Earnings update. So far, U.S. earnings season has been generally in line with expectations. With 75 S&P 500 Index companies having reported results, third quarter 2019 S&P 500 earnings are tracking to a more than 4% year-over-year decline, even though slightly more than 80% of reporting companies have exceeded forecasts. Estimates for the next 12 months have fallen 0.7% since September 30–consistent with recent quarterly trends–amid trade uncertainty, weak U.S. manufacturing data, and slowing international growth.
Brexit optimism. Stocks are up this morning as investors digest the latest headlines in discussions about the United Kingdom’s (U.K.) exit from the European Union (E.U.), also known as Brexit. Sentiment around Brexit discussions has turned optimistic once again on hopes that the U.K. Parliament will vote to accept the latest Brexit agreement. On October 19, Parliament voted to request another extension to the October 31 Brexit deadline instead of approving Prime Minister Boris Johnson’s previous version of a Brexit deal, which was approved by E.U. member states late last week. A “no deal” Brexit, which is the worst-case economic and market scenario, still looks unlikely.
Seasonal (tail)winds. October has been a bumpy road for stocks so far, but historically the fourth quarter has been the strongest period of the year for U.S. stocks. We still see long-term opportunity in U.S. stocks, especially as seasonal factors kick in. Today’s Weekly Market Commentary: Seasonal (Tail)Winds explains why we have confidence in the fourth quarter and U.S. stocks.
Another run at record highs. U.S. stocks gained last week and made another run at all-time highs. Global stocks nudged higher as well. U.S. fixed income trended sideways, and the U.S. dollar fell. For a review of all the major equity, fixed income, and commodity indexes, please see Friday’s Weekly Market Performance: Another Run at Record Highs.
The week ahead. The European Central Bank is slated to announce a policy decision October 24. Markit’s Purchasing Managers’ Index October data for several global regions and the September U.S. durable goods report are scheduled to be released October 24 as well. It’ll also be a busy week for earnings, as more than 130 S&P 500 companies are scheduled to report results.
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