A Few Tricks, Plenty of Earnings Treats

Last Week

The tricks and treats on Wall Street are giving investors a spooky time, most recently coming from goblins in Muse costumes. Indeed, stocks traded higher through Wednesday, with SpaceX’s earnings fueling optimism. That rally proved short-lived as Meta’s strong earnings and robust start for its personal AI agent, Muse, were overshadowed by the significant capital raises needed to fund its growth. The damage to the broader market was modest, given continued weakness in the SOXX (iShares Semiconductor ETF), which fell another 4.7%, and the 8.9% decline in Meta shares. In fact, Small and MidCap indices finished green, while the S&P 500 and Nasdaq Composite slipped only 0.5% and 0.7%, respectively. The bond market rallied as the 10-year Treasury yield fell 11 basis points to 4.99%, while the Dollar was steady at its recent level, at the top of its trading range over the last 18 months. Gold fell below $4,000 an ounce, down almost 4%, while Crude Oil moved 1.8% higher. High energy prices have driven inflation expectations to multi-year highs and consumer sentiment to historic lows. There seems to be no progress in resolving the expanding conflicts in the Middle East or any of the other numerous geopolitical hotspots.

As far as treats go, corporate earnings are on track for 29.5% growth, marking the third consecutive quarter of earnings growth above 25% and the eighth consecutive quarter of double-digit earnings growth for the index. The growth is also broad-based, with ten of the eleven sectors reporting year-over-year earnings growth. Five of these sectors are reporting double-digit growth, led by Energy, Information Technology, Communication Services, and Materials, and only Health Care is reporting a year-over-year decline in earnings. As a result of strong earnings, the S&P 500’s forward 12-month P/E ratio is now 18.7, below its 5-year average of 19.8 and its 10-year average of 19.1. Put differently, earnings have grown faster than stock prices so far in 2026.

On the Chicago Sports Scene, the Bears treated their fans to another victory on Thursday night at Soldier Field against the New England Patriots.

This Week

Earnings season will be in full swing, with nearly 1/3 of all S&P 500 companies reporting third-quarter results, including index heavyweights Alphabet, Microsoft, and Amazon, as well as ExxonMobil and Chevron, the two biggest energy companies in the index.

On Wednesday, the Federal Open Market Committee will announce its monetary policy decision. Any change in the federal funds rate would shock the market.

On Thursday, the Bureau of Economic Analysis will release the September personal consumption expenditures price index. The trend hasn’t been our friend in these inflation reports, as energy prices have flowed into most goods and services.

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