Soft stock market action across the pond in Europe, following
a downgrade of the region's growth outlook by the European
Commission, will likely weigh on U.S. market sentiment at the
open. But investors will take their cue from the service sector
ISM reading coming out a little later. Investors will be trying
to find through the ISM reading the answer to the only question
that's on everyone's mind, the timing of the Fed's Taper
The key economic reports this week include the Q3 GDP report
on Thursday and Friday's government jobs report, but today's
non-manufacturing ISM report will give us a good sense of the
economy's underlying momentum, particularly following last week's
surprisingly strong factory sector ISM report.
The stronger service-sector showing today - the consensus
expectation is for the index to come in modestly below the
prior-month's level - will feed into the December Taper narrative
that has slowly been gaining ground lately. With the Q3 earnings
season slowly winding down, the timing of the Taper announcement
is becoming the sole issue for the market in these final months
of the year.
On the earnings front, we got solid results this morning from
) will report after the close today. Including the results from
CVS and others this morning, we now have Q3 results from 400
S&P 500 members or 80% of the index's total
Total earnings for these 400 companies are up +4.6%, with
67.3% coming ahead of consensus earnings expectations. Total
revenues are up +2.9% and 50.1% are beating top-line
expectations. The composite earnings growth rate for Q3,
combining the results for the 400 companies that have reported
with the 100 still to come, is +4.4%, up from +3.6% in Q2.
The Q3 earnings season has turned out to be better not only
relative to lowered pre-season expectations, but also relative to
the first two quarters of the year. Growth remains anemic,
however, and most companies are still guiding lower, prompting
estimates for Q4 to come down.
But we remain on track to achieve a new quarterly record for
total earnings in Q3, and the quarter's earnings growth rate will
likely be the best thus far this year. Investors seem to
satisfied with this performance, holding out hopes for better
growth in the coming quarters.
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