A Packed Week: Peak Earnings Season, a US Presidential Election and a Fed Decision

Wall Street Horizon
8 min read

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This week will bring more volatility-inducing events than we typically see in a given week. On top of this being the second peak week of earnings season with over 3,700 companies expected to report, Tuesday brings a U.S. presidential election, followed by a Fed meeting on Thursday.

Earnings Update

Last week marked the first peak week of the Q3 2024 earnings season, highlighