Strong third quarter GDP data, which came in at an impressive +3.5%, caused some investors to fear that the Fed would raise rates sooner than expected (sound familiar?) – causing pre-market futures to fall slightly. But earning came to the rescue – today it was Visa’s (V) turn, which rallied more than 10%, contributing more than 150 points to the Dow’s 200 point rally. In spite of the sharp gains for the Dow, overall market action was a bit more muted, as only three stocks advanced for every two that declined. The S&P 500 gained nearly 2/3rd of a percent, as the energy sector was the sole loser on a continued decline in oil prices on the heels of a stronger dollar. Healthcare and Utilities sectors were the strongest, while technology shares generally underperformed as Microsoft (MSFT) and Intel (INTC) fell sharply.
As October comes to an end, it might be time for Market Bears to hibernate once again. Not only is history on the side of the Bulls, but more significantly, with over 80% of the S&P 500 constituents reporting earnings so far, and the average EPS growth coming in just over 10% for these so far, valuations are coming down rapidly – making stocks more attractive. As we’ve frequently and repeatedly stated, corporate earnings are the long-term driver of market returns. With the potential of strong earnings growth in the fourth quarter as well as an improving outlook for 2015, more market gains could lie ahead. One area of concern, at least in the short-term, are commodity-price sensitive companies. Most evidently, this is being seen by the earnings misses by Starbucks, Hershey and Craft, as well as some of the Energy related companies such as Oil and Gas & Exploration companies. None-the-less, the overall outlook is reasonably constructive for patient investors.
Next Week’s Market Moving Events:
- Monday: French and German PMI Manufacturing data, US PMI Manufacturing data, ISM Manufacturing data, Construction Spending, PMI Manufacturing
- Tuesday: Goldman Same Store Sales, Factory orders, and the Redbook report
- Wednesday: Mortgage Applications, Job Creation report, ADP Unemployment report, PMI Services and ISM Non-Manufacturing data.
- Thursday: US Productivity and Consumer Comfort data
- Friday: Eurozone Industrial Production data and US Unemployment report
Don’t miss Money Matters with Gary Goldberg this Saturday at 5:00 PM and Sunday at 11:00 AM on WOR 710 AM Radio to hear our latest economic analysis and market commentary, as well as a great interview with Callista Gingrich. Visit our website www.ggfs.com for details.