trend has turned down.
TSX Momentum Barometers
The intermediate term Barometer dropped 5.38 on Friday and plunged 10.76 last week to 69.51. It remains Overbought. Daily trend has turned down.
The long term Barometer slipped 0.45 on Friday and dropped 1.79 last week to 78.48. It remains Overbought.
Disclaimer: Seasonality ratings and technical ratings offered in this report and at
www.equityclock.com are for information only. They should not be considered as advice to purchase or to sell mentioned securities. Data offered in this report is believed to be accurate, but is not guaranteed
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Equity Clock Publications