Copyright brecorder
NEW YORK: The US stock rally confronts a potentially consequential week to keep its momentum heading into year-end, including a flood of corporate results headlined by megacap companies and a likely interest rate cut by the Federal Reserve after its two-day policy meeting. US-China trade tensions could come to a head in the coming days, while a persistent US government shutdown further unsettles the backdrop for investors. Stocks have weathered increased volatility this month, with the S&P 500 close to its all-time high, after a 35 percent climb since its low for the year in April. The benchmark index is up over 14 percent year-to-date. Given that the market has rallied for several months without a particularly significant decline, equities could remain choppy in the days ahead, said Chris Fasciano, chief market strategist at Commonwealth Financial Network. “What we need to see is continued earnings beats and corporate America talking positively about the economy,” Fasciano said. “When people start to get nervous, it’s when they see consumer confidence coming down, or business confidence coming down.” Third-quarter earnings season is off to a solid start overall, despite disappointments this week from companies such as streamer Netflix and chipmaker Texas Instruments . Including results from 130 companies that have reported, S&P 500 profits are estimated to have increased nearly 10 percent from a year ago, according to LSEG IBES data as of Thursday. So far, 86 percent of companies have topped analysts’ earnings estimates and 81 percent have beaten revenue estimates - both higher than historically typical rates. Next week is the busiest of the season, with over 170 companies expected to report. They include Microsoft, Apple, Alphabet, Amazon and Meta Platforms, five of the “Magnificent Seven,” a group of companies with huge market capitalizations whose shares dominate equity indexes and which overall have posted outsized profit growth over the past couple of years. Their profit edge over the rest of the index is narrowing, but the Magnificent Seven are still expected to post stronger results this period. Earnings for the group are expected to rise 16.6 percent against an 8.1 percent rise for the rest of the index, according to Tajinder Dhillon, senior research analyst at LSEG. A number of the megacap companies are also key players in the artificial intelligence industry, enthusiasm for which has been a main driver of stock market performance. “The factor that is probably going to have the most influence between now and the end of the year is going to be these big tech (reports),” said Anthony Saglimbene, chief market strategist at Ameriprise Financial. “The hurdle rate is very high for these companies coming into next week’s earnings.”
