U.S. equity investors are gearing up for a pivotal week with a spotlight on the presidential election and a keen eye on potential interest rate cuts by the Federal Reserve, accompanied by corporate earnings reports. Tuesday marks the U.S. election, while Thursday will see a concentration of central bank decisions, both in the U.S.
and globally. This dynamic scenario poses questions about which influences the markets first, particularly as the timeline for election results remains uncertain and the implications of campaign rhetoric on future policy become paramount. Derek Holt, head of capital market economics at Scotiabank, emphasizes the unpredictability of the election outcomes and their direct consequences on market behavior. In the realm of monetary policy, the Federal Reserve's Open Market Committee is widely expected to implement a reduction in the target interest rate by 25 basis points.
Holt notes, "Consensus is almost unanimous, especially when looking at expectations among U.S. primary dealers, including our firm." On the corporate landscape, several headline quarterly earnings reports are anticipated this week, featuring firms such as Arm Holdings, Qualcomm, NXPI Semiconductors, Airbnb, CVS Health, Gilead Sciences, and Wynn Resorts.
With approximately 70% of the S&P 500’s component companies reporting their Q3 earnings, there has been a noted increase of 5.7% year-over-year in index earnings, surpassing the FactSet consensus forecast of 4%, as noted by D.A. Davidson. However, the Information Technology segment within the S&P 500 has notably fallen short of expectations, experiencing a 5.3% decline in earnings against projections of 15% growth.
Currently, 54% of companies have released their earnings results, indicating a robust reporting season overall. FactSet's blended earnings estimate for the S&P 500, which merges reported figures with outstanding consensus estimates, suggests an annual increase of 5% in earnings, a notable rise from last week's projection of over 3.5%.
This suggests that the remaining earnings results will likely trend slightly higher from previous expectations, according to insights from D.A. Davidson..