The Week That Was, The Week Ahead: Macro & Markets, October 20, 2024

Everything to Know about Macro and Markets

Major stock indexes rose, with the S&P 500 (SPX) climbing for the sixth week in a row to a new record with gains of 0.85%. The Dow Jones Industrial Average (DJIA) rose by 0.96% on the week, also climbing to an all-time high. Meanwhile, the Nasdaq Composite (NDAQ) and the Nasdaq-100 (NDX) added 0.80% and 0.26%, respectively.  

Climbing to Records and Hoping for More

Stocks overcame another bout of turbulence as large tech wobbled mid-week, but strong earnings and robust economic data propelled them to their longest stretch of gains so far this year. This marked the 7^th time in the past decade that the S&P 500 has gained for six straight weeks. If stocks manage to maintain their impressive performance through the end of the year they will achieve two back-to-back 20%+ annual increases for only the sixth time in the past 75 years.

While tech stocks succeeded in staging a turnaround from their mid-week dip, the rally has visibly broadened to include other sectors seen as beneficiaries of the economy’s resilience and the Fed’s rate-easing cycle, with both trends expected to support earnings. Thus, the past week’s best-performing S&P 500 sectors were Utilities, Real Estate, and Financials, with the latter also benefitting from stronger-than-expected results posted by large banks and other financial institutions.

“The Other 493” Will Rise Again

As the Q3 earnings season heats up, earnings at companies outside of the Magnificent cohort are expected to continue improving. Although most of the earnings growth is still slated to arrive from tech megacaps, analysts forecast the second-straight quarterly earnings increase of the “S&P 493”.

According to Bloomberg Intelligence forecast, the Magnificent Seven will register growth of over 18% in their bottom lines, while the rest of the stocks comprising the benchmark index are expected to post an average increase of 1.8%. However, their earnings growth is expected to accelerate to double-digits next year.

Additionally, “The Other 493” are slated to provide more – and larger – positive earnings surprises than the Magnificent pack, as expectations for their results are more than achievable, providing a low bar to overcome. This could inject additional positive sentiment and help the rally to broaden further.   

Goldilocks Isn’t Going Anywhere

Last week, solid retail sales numbers and lower weekly jobless claims provided a boost to investor sentiment. In response to continued economic resilience, markets have lowered their expectations regarding the number and size of rate cuts this year. However, the Fed apparently has much more room for monetary easing, since the prolonged softness in manufacturing, coupled with lower commodity prices, keeps a lid on inflation.

Meanwhile, with 15% of the S&P 500 constituents having reported their Q3 earnings, the results are encouraging. Average EPS growth has climbed to 6.7%, exceeding Wall Street’s expectations. The bulk of these results are thanks to the Financial sector’s performance.  

After a “grand opening” by JPMorgan Chase (JPM), Wells Fargo (WFC), and Bank of New York Mellon (BK), another wave of big banks took the earnings baton, delivering more good news. Morgan Stanley (MS), Goldman Sachs (GS), Bank of America (BAC), and Citigroup (C) topped earnings expectations. Since the banks are both the bellwether and the backbone of the economy, these results are more than encouraging.

Stocks That Made the News

¤ Tech stocks experienced increased earnings-related volatility this past week, taken down strongly on Wednesday as the Dutch chipmaking giant ASML Holding (ASML) reduced its 2025 revenue guidance. However, tech rebounded afterwards thanks to positive news from Taiwan Semiconductor and Netflix. 

¤ Taiwan Semiconductor Manufacturing (TSM) gained almost 4.5% on the week after reporting higher-than-expected revenue and EPS results and issuing strong guidance for the fourth quarter, with the increased outlook driven by surging demand for AI chips. The bullish outlook restored optimism in the AI trade, helping Nvidia (NVDA) and other prominent AI firms to rebound.

¤ Netflix (NFLX) saw its stock surge after the streaming giant reported results topping analyst estimates, beating on both top and bottom lines, as well as subscriber number growth. The company also increased its full-year revenue guidance to the upper bound of the previously provided range.

¤ Apple (AAPL) shares strongly rebounded, closing the week with a sizable gain, after the tech behemoth reported a strong demand for its new iPhone in the Chinese market.  

¤ American Express (AXP) tumbled after releasing its quarterly results. While its EPS outpaced analysts’ expectations, a miss on revenue and larger-than-expected credit-loss provisions weighed on the stock.

¤ Elevance Health (ELV) tumbled by over 14% on the week, leading the Healthcare sector decliners, after the health insurance giant reported lower-than-expected earnings and reduced its full-year profit guidance, citing rising costs in its Medicaid business.    

Upcoming Earnings and Dividend Announcements

The Q3 2024 earnings season is in full swing, with many newsworthy earnings releases scheduled for this week.

The highlight of this week will be the quarterly report of Tesla (TSLA), the first “Magnificent” tech stock to report earnings this season. Other notable earnings releases this week are coming from GE Aerospace (GE), Danaher (DHR), Verizon (VZ), RTX (RTX), Lockheed Martin (LMT), General Motors (GM), Coca-Cola (KO), T Mobile US (TMUS), International Business Machines (IBM), ServiceNow (NOW), AT&T (T), NextEra Energy (NEE), Boeing (BA), L3Harris Technologies (LHX), and other heavyweights from different industries.

Ex-dividend dates are coming this week for CVS Health (CVS), Caterpillar (CAT), Bank of New York Mellon (BK), Dell Technologies (DELL), Lowe’s (LOW), Fastenal Company (FAST), and other dividend-paying firms.   

For additional exclusive market insights and content from TipRanks Macro & Markets research analyst Yulia Vaiman, click here.