Hello, this is Tom Jalics, Chief Investment Strategist at Fifth Third Bank
Domestic equities finished the pre-Thanksgiving stretch with its fifth-straight winning session last Friday as corporate earnings largely impressed as well as on hopes for an improved business climate under the next U.S. administration. The S&P 500 Index was up 1.7% for the week and the Nasdaq Composite closed the week up 1.8%. The Dow Jones Industrial Average finished the week 2.0% higher. U.S. Treasury yields were mixed last week with the 10-year U.S. Treasury note ending the week down three basis points to 4.41% and the 2-year U.S. Treasury note up eight basis points ending the week at 4.38%. The 2-year/10-year U.S. Treasury yield curve finished the week normally sloped by three basis points. Gold finished the week 5.7% higher, ending the week at $2,709/ounce. West Texas Intermediate (WTI) crude oil was up by 6.3% for the week, ending the week at $71.26/barrel.
The third quarter earnings season is largely in the books with the S&P 500 reporting year-over-year earnings growth of 5.8% according to FactSet Earnings Insight. This marks the fifth quarter in a row of year-over-year growth for the index. However, for fourth quarter 2024, the estimated earnings growth rate for the index is expected to more than double to 12.0%. If 12.0% is the actual growth rate for the quarter, it will mark the highest year-over-year earnings growth rate reported by the index since the fourth quarter of 2021 which saw 31.4% growth. Analysts expect double-digit earnings growth will continue for the S&P 500 through all four quarters of 2025. The estimated earnings growth rates for first quarter through fourth quarter 2025 are 12.7%, 12.1%, 15.3%, and 17.0%. An improving earnings outlook suggests a growing economy and will be one of the largest factors for a continued move higher in domestic stock prices prospectively.
It was a relatively quiet week on the domestic economic front with only a few reports of note released including existing home sales which increased 2.9% from the same period a year ago, which was the first year-over-year increase since July 2021. The median existing home price for all housing types increased 4.0% year-over-year to $407,200, the sixteenth consecutive month of year-over-year price increases. The key takeaway from the report is that the ongoing increase in the median home price, affordability constraints will persist, capping total sales potential. Initial jobless claims for the week ending November 16 decreased by 6,000 to 213,000. Continuing jobless claims for the week ending November 9 increased by 36,000 to 1.908 million. That is the first reading above 1.900 million since November 2021. The key takeaway from the report is that the rising trend for continuing jobless claims suggests a modestly softening labor market where it is becoming more challenging to find a new job after being laid off.
In the week ahead, markets are closed on Thursday for the Thanksgiving holiday, while bond markets will close early on Black Friday, one of the biggest shopping days of the year. Prior to Thanksgiving, investors will get key economic data on Wednesday with the release of the Personal Consumption Expenditures (PCE) inflation index for October. Third-quarter Gross Domestic Product (GDP) and minutes for the November meeting of the Federal Reserve will also attract investor interest. Consumer confidence and housing market data are also on tap. Earlier in the week, earnings reports from tech firms Dell Technologies, CrowdStrike, HP Inc, and Analog Devices will be among the highlights of the corporate calendar.
As always, we will be watching and reporting to you next week. Thank you.