Consistently Better
Wall Street saw a sharp downturn on Friday, as investors assessed Fed Powell's remarks.
The S&P 500 dropped 1.4%, while the Dow fell by 350 points and the Nasdaq dropped 2.4%.
Retail sales exceeded forecasts in October, rising 0.4%.
The technology sector saw significant losses, with major companies like Nvidia, Amazon, Meta, and Alphabet falling over 2%.
The pharmaceutical sector also faced pressure due to news that Trump may appoint vaccine skeptic Robert F Kennedy.
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The economy is maintaining above average growth and the Federal Reserve is lowering interest rates.
Better growth with lower interest rates is constructive for equity values.
S&P 500 earnings in the third quarter were up 8% year-on-year. Consensus expectations were for 3% growth, whilst actual earnings have been consistently better than expected over the past year.
With 89% of S&P 500 companies having reported, 71% beat 3Q earnings estimates. Roughly 49% of companies beat both earnings and revenue projections.
2024 full-year earnings growth is now expected to be up 13% versus 2023.
2025 earnings are expected to advance by 10% over 2024.
The Magnificent 7 (Apple, Amazon, Google, Meta, Microsoft, Nvidia, Tesla) carried the load when it comes to earnings growth. For 2024, the Magnificent 7 are expected to grow earnings 33% year-over-year.
The remaining 493 companies have combined earnings growth of 3%. In 2025 and 2026, the earnings growth rate of the 493 are expected to be up 12% and 11%, respectively. A broadening out of earnings growth may help provide the next leg higher in this bullish run.
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