This week, US equity investors are poised to direct their attention primarily toward the presidential election while maintaining a close watch on potential interest rate cuts by the Federal Reserve, alongside the release of various corporate earnings. The pivotal moments for the week are set for Tuesday, coinciding with the US election, and Thursday, which features a concentration of key central bank decisions both domestically and abroad, as highlighted in a recent note from Scotiabank. "The timing and impact of market reactions remain uncertain as the timeline for the US election results is unclear, not to mention the potential outcomes for the Presidency and both legislative chambers, alongside how campaign statements may evolve into actionable policies," remarked Derek Holt, head of capital market economics at Scotiabank, in the commentary that accompanied their analysis. In terms of monetary policy, the Federal Reserve's Open Market Committee is expected to implement a 25 basis point cut to the target interest rate.
“There is a near-unanimous consensus on this decision, particularly when we consider the sentiment from US primary dealers, including our own expectations,” noted Holt. On the earnings landscape, a significant lineup of quarterly reports is anticipated this week from notable companies such as Arm Holdings, Qualcomm, NXPI Semiconductors, Airbnb, CVS Health, Gilead Sciences, and Wynn Resorts. To date, nearly 70% of S&P 500 companies have disclosed their third-quarter results, with the earnings for the index reflecting a 5.7% increase year-over-year, surpassing the FactSet consensus estimate of a 4% gain by September 30, as reported by D.
A. Davidson. However, the Information Technology sector within the S&P 500 has fallen short of expectations, witnessing a 5.3% decline in earnings compared to projections that indicated a 15% growth, according to the note. It stated that 54% of companies in this sector have reported their earnings thus far. Currently, FactSet's blended earnings estimate for S&P 500 for Q3, which merges reported earnings with outstanding consensus estimates, suggests a 5% year-over-year increase, marking an upswing from the previous estimate of more than 3.5% last week.
This indicates that the remaining earnings reports are likely to reflect a moderate uptick as the reporting season progresses, as noted by D. A. Davidson..