Hello, this is Tom Jalics, Chief Investment Strategist at Fifth Third Bank
Domestic equities enjoyed their sixth consecutive weekly gain with a new record finish Friday as mostly positive third quarter earnings reports acted as a positive catalyst. The S&P 500 Index was up 0.9% for the week and the Nasdaq Composite closed the week up 0.8%. The Dow Jones Industrial Average finished the week 1.0% higher. Treasury yields were down modestly last week with the 10-year U.S. Treasury note ending the week down two basis points to 4.08% and the 2-year U.S. Treasury note down two basis points ending the week at 3.94%. The 2-year/10-year U.S. Treasury yield curve finished the week normally sloped by fourteen basis points. Gold finished the week 2.4% lower, ending the week at $2,722/ounce. West Texas Intermediate (WTI) crude oil was down by 8.2% for the week, ending the week at $67.36/barrel.
The third quarter earnings season for the S&P 500 is off to a positive start according to FactSet’s Earnings Insight. Thus far only 14% of the companies in the S&P 500 have reported actual results for third quarter 2024. The earnings growth rate for the third quarter is 3.4% today, compared to an earnings growth rate of 2.9% last week. If 3.4% is the actual growth rate for the quarter, it will mark the fifth consecutive quarter of year-over-year earnings growth for the S&P 500. However, it will also mark the lowest earnings growth rate reported by the index since second quarter 2023. Looking ahead, analysts expect year-over-year earnings growth rates of 14.0%, 13.8%, and 13.0% for fourth quarter 2024, first quarter 2025, and second quarter 2025, respectively. For full year 2024, analysts are calling for year-over-year earnings growth of 9.4% for the S&P 500 and for full year 2025, analysts are predicting year-over-year earnings growth of 15.1%.
It was a relatively quiet week on the domestic economic front, but investors did digest initial jobless claims for the week ending October 12 which decreased by 19,000 to 241,000 as well as continuing jobless claims for the week ending October 5 which increased by 9,000 to 1.867 million. The key takeaway from the reports is that they are muddled by the effects of the Florida hurricanes yet are being greeted with a sense of pleasant surprise that initial jobless and continuing claims were much better than feared, signaling a labor market which remains resilient. Additionally, September retail sales increased 0.4% month-over-month following an unrevised 0.1% increase in August. The key takeaway from the report is that consumer spending on goods accelerated in September with notable increases seen in many discretionary categories, suggesting that the biggest driver of the domestic economy, consumer spending, remains on solid footing.
In the week ahead, investors will digest earnings updates from Tesla, Amazon, Coca-Cola, T-Mobile, Verizon, AT&T, and Boeing. Several Federal Reserve speakers will deliver remarks, including Federal Reserve Governor Bowman, Dallas Fed President Logan, Kansas City Fed President Schmid, Minneapolis Fed President Kashkari, and Philadelphia Fed President Harker. Market participants will also get updates on the housing market, Purchasing Managers Index surveys for manufacturing and services, and consumer sentiment for October.
As always, we will be watching and reporting to you next week. Thank you.
