Rally Week/Earnings Update – Monday Morning Market Memo – October 24, 2022

Rally Week/Earnings Update – Monday Morning Market Memo – October 24, 2022

The three major stock market averages all rose sharply Friday, with each index gaining over 2% and the Dow rising nearly 750 points, as investors were enthused by reports in the financial media, along with commentary by San Francisco Fed President Mary Daly, suggesting the Federal Reserve may begin to decelerate the pace of rate hikes later this year.  While the financial markets are clearly expecting a three-quarters of a percentage point hike in November, expectations for a 3/4% rate hike in December have lessened – and are now below 50% according to the CME FedWatch Tool.

Friday’s gains added to the weekly advance, in which the Dow Jones Industrial Average rose 4.9% to 31,083 – the NASDAQ Composite jumped 5.2% to 10,860 – and the Standard & Poor’s 500 Index gained 4.7% to 3,753.  It was the best week for the market averages since June (according to Dow Jones Market Data).

Also supporting the market last week is an earnings season that we would describe as so far-so good, better-than-expected, or perhaps the best description, is better-than-feared.  Positive surprises came from notable companies including Bank of AmericaIBMNetflix, AT&T, and Procter & Gamble.  Looking at earnings season in total so far:  For the third quarter of 2022 (with 20% of S&P 500 companies reporting actual results), 72% of S&P 500 companies have reported a positive EPS (earning per share) surprise and 70% have reported a positive revenue surprise – according to data from FactSet.

The week ahead is going to be packed with earnings reports, as we gear up for the busiest week of earnings season, with about 1/3rd of S&P 500 companies scheduled to report.  Large cap technology names reporting include AppleMicrosoftAmazonAlphabet, and Meta Platforms – so we’ll get a strong indication as to whether earnings season remains so far, so good.

As always, please contact us with any questions you may have or if you would like to set up a meeting.

All the best – Southport Station Financial Management, LLC