The Week That Was, The Week Ahead: Macro & Markets, October 27, 2024

Everything to Know about Macro and Markets

Stock markets snapped their six-week streak of gains as rising bond yields spooked investors. The S&P 500 (SPX) declined by 0.96% on the week, while the Dow Jones Industrial Average (DJIA) dropped by 2.68%. Meanwhile, the tech benchmarks Nasdaq Composite (NDAQ) and Nasdaq-100 (NDX) closed the week in the green, rising by 0.16% and 0.14%, respectively.

Bonds Don’t Believe in Cuts?

Bond prices have been on the downslope since the Fed delivered its first rate cut, with the trend finally getting on the stock-investor radar last week. The bond market’s apparent disbelief in the continuation of fast monetary easing in the wake of stronger-than-expected economic data presented a strong headwind for equities. The improving consumer sentiment and robust durable goods numbers added to the rising yields.

This week will be crucial to the bond markets in reestablishing or overturning the recent trend, which will in turn affect the stock market. Investors are focusing on the preliminary estimate of Q3 economic growth, as well as on the Fed’s preferred measure of inflation, Core PCE, and the latest data reflecting the state of the job market.

Indeed, job market numbers have been one of the main culprits for the steady rise in bond yields in the past month, as more robust than expected job growth has painted a picture of a stronger-than-expected economy, changing investor expectations for inflation and Fed policy. The latest two monthly job reports featured stronger-than-projected wage growth, adding to speculations that higher inflation rates may return.

Taking into account robust job and wage growth, the markets are currently pricing in zero chances of another jumbo cut in November, a 95% chance rates will fall 25 basis points, and a 5% chance they will remain on hold.

“Magnificent” Earnings Lift Optimism

Tech stocks were lifted last week by blockbuster quarterly results from Tesla, the first member of the “Magnificent” cohort to release its earnings this season. This rekindled investor optimism towards tech stocks, helping the Nasdaq Composite clock in its first intraday high since July.

In addition, better-than-expected quarterly releases from Texas Instruments and Lam Research lifted the spirits of semiconductor-sector investors, supporting the view that the demand outside of the AI-related areas is on the mend. Besides, high hopes for reports this week from five members of the “magnificent” bunch added to the tech rally.    

Stocks That Made the News

¤ As of last Friday, 37% of S&P 500 companies have reported their Q3 2024 earnings. Of these, 75% exceeded analysts’ EPS estimates, a percentage that is slightly lower than the five-year average of 77%, according to FactSet. As a result, FactSet’s estimate for third-quarter EPS growth of all S&P 500 companies was reduced from 4.3% at the start of the earnings season to 3.6%. However, most of the large-cap tech companies are yet to report their results, which could strongly lift the total earnings growth. Up to last Friday, IT and Communication Services firms have reported the strongest results, while Industrials, Healthcare, and Energy registered the largest number of downward revisions to EPS estimates and negative EPS surprises.

¤ Industrial Sector stocks were under pressure last week due to disappointing quarterly results from industrial giants GE Aerospace (GE), 3M (MMM), Honeywell (HON), and Boeing (BA).

¤ McDonald’s (MCD) helped drag down the Dow Jones Industrial Average as it tumbled following the news of its meals connected to an E. coli outbreak. International Business Machines (IBM) also pushed DJIA down, falling by 7.3% on the week as the tech giant missed revenue estimates. Another DJIA performance detractor was Verizon (VZ), which declined by almost 6% despite an earnings beat after KeyBanc’s downgrade on “limited room for EBITDA acceleration in 2025.”

¤ The Healthcare sector continued its underperformance last week under the weight of HCA Healthcare (HCA), which tumbled by over 12% due to an EPS miss.

¤ On the positive side of the non-tech earnings table, United Parcel Service (UPS), American Airlines (AAL), Southwest (LUV), and Whirlpool (WHR) surpassed estimates. Deckers Outdoor (DECK) was the champion in the Consumer Discretionary sector, while Philip Morris (PM) led the gains in the Consumer staples, as both companies strongly surpassed analyst EPS forecasts.   

¤ Tesla (TSLA) was the best performer in the S&P 500 last week after surging by 22% on Thursday, clocking in its best daily gain in more than 11 years. The stock’s rally followed the release of unexpectedly strong quarterly earnings and the updated sales projection envisioning growth of 20-30% in 2025.

¤ Nvidia (NVDA) rose on the week, with its market capitalization almost reaching that of Apple (AAPL). The iPhone maker’s stock declined after KeyBanc analysts downgraded the stock to “Sell” amid lower projections for sales of the new iPhone 16.

¤ Lam Research (LRCX) and Texas Instruments (TXN) helped semiconductor stocks to rebound last week, as both industry stalwarts saw their stocks jump after reporting better-than-expected quarterly results.

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 reports of the “Magnificent” pack members Alphabet (GOOGL), Microsoft (MSFT), Meta Platforms (META), Apple (AAPL), and Amazon (AMZN).

AI hardware leaders Advanced Micro Devices (AMD) and Super Micro Computer (SMCI) will also be in focus this week.

Other notable earnings releases this week are coming from Cadence Design (CDNS), Ford Motor (F), Visa (V), McDonald’s (MCD), Stryker (SYK), PayPal (PYPL), Check Point (CHKP), Eli Lilly & Co (LLY), Caterpillar (CAT), KLA (KLAC), Monolithic Power (MPWR), Robinhood (HOOD), Exxon Mobil (XOM), and other heavyweights from different industries.

Ex-dividend dates are coming this week for Albertsons Companies (ACI), ASML Holding (ASML), Enterprise Products Partners (EPD), Morgan Stanley (MS), Texas Instruments (TXN), Kinder Morgan (KMI), Costco (COST), Realty Income (O), Oneok (OKE), and other dividend-paying firms.   

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