Dow Jones, Nasdaq, S&P 500 weekly preview: Fed sparks a massive rally
Stocks surged aggressively last week as investor bets rose that rates have peaked in the aftermath of the FOMC’s decision to leave rates unchanged. Moreover, the labor market data cooled, signaling the Fed is done hiking.
The S&P 500 (SPX) added 5.9% to mark its best week of the year. Dow Jones Industrial Average (DJI) rose 5.1% while the tech-heavy Nasdaq Composite Index (IXIC) jumped 6.6%.
“The FOMC held steady, shrugging off strong data on the pretext of tightened financial conditions. But this dovish turn may have backfired, with financial conditions easing significantly this week amid some softer data. We retain our view that data momentum will force another hike, though we push back the timing to January,” analysts at Barclays said.
On the earnings front, about 80% of the S&P 500 companies have reported so far. Earnings have come better than expected, although forward guidance has been underwhelming.
On the economic data front, the Michigan confidence survey for November is out later this week. Fed Chair Jerome Powell will be speaking twice this week. Other Fed officials are on the speaker calendar too.
Earnings take backstage as Fed steals the show
According to FactSet’s data, 82% of S&P 500 companies have reported a positive EPS surprise and 62% of S&P 500 companies have reported a positive revenue surprise.
“3Q23 S&P500 EPS has come in ~7% above consensus to date, mostly on margin strength as sales beats are below recent quarterly trend. Despite 80% of firms beating EPS, guidance trends have disappointed and point to a cautious Q4,” analysts at Wells Fargo wrote in a note to clients.
For Q4 2023, 48 S&P 500 companies have issued negative EPS guidance and 27 S&P 500 companies have issued positive EPS guidance.
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