°¿±¹±ð°ù±¹¾±±ð·É:ÌýGlobal stocks moved higher last week, building on the prior week’s strong momentum. In the U.S., the S&P 500 rose more than 1% while the technology-heavy Nasdaq index rallied more than 2%. In bonds, shifts in the interest-rate outlook paired with disagreement in Washington continued to drive interest rate volatility. On Friday, Moody’s Investors Services lowered its U.S. credit rating outlook from stable to negative, citing fiscal deficits and political division as key factors. This comes amid a resurging threat of a U.S. government shutdown. Currently, the government is funded through to Nov. 17, but lawmakers remain divided over a financing bill past that deadline. Looking ahead, Tuesday will bring the widely followed CPI inflation report. Consensus expectations are for headline inflation to have risen 3.3% year-over-year, a sharp decline from last month’s reading of 3.7% amid lower oil prices. Core CPI, which is more closely followed by the Federal Reserve, is expected to remain unchanged at 4.1% on a year-over-year basis. Just last week, Fed Reserve Chair Jerome Powell said inflation still is too high and reiterated the central bank’s focus on bringing inflation back to 2%. Still, futures markets are only pricing in about a 15% probability of any further rate hikes this cycle. Separately, Wednesday will give investors a look at retail sales data, which are expected to post a decline of around 0.3% for October following a strong gain of 0.7% in September.Ìý
Update on EarningsÌý(from JP Morgan):ÌýWith almost 90% of market cap having reported, S&P 500 operating earnings are on track to finish 3Q23 up 4.5% y/y. While results have fared well this quarter, we are beginning to see a slowdown on a sequential basis. We currently are tracking a q/q operating EPS decline of 3.8%, with many companies also downgrading guidance for 4Q23 and 2024. At the moment, the weaker-than-expected guidance falls in line with our view of 2024 earnings expectations as being overly optimistic. The current consensus estimate is for operating EPS to grow ~12% in 2024; we see operating EPS growing in the low-single digits, with the possibility of further downside dependent on economic activity and the dynamic between revenues and costs. On the latter, the latest NFIB survey results and the October Jobs Reports have provided a timely update. So far this year, revenues have held up decently, as net pricing plans have increased on the back of strong consumption. With that being said, net sales expectations remain negative, perhaps suggesting we are beginning to see demand destruction. Turning to costs, since peaking in 2021, net compensation and hiring plans have declined notably and suggest a moderation in labor market strength. This was reiterated in the October jobs report, as nonfarm payrolls came in below expectations and average hourly earnings growth decelerated. Nevertheless, the October NFIB jobs survey also indicated a high 43% of firms still are reporting they are unable to fill positions and could pose upside risk to the cooling we expect to see in wage growth; but, at the moment, this has not materialized. Labor market data over the coming months will be key, as they will help determine, in part, the path for earnings ahead.
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Sources: JP Morgan Asset Management, Goldman Sachs Asset Management, Barron’s, Bloomberg, CNBC
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