Market Commentary
Stocks began the week taking a breather after 2024’s longest weekly rally, while Fixed Income faced renewed pressure. This comes as markets scaled back expectations for aggressive rate cuts, with the looming government debt debate weighing on bond investors’ minds.
Nearly 20% of S&P 500 companies are set to report earnings this week. According to Factset, the “Magnificent 7” names are projected to post year-over-year earnings growth of 18.1% for Q3. Excluding these seven companies, the blended earnings growth rate for the remaining S&P 500 firms is a modest 0.1%. Overall, the blended earnings growth rate for the full S&P 500 stands at 3.4% for the third quarter. Notably, companies exceeding Q3 earnings or revenue expectations have seen an average one-day excess return of 2.1%, 2.3%, and 2.6% — more than double the long-term averages for entire earnings seasons. Meanwhile, earnings misses have led to sharper selloffs of 3.8%, 2%, and 3.7%, respectively.
This week is also filled with a flurry of Fed speeches, and investors will be closely watching for any shifts in the outlook on rate cuts in the coming months. Volatility remains elevated, driven by upcoming U.S. elections just two weeks away, heightened geopolitical tensions between Israel and Iran, and technically overbought risk-on markets. The elevated volatility index indicates investors are slightly hedging against potential negative shocks in these areas.
Newton models last week recommended rotating back to domestic markets over international ones, a theme that persists this week. Energy, once a bright spot just a few weeks ago, now ranks as the worst-performing sector and the only one with a score below 12. Leading the pack are Financials, Consumer Discretionary, and Industrials.
Economic Releases This Week
Monday: US Leading Economic Indicators, Dallas/Minneapolis/Kansas City/San Francisco Fed President’s Speak.
Tuesday: Philadelphia Fed President Harker Speaks
Wednesday: Fed Governor Bowman Speaks, Existing Home Sales, Fed Beige Book
Thursday: Initial Jobless Claims, S&P Flash Manufacturing & Services PMI, New Home Sales
Friday: Durable Goods, Consumer Sentiment
Stories to Start the Week
Some progress has been made in establishing power throughout Cuba, but most of the island remained in the dark after the electrical grid collapsed.
Boeing and its machinists’ union have reached a new contract proposal that could end a more than monthlong strike.
The New York Liberty survived OT to win their first WNBA title.
Disney has tapped James Gorman to replace Mark Parker as the company’s next chairman. The company will name a successor for CEO Bob Iger in early 2026.
What is Newton?
Our Newton model attempts to determine the highest probability of future price direction by using advanced algorithmic and high-order mathematical techniques on the current market environment to identify trends in underlying security prices. The Newton model scores securities over multiple time periods on a scale of 0-20 with 0 being the worst and 20 being the best possible score.
Trend & level both matter. For example, a name that moves from an 18 to a 16 would signal a strong level yet slight exhaustion in the trend.
Technical trading models are mathematically driven based upon historical data and trends of domestic and foreign market trading activity, including various industry and sector trading statistics within such markets. Technical trading models, through mathematical algorithms, attempt to identify when markets are likely to increase or decrease and identify appropriate entry and exit points. The primary risk of technical trading models is that historical trends and past performance cannot predict future trends and there is no assurance that the mathematical algorithms employed are designed properly, updated with new data, and can accurately predict future market, industry and sector performance.