Markets Rally as the Q3 Earnings Season Enters its Final Peak Week

by Wall Street Horizon, 11/14/24

Takeaways

  • Q3 S&P 500® EPS growth expected to come in at 5.3%, the fifth consecutive quarter of growth

  • Large cap outlier earnings this week: LiveNation Entertainment, Occidental Petroleum Corp, The Mosaic Company, and The Walt Disney Company

  • Last peak week of the Q3 earnings season with 2,640 global companies reporting

Investor uncertainty tends to be a detriment to the stock market, but last week the US got answers to two looming questions: who will be the 47th president of the United States and will the Federal Reserve cut rates for the second consecutive time since 2020? In many ways it didn’t matter what those answers were, just that they were out of the way and investors and US companies could begin to plan accordingly for Q4, 2025 and beyond.

On Wednesday, November 6, Donald Trump was announced as the 47th president of the United States, securing a second although not consecutive term. Equity markets have risen in the last week, with all three major indices (DJIA, S&P 500, NASDAQ) trading at record highs.1 Cryptocurrencies such as Bitcoin also received a boost, currently priced around $87k, as a reaction to the potential of lighter crypto regulation.2

The following day, Thursday November 7, the US Federal Reserve lowered interest rates an additional 25bps, on top of the jumbo 50bps cut back in September.3 The move was anticipated, although in the weeks leading up to the meeting the probability of the Fed not cutting rates had grown as a result of stronger-than-expected economic data.4

In the midst of all of this market moving news was also the continuation of the Q3 earnings season, with last week being the busiest week of the season with 3,181 companies reporting. Earnings continue to come in better than expected. With over 90% of the S&P 500 reported thus far, the YoY growth rate stands at 5.3%, the fifth consecutive quarter of growth, and an increase from 5.1% last week.5

Uncertainty Still Remains for US Corporations

Even with a new US president elect, uncertainty remains for US corporations that will wait and see what policies promoted on the campaign trail will actually be enacted, and how those will impact their bottom-line.

After falling to its lowest level in its nine years in the first quarter of 2024, the Late Earnings Report Index, our proprietary measure of CEO uncertainty, has been higher for the last two quarters. This quarter was likely due to the US presidential election being held during a peak week for Q3 earnings season, with many companies perhaps wanting to avoid getting lost in the news cycle and therefore pushing their earnings date.

The LERI tracks outlier earnings date changes among publicly traded companies with market capitalizations of $250M and higher. The LERI has a baseline reading of 100, and anything above that indicates that companies are feeling uncertain about their current and short-term prospects. A LERI reading under 100 suggests that companies feel they have a pretty good crystal ball for the near-term.

The official pre-peak season LERI reading for Q3 (data collected in Q4) stood at 278, well above the baseline reading. Our official post-peak season LERI, now that a majority of companies have reported for the quarter, also closed atypically high at 287. However, as stated above, this is likely a result of the US presidential election. We have noticed that the last two election cycles, 2016 and 2020, also resulted in outsized earnings date delays. As of November 12 there were 257 late outliers and 72 early outliers.

late earnings