The major stock market averages all rose for a second consecutive week, an indication the Bull Market is intact, after a bit of a downturn/rest in December. The Standard & Poor’s 500 Index and NASDAQ Composite each rose about 1.7% last week, to 6,101 and 19,954, respectively, while the Dow Jones Industrial Average climbed 2.2% to 44,424. Along with hitting new intraday record highs last week, the S&P 500 notched a fresh all-time closing high last Thursday.
The stock market was lifted by continued optimism, on balance, regarding hopes for pro-business policies by the new administration, along with fourth quarter Earnings Season getting off to a strong start. Both the percentage of S&P 500 companies reporting positive earnings surprises, and the magnitude of earnings surprises are above their 10-year averages, according to FactSet Research Systems.
In total, investors are expecting strong results this earnings season. For the fourth quarter of 2024, the blended (year-over-year) earnings growth rate for the S&P 500 is 12.7%, if this is the actual growth rate for the quarter, it will mark the highest (year-over-year) earnings growth rate reported by the index since the fourth quarter of 2021 – also according to FactSet.
Earnings Season kicks into high gear this week, with mega technology names front and center as four of the Magnificent Seven – Meta Platforms, Microsoft, Tesla, and Apple – are scheduled to report quarterly numbers. Other companies reporting this week include AT&T, Lockheed Martin, Boeing, RTX, General Dynamics, General Motors, International Business Machines, Intel, United Parcel Service, Caterpillar, Mastercard, Starbucks, Visa, Valero Energy, Chevron, and ExxonMobil. In addition to a busy week of earnings, investors will also digest a Federal Reserve policy meeting.
Financial Markets are placing a more than 99% probability the Federal Reserve will keep interest rates unchanged when they announce their policy decision Wednesday afternoon, according to CME FedWatch. With the economy and employment picture currently in good condition, and inflation still above their 2% target level, the Federal Reserve is in a holding pattern. Overall, traders are currently predicting the first Fed rate cut of the year will come in June. Of course, there is a lot of time between now and then, and that forecast can, and likely will, change.
This week wraps up with a fresh reading on the Federal Reserve’s preferred inflation measure when the U.S. Bureau of Economic Analysis releases the Personal Consumption Expenditures Price Index Friday morning. The consensus estimate is for a 2.5% year-over-year increase, a notch higher than the prior reading. The core PCE, which excludes food and energy, is seen increasing 2.8 percent.
As always, don’t hesitate to contact us with any questions you may have, or if you would like to schedule a meeting.
All the best – Southport Station Financial Management, LLC