Medicare Agent News: The Heart of Earnings Season

Wednesday, October 26, 2022

The Heart of Earnings Season

By Connor Smith | Friday, October 21

Some Relief. With a key stretch of earnings season approaching, stocks today capped off their best week since June.

The Dow Jones Industrial Average rose 2.5% today to bring this week's gains to 4.9%. The Dow has risen for three consecutive weeks for a total gain of 8.2%. That's the Dow's best three-week stretch since the one that ended on Nov. 20, 2020.

The S&P 500 rose 2.4% and 4.7% on the week. It's up for two of the past three weeks. As is the Nasdaq Composite, which rose 2.3% and 5.2% on the day and the week, respectively.

Some 72% of the S&P 500 companies reporting third-quarter earnings thus far have beaten Wall Street's expectations, according to FactSet. Those companies have beaten earnings estimates by 2.3% in aggregate. That's below a five-year average of 8.7%, according to FactSet senior earnings analyst John Butters.

Butters notes that the blended net profit margin for the S&P 500 for the third quarter of 2022 is 12%, which is below the second-quarter's net profit margin.

"If 12.0% is the actual net profit margin for the quarter, it will mark the fifth straight quarter in which the net profit margin for the index has declined quarter-over-quarter," Butters writes. "On the other hand, it will also mark the 7th consecutive quarter that the net profit margin has been 12% or higher."

Investors continued to watch inflation and the Federal Reserve's efforts to rein in prices. The Wall Street Journal's Nick Timiraos wrote that the Fed is likely to raise interest rates by three-quarters of a point at its next meeting. That's significant because, as Barron's Ben Levisohn points out, Timiraos is known on Wall Street as the Fed Whisperer. Ben writes:

Still, the stock market rallied after the article was published, and that was because Timiraos reported that the Fed governors were in the process of deciding whether to aim for a smaller hike in December, and how to communicate that to the market if that’s what they decide to do. Chances of a 0.75 percentage point rate hike in December have fallen to 50.5%, down from 75.4% on Thursday, while chances of a 0.5 point hike have increased to 47.4%, from 24.2% yesterday.

“Here is the first white flag from the Fed,” writes NatAlliance Securities’ Andrew Brenner.

Ben notes that investors have been hoping for a pivot from the Fed. In the meantime, the market is bracing for the true earnings season test to come next week. Stocks will face the heart of the third-quarter reporting season with Big Tech firms and other corporate behemoths set to deliver results.

Watch our weekly TV show on Fox Business Saturday or Sunday at 10 a.m. or 11:30 a.m. ET. This week, insights on the market outlook from Stifel CEO Ronald Kruszewski, plus, a look at what’s ahead for Tesla and the chip sector.