Investors in US equities are turning their attention to the robust rally initiated by the recent presidential election, while also monitoring Federal Reserve Chair Jerome Powell's upcoming speech in light of the latest inflation data this week. US equity indexes experienced a notable increase last week, buoyed by a clear outcome in the presidential elections alongside the Federal Reserve's continued easing of monetary policy.
Both the S&P 500 and the Dow Jones Industrial Average achieved another record high during intraday trading on Friday. The discussions emerging from the camp of President-Elect Donald Trump regarding pivotal policies, including tariffs and tax cuts, will be scrutinized as investors seek to gauge their potential effects on the markets.
Moreover, the key appointments to the new administration by the former president are factors that will attract significant investor attention. With over 90% of S&P 500 companies having reported their Q3 results, the index's earnings have recorded a 4.1% year-over-year increase, surpassing the FactSet consensus of a 3.9% gain as of September 30, according to a note from D A Davidson issued on Friday.
The Communication Services sector has exhibited outstanding performance, boasting an earnings growth of 23%, significantly higher than the estimated 9.4% growth, with 91% of the sector’s companies having reported their earnings. In contrast, the Information Technology sector is lagging behind expectations, showing a decline of 3.5% in earnings as opposed to the projected growth of nearly 15%, with 75% of its companies having reported their figures. Looking ahead, another Consumer Price Index reading for October, set to be released on Wednesday, is expected to provide insights but may not be particularly revealing for the Federal Open Market Committee, as noted by Scotiabank late on Friday.
This report marks one of three inflation readings before the next FOMC decision scheduled for December 18. Additional CPI data will follow on December 11, along with a personal consumption expenditures price index, which is the Fed’s preferred measure of inflation, coming out on November 27. During a press briefing last Thursday, Powell addressed a question by stating that it is "not permitted under the law" for presidents to dismiss members of the independent central bank.
This week, Powell is also set to give a speech on Thursday, which is anticipated to attract widespread attention from market participants. The trend in key indices like the $US30 and $US500 continues to offer insights into investor behavior and market sentiment as these entities navigate potential policy shifts and economic indicators..