Mid-Week Market Minute 10.26.22

Key Earnings, GDP Report Out This Week

U.S. equities were higher this week as the markets looked to extend last week’s rally. The S&P 500 was about 2% higher mid-week despite disappointing third-quarter earnings from Alphabet (Google’s parent company) and Microsoft. Alphabet fell by about 6% for the week after missing top- and bottom-line expectations on Tuesday. Meanwhile, shares of Microsoft declined as well after issuing forward revenue guidance that came up short of analysts’ forecasts. Investors will be paying close attention to earnings for the remainder of this week, with heavyweights such as Apple and Amazon reporting. Collectively, these two companies represent more than 10% of the S&P 500 index. Interest rates moved lower on the week, with the yield on the 10-year Treasury note trading around 4.02% mid-week.

Higher interest rates this year continue to weigh on the housing market as a report from S&P Case-Shiller showed home prices declined by 0.7% in August. In addition, mortgage applications fell for the fifth consecutive week. Separately, October’s measure of consumer confidence unexpectedly fell 5.3 points to 102.5 amid growing fears of a recession. For the rest of the week, investors will keep a close eye on third-quarter GDP data on Thursday, along with core PCE, and the University of Michigan’s consumer sentiment report on Friday. Markets are looking for annualized real GDP to come in around 2.3% for Q3, a sharp reversal from the negative growth posted in the first half of this year. The PCE price index on Friday will be the last piece of key inflation data between now and the Federal Reserve’s meeting on Wednesday of next week. With near certainty, Wall Street is pricing in another 0.75% rate hike at this upcoming meeting which would bring the federal funds rate to a target range of 3.75%-4.0%.

Source: GSAM, CNBC, JPMorgan

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