Thursday, October 31, 2013
The stock market today will reflect further follow-through from
the Fed's Wednesday statement that many perceived to be relatively
on the hawkish side. The market may not pay much attention to the
weekly Jobless Claims numbers, but it has more Q3 earnings reports
to digest, with further follow through to last evening's
) results and a busy docket of releases this morning.
There wasn't anything overtly hawkish about the Fed statement as
they effectively maintained their existing policy. But the market
appeared to be surprised by the central bank's positive economic
outlook, which was interpreted to mean that Taper could start as
early as at the December meeting.
The market had started pricing no Taper at least through April
2014, but the Wednesday statement appeared to run counter to that
outlook. This incremental source of uncertainty will likely figure
prominently in the market, with economic data tainted by the
shutdown and the earnings season slowly winding down.
On the earnings front, Facebook shares will be in the spotlight
after the company's blowout numbers after the close on Wednesday.
The stock quickly gave up its initial gains after the CFO announced
on the earnings call that U.S. teens were spending less time on the
site and that the share of ads in users' news feeds may have
already maxed out. While the company still has a number of untapped
opportunities for incremental ad dollars, these disclosures do
create fresh doubts in the minds of investors.
Including this morning's reports from
) and others, we now have Q3 results from 343 S&P 500 members
that combined account for account for 72.2% of the index's total
market capitalization. Total earnings for these 343 companies are
up +5.7%, with 67.9% coming ahead of consensus earnings
expectations. Total revenues are up +3.3%, and 50.7% are beating
This is better performance than what this same group of companies
reported in recent quarters, with the growth pick up outside of the
Finance sector accounting for all of the variance. The growth rate
has notably picked up for the Technology sector relative to what we
have been seeing in recent quarters, though the growth pace in
other sectors like Transportation, Basic Materials has also
Despite the negative comparisons at sector leader
), total earnings for the Technology sector are currently up +5.1%
from the same period last year, which compares to an earnings
decline of -11.6% in Q2 and the 4-quarter average earnings decline
of -3.4% for the sector companies that have reported already.
The composite earnings and revenue growth rates for Q3, combining
the results for the 343 companies that have reported with the 157
still to come, are +4.1% and +2.2%, respectively. This puts Q3's
earnings growth rate on track to be better than what we saw in the
first two quarters of 2013.
Expectations for 2013 Q4 have started coming down, but they likely
still have plenty of room for coming down, with total earnings for
the S&P 500 expected to be up +8.4%, down from +9.1% last week
and higher than +10% at the start of the reporting season.
APPLE INC (AAPL): Free Stock Analysis Report
CONOCOPHILLIPS (COP): Free Stock Analysis
FACEBOOK INC-A (FB): Free Stock Analysis Report
MASTERCARD INC (MA): Free Stock Analysis Report
EXXON MOBIL CRP (XOM): Free Stock Analysis
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Director of Research