Light macro week, but heavy 3Q24 EPS season. 112 cos report (>20% index) with 25 being Industrials. Stay on target.

VIDEO: We are entering the “heart” of earning season with 112 cos reporting this week, or >20% of S&P 500.  So far, this has been a good quality 3Q24 EPS season.

Please click below to view our Macro Minute (duration: 5:03).

We are entering the “heart” of 3Q24 EPS season this week, with 112 S&P 500 set to report, or >20% of the index. There are little major macro events this week, so the same macro issues linger (war, election, jobs).

• This week, 25 of the 112 reports are Industrials (last week was financials) so this is probably the market’s focus. Industrials broadly. And the largest company to report this week is Tesla TSLA 3.28%  on Wed (after the close).
• We have the summary of key earnings from EarningsWhispers.com below but the key highlights are:
  – Monday: – Technology & Materials: SAP -0.26% , NUE 0.09%
  – Tuesday: – Communications & Industrials: VZ -1.08% , GM -1.29% , GE -0.36% – Diversified: MMM -1.48% – Aerospace & Defense: RTX 0.42% , LMT -0.55% – Mining: FCX -0.49% – Energy & Semiconductors: PM -2.21% , ENPH 3.27% , TXN 0.15%
  – Wednesday: – Automotive & Tech: TSLA 3.28% , IBM -1.66% – Semiconductors & Services: LRCX 1.36% , NOW -0.60% – Aerospace & Consumer Goods: BA -0.13% , KO -0.53% – Telecom & Financials: T -1.62% , VRT 1.97% – Mining: NEM -1.71%
  – Thursday: – Airlines: AAL 2.82% , LUV 1.14% – Shipping & Industrials: UPS -0.90% , HON -0.52% – Apparel & Tech: DECK 9.94% – Data Storage & Medical Devices: WDC 4.43% , DXCM -1.75%
  – Friday: – Banking & Energy: NYCB -7.83% – Consumer Products: CL -4.14%
• This remains a solid earnings season so far with 81% beating and the overall EPS delivered coming 6% above consensus. This is impressive but only 72 cos so far (14%), but still a strong start. And as we noted previously, the key is “real revenue” growth (post inflation) is accelerating to 2%, meaning that the quality of growth is rising.
• As for macro, this is not a heavy week:
  – 10/23 Wed 10:00 AM ET: Sep Existing Home Sales    3.9me    
  – 10/23 Wed 2:00 PM ET:  Fed Releases Beige Book
  – 10/24 Thu 8:30 AM ET: Sep Chicago Fed Nat Activity Index
  – 10/24 Thu 9:45 AM ET: Oct P S&P Global Manufacturing PMI    47.5e
  – 10/24 Thu 9:45 AM ET: Oct P S&P Global Services PMI    55.0e
  – 10/24 Thu 10:00 AM ET: Sep New Home Sales    720ke
  – 10/25 Fri 8:30 AM ET: Sep P Durable Goods Orders   -1.0%e
  – 10/25 Fri 10:00 AM ET: Oct F U. Mich. 1yr Inf Exp
• Of these, we are most closely watching new home sales (+720k) because this is the data most sensitive to Fed easing.
• There is not a ton of Fed speak, and Powell is not speaking:
  – 10/21 Mon 8:55 AM ET:  Logan Speaks at SIFMA Annual Meeting
  – 10/21 Mon 1:00 PM ET:  Kashkari Participates in Townhall Event
  – 10/21 Mon 5:05 PM ET:  Schmid Speaks on Economic and Monetary Policy Outlook
  – 10/21 Mon 6:40 PM ET: Daly Speaks in Moderated Discussion
  – 10/22 Tue 10:00 AM ET:  Harker Speaks at Fintech Conference
  – 10/23 Wed 9:00 AM ET:  Bowman Gives Opening Remarks
  – 10/23 Wed 12:00 PM ET:  Barkin Speaks About Community Colleges
  – 10/24 Thu 8:45 AM ET:  Hammack Gives Welcome Remarks
• There remains a steady bit to stocks, something we alluded to last week and tells us that investors are probably under-allocated to stocks. This is understandable given many got cautious ahead of the elections. This seasonally also fooled us.
• An interview by Stan Druckenmiller, of Duquesne, might explain why stocks are getting a better bid. He notes that he now expects a Republican sweep, and at least Republicans taking the Senate. This would be positive for stocks, in his view, because this would trigger/ ignite animal spirits. That is, de-regulation, etc would boost economic activity, and thus stocks.
• To me, this is as good an explanation as any for why stocks have been performing strongly recently. And as we wrote about extensively, we think equity markets do well under either Trump or Harris. But there are wide sectoral differences. With cyclicals outperforming if Trump wins.
  – in fact, Bitcoin is the most important to watch
  – as Trump is running on a pro-Bitcoin platform
  – and has suggested Bitcoin could become a Treasury reserve asset

