Next week’s earnings will be the deciding factor in where the stock goes from here. There will be a significant jump in the number of companies preparing to report third-quarter results in the coming days. While about a tenth of S&P 500 companies reported in the past week, about 20% of the broader index plans to report next week. Among the more notable names will be Amazon and Tesla, which will serve as precursors to a series of large-cap results due out next week. .SPX 5D Mountain S&P 500 5-Day With the macroeconomic calendar shining on key catalysts next week, as well as predictions of a general lull ahead of next month’s US presidential election, Earnings results will be a key factor in determining whether the stock, which is trading near all-time highs, can still move higher. According to Sam Stovall, chief investment strategist at CFRA Research, valuations are stretched. He noted that the S&P 500 is trading at a 40% premium to its long-term P/E ratio, while tech stocks are trading at a 60% premium. “We need better-than-expected earnings to help justify investor enthusiasm,” Stovall said. Wall Street recently decided to take risks. The major averages on Friday were headed for a sixth straight week of gains. For the Dow Jones Industrial Average and S&P 500, it would be the first winning streak since December 2023. For the Nasdaq Composite, it would be the first winning streak since July. Low for Beats growth expectations Earnings for this season have been lower than in the past. While that means any disappointment could weigh on investor sentiment, potentially leading to a drain on stock profits, it also means companies have a chance to better opportunity to achieve the best expectations. FactSet’s John Butters notes that S&P 500 companies in the third quarter are expected to post earnings growth of just 4.1% — down from the 4.4% estimate in September and also weaker than the pace. Double-digit levels were recorded in the previous reporting season. lower than the 12.5% growth expected in the fourth quarter. Likewise, Butters noted that S&P 500 earnings growth will likely be above 7% in the third quarter, based on the positive surprises of companies. “If things have gone pretty well in previous reporting periods,” Stovall said. “There’s no reason why this time it won’t work.” Signs of expansion next week will bring notable results from Amazon, expected to release earnings on Thursday, and Tesla, confirmed to release on Wednesday, both of which may serves as a precursor to next week’s big week in megacap tech earnings. Amazon, in particular, could serve as a flagship for the broader consumer discretionary sector. But investors will get plenty of reports from companies across a variety of industries, including aerospace and defense companies like Lockheed Martin and GE Aerospace, as well as blue-chip giants. like International Business Machines. General Motors, Verizon Communications, United Parcel Services and Southwest Airlines are among the other companies preparing to report. If those earnings results continue to surprise on the upside, that could add credence to the recent signs of market expansion that have been shown – despite Nvidia and other semiconductors still continues to work well. The small-cap Russell 2000 is up nearly 2% this week, bettering the S&P 500’s 0.8% gain. Meanwhile, the equally weighted S&P 500 index is up slightly against the market-cap benchmark this week, a bullish signal for sectors like healthcare. “We think actually what you saw in the third quarter was an expansion of what was working,” said Nelson Yu, head of equities at AllianceBernstein. “And we think that will continue.” Week Ahead Calendar All Times ET. Monday, October 21, 10 a.m. Leading Indexes (September) Tuesday, October 22, 10 a.m. Philadelphia Reserve Bank President Harker speaks at Ten Independence Mall, Philadelphia Wednesday , October 23, 10 a.m. Existing Home Sales (September) 10 a.m. Fed Beige Book Thursday, October 24 8 a.m. Final Building Permits (September) 8: 30 a.m. Chicago Fed National Activity Index (September) 8:30 a.m. Jobless Claims Continued (Oct. 12) 8:30 a.m. Initial Claims (Oct. 19) 9:45 a.m. Preliminary Totals Compound PMI (Oct) 9:45 a.m. S&P PMI Manufacturing Prelim (Oct) 9:45 a.m. S&P PMI Services Prelim (Oct) 10 a.m. New Home Sales (Oct) 9) 11 a.m. Kansas City Fed Manufacturing Index (October) Friday, October 11. 25 8:30 a.m. Preliminary Durable Goods Orders (September)
