S&P 500 Index Nears Record High amid Earnings Season

The S&P 500 Index (SPX), represented by the SPDR S&P 500 ETF (SPY), rose 0.3% on October 23, nearing the all-time high it saw in July. Month-to-date, it’s up about 1.0%.

The S&P 500 Index is nearing a record high amid the current earnings season. According to a MarketWatch report, 98 companies in the S&P 500 have reported their earnings so far. A total of 83% of them have surpassed their earnings estimates for the quarter.

These better-than-expected performances have bought on optimism, as investors had been expecting weak numbers. They based their estimates on the fact that business conditions have been clouded by trade tensions and slowing economic growth. As companies topped earnings expectations, markets reacted positively. Optimism regarding trade talks is also supporting the market.

As per MarketWatch, Kate Warne, principal investment strategist with Edward Jones, said, “In an environment of job growth, ultra-low interest rates and central-bank stimulus, this is actually an okay environment and one in which you need to be putting money into stocks because they can continue to go higher.”

The Dow Jones Industrial Average (DJIA), represented by the SPDR Dow Jones Industrial Average ETF (DIA), rose 0.2% on October 23. The Nasdaq Composite Index (COMP) rose 0.2% on the same day.

On October 23, Caterpillar (CAT) and Boeing (BA) rose despite earnings misses.

Heavy machinery manufacturer Caterpillar fell short of Wall Street’s estimate on revenue as well as earnings. The company also reduced its EPS guidance for the year, which saw its stock plunge about 6% in premarket trading on October 23. To learn more, read Caterpillar: Lower Q3 Results, Earnings Guidance Fell. Later, CAT bounced back, closing the day with a rise of 1.2%.

Boeing also sharply missed its earnings estimate and saw a huge slide in profits. But its plans for the 737 MAX’s return lifted its stock, which rose 1.0% on the day. To learn more, read Boeing in Q3: EPS Falls, 737 MAX Return Reaffirmed.

However, Texas Instruments (TXN), a significant player in the microchip industry, fell 7.5% on lower guidance. The company’s revenue also fell short of analysts’ estimates.

After the market closed on October 23, eBay (EBAY), Ford Motor Company (F), Tesla (TSLA), and Microsoft (MSFT) reported their earnings results. eBay stock fell after hours on lower-than-expected guidance for its fourth-quarter revenue. Ford stock slid after hours on lower earnings guidance for the year’s end. However, the company topped its earnings estimate for the third quarter. Microsoft stock fell despite its earnings and revenue beat. The company also lowered its revenue guidance.

Among these companies, Tesla stock was the standout. Tesla reported a surprise profit compared to an expected loss. This result sent the stock soaring 20% in after-hours trading on October 23. The company’s return to profitability was viewed positively, even by Wall Street analysts. JPMorgan, RBC, and Credit Suisse raised their price targets on the stock. Tesla saw record deliveries in the quarter.

This week, the companies to watch include Amazon (AMZN), Comcast (CMCSA), Cerner (CERN), Baxter International (BAX), Intel (INTL), Visa (V), and Southwest Airlines (LUV). Verizon (VZ) and Charter Communications (CHTR) are also expected to report their earnings results on October 25.

For Amazon, which reported lower-than-expected earnings in the previous quarter, all eyes are on its guidance. To learn more, read Amazon’s Q3 Earnings: Should Retailers Worry? To understand how Comcast is expected to perform, read Is Comcast Stock a ‘Buy’ before Q3 Earnings? For a look at what’s expected of Intel, read Intel Earnings: Q3 Expectations Both High and Low.

A series of macroeconomic data is slated for release in the latter part of the week. Markets will be watching for weekly jobless claims and durable goods and capex orders. The Markit manufacturing and services PMIs (purchasing managers’ index) are also scheduled for release in the week. New home sales data and consumer sentiments will also influence the S&P 500 and the Dow.

Markets will also be watching for developments on Brexit. Recently, an EU lawmaker didn’t support British Prime Minister Boris Johnson’s plan to speed up the United Kingdom’s exit from the European Union.