Bottom line: We are still in the “tricky” period, but in the context of a very strong market

2024 has proven the S&P 500 to be very strong. Thus, we expect dip buyers to emerge if we get any pullback. 3Q24 EPS season is supportive of fundamentals.

• the new tactical idea
• Buy homebuilders
• Homebuilder ETF: XHB -1.49%  ITB -1.50%  PKB -1.47%

Given the movement in polls, there are sectoral implications. And as we noted, the following are positively leveraged to a Trump victory:
– Small-caps: IWM -0.46%  IJR -1.23%
– Cyclicals: XLF -1.10%  KRE -1.81%  XLI -0.26%
– Bitcoin: BTC MSTR -0.77%  SMLR -0.87%

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Key incoming data October:

• 10/1 9:45 AM ET: Sep F S&P Global Manufacturing PMI Tame
• 10/1 10:00 AM ET: Sep ISM Manufacturing PMI Tame
• 10/1 10:00 AM ET: Aug JOLTS Job Openings Tame
• 10/3 9:45 AM ET: Sep F S&P Global Services PMI Tame
• 10/3 10:00 AM ET: Sep ISM Services PMI Mixed
• 10/3 10:00 AM ET: Aug F Durable Goods Orders Tame
• 10/4 8:30 AM ET: Sep Non-Farm Payrolls Hot
• 10/7 9:00 AM ET: Aug F Manheim Used Vehicle Index Tame
• 10/8 6:00 AM ET: Sep Small Business Optimism Survey Tame
• 10/8 8:30 AM ET: Aug Trade Balance Tame
• 10/9 2:00 PM ET: Sep 18 FOMC Meeting Minutes Dovish
• 10/10 8:30 AM ET: Sep CPI Hot
• 10/11 8:30 AM ET: Sep PPI Tame
• 10/11 10:00 AM ET: Oct P U. Mich. Sentiment and Inflation Expectation Tame
• 10/15 8:30 AM ET: Oct Empire Manufacturing Survey Tame
• 10/15 11:00 AM ET: Sep NY Fed 1yr Inf Exp Tame
• 10/17 8:30 AM ET: Sep Retail Sales Data Tame
• 10/17 8:30 AM ET: Oct Philly Fed Business Outlook Tame
• 10/17 9:00 AM ET: Sep M Manheim Used Vehicle Index Tame
• 10/17 10:00 AM ET: Oct NAHB Housing Market Index Tame
• 10/17 4:00 PM ET: Aug Net TIC Flows Tame
• 10/23 10:00 AM ET: Sep Existing Home Sales
• 10/23 2:00 PM ET: Oct Fed Releases Beige Book
• 10/24 8:30 AM ET: Sep Chicago Fed Nat Activity Index
• 10/24 9:45 AM ET: Oct P S&P Global Manufacturing PMI
• 10/24 9:45 AM ET: Oct P S&P Global Services PMI
• 10/24 10:00 AM ET: Sep New Home Sales
• 10/25 10:00 AM ET: Oct F U. Mich. Sentiment and Inflation Expectation
• 10/25 10:00 AM ET: Aug F Durable Goods Orders
• 10/28 10:30 AM ET: Oct Dallas Fed Manuf. Activity Survey
• 10/29 9:00 AM ET: Aug S&P CoreLogic CS home price
• 10/29 10:00 AM ET: Oct Conference Board Consumer Confidence
• 10/29 10:00 AM ET: Sep JOLTS Job Openings
• 10/30 8:30 AM ET: 3Q A 2024 GDP
• 10/30 10:00 AM ET: 3Q24 Treasury Quarterly Refunding Press Conference
• 10/31 8:30 AM ET: Sep PCE Deflator
• 10/31 8:30 AM ET: 3Q Employment Cost Index

Economic Data Performance Tracker 2024:

Economic Data Performance Tracker 2023: