Optimistic forecasts from a number of companies that reported yesterday brought Wall Street’s main stock indexes up. The mood was also uplifted by the indication that US business output rose for October as shown from the S&P global survey.
Market optimism boosted by positive forecasts from reporting companies
The stock market recovered slightly yesterday from its longest period of decline in 2023. The main reason for this was the string of strong corporate earnings, including giants like Microsoft and Google, parent company Alphabet Inc., reporting their numbers after the close.
The S&P 500 halted a five-day slide and Wall Street's main stock indexes advanced on Tuesday. Positive forecasts from Verizon, Coca-Cola, and others boosted optimism about the health of American businesses. All this despite negative forecasts for the performance of the economy and inflation that, although decreasing, is still at high levels.
Verizon rose 9.1% while General Electric rose 6% after it raised its full-year profit forecast. Coca-Cola rose 3% as it raised its annual sales forecast.
The S&P Global Survey showed US business output rose in October
The S&P Global Survey showed US business output rose in October. Specifically, the survey showed the manufacturing sector grew for the first time after contracting for five straight months, while services activity accelerated modestly amid signs of easing inflationary pressures.
Alphabet and Microsoft expected to post biggest earnings in a year
US tech giants like Alphabet and Microsoft are expected to post their biggest quarterly revenue growth in at least a year.
Of the 118 S&P 500 companies that have reported earnings so far, 81.4% beat overall analyst expectations. Third-quarter earnings are expected to rise 1.7% year over year.
The present economic scenario is far from previous forecasts that predicted a deep slowdown in the economy due to enormous increases in interest rates put in place to fight inflation.
Treasury bond yields fell yesterday
Yesterday, Treasury bond yields fell with the 10-year bond to 4.82%, after exceeding 5% the day before. This also contributed to improving investors’ risk sentiment and their expectations of an end to the upward race in market interest rates.
As risk sentiment improves, concerns around the conflict in Israel remain
The main focus of concern remains the conflict in Israel. The fear of an extension of the conflict to nearby countries where the main oil producers are located, weighs on the mood of investors.
However, as time passes and the ground invasion of the Gaza Strip does not happen, the market gains confidence. This is mainly reflected in the price of oil, which after the latest bullish rallies, yesterday fell around $2, with WTI crude oil trading below $84.
Verizon monthly chart, October 25, 2023. Source: CAPEX.com WebTrader.
Key Takeaways
- The stock market recovered slightly from longest slide in 2023.
- Wall Street’s main indexes rose around optimistic forecasts from several companies.
- Verizon rose 9.1%, General Electric rose 6%, and Coca-Cola rose 3% after raising their forecasts.
- The S&P Global Survey showed US business output rose in October.
- The US manufacturing sector grew for the first time in five months.
- From the 118 companies on the S&P 500, 81.4% beat analyst expectations.
- Treasury bond yields fell yesterday.
- The conflict in Israel remains a concern for markets.
- The price of oil fell around $2.
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Sources: Bloomberg, Reuters
