The stock market is rewarding bulls with a strong earnings season, with the Dow Jones Industrial Average recording an all time high above 44,000 on Monday.
While strategists parse the impact of potential policies under a second Trump administration, equity traders returned their focus to the corporate earnings. As the third-quarter earning’s season draws to a close, investors are digesting a mixed bag of results.
From a numbers standpoint, the picture is bullish. Roughly 67% of companies that have reported so far have beaten projections, while the portion of the S&P 500 that has released results have averaged 6.6% higher than expected. The S&P 500 components that beat both revenue and earnings per share forecasts have outperformed the index by 2.5% on average since they reported. The reaction has been equally strong to the downside for companies who have disappointed shareholders.
Five of the six large tech companies that have driven market sentiment in 2024, Alphabet (google) GOOG , Amazon AMZN , Apple AAPL , Meta Platforms (Facebook) META , Microsoft MSFT , have all presented results. NVIDIA NVDA — which overtook Apple last week to become the world’s largest stock by market capitalization, will report later this month.
Strategas analyst Ryan Grabinski, in a note to clients on Tuesday, concluded that the strong earnings may signal further upside stating that EPS growth estimates are “suggesting a reacceleration.” While cautious over extended stock valuations, Grabinski noted that a double digit growth rate in 2025 would equate to the highest margin on record.
Bonds
Federal Reserve Chair Jerome Powell took a cautious tone speaking to reporters on Monday about rising federal debt and budget deficit levels. With growth in the U.S. economy keeping pace with interest rates, most Wall Street analysts are expecting the recent increase in Treasury yields to continue to moderate. October consumer inflation data is slated for release Wednesday with a modest uptick forecasted.
As growth accelerates, U.S. companies are taking advantage of markets hungry for bonds. Goldman Sachs estimated in a recent report that the bond markets are now on track for the second busiest year on record with up to $1.5 trillion brough to market.
For equity investors this corporate borrowing may be great news. In a report presented to investors last week Brian Reynolds, chief market strategist for Reynolds Strategy LLC, wrote that “the credit market is signaling that debt-fueled stock buybacks are poised to accelerate.”
Impact
iShares ESG Aware MSCI USA ETF ESGU — the largest impact ETF by market capitalization, rose in trading today. Despite shifting political expectations following U.S. elections, diversified value based ETFs have registered positive performance.
Exposure to technology firms, including electric vehicle producers, has fueled this resilience among impact funds. In late October, Tesla TSLA beat forecasts for third quarter earrings at $0.72 per share and guided expectations higher for EV sales in 2025. Tesla founder Elon Musk’s close association with President-elect Donald Trump has helped fuel a 9% spike in share price since Trump’s presidential election win.
Macro news for impact investors was positive on Tuesday, with the world’s top multilateral banks pledging $120 billion in climate finance for low and middle income countries by 2030. The announcement came at the COP29 summit in Baku. Separately, Singapore announced a commitment of $500 million for Asian decarbonisation efforts.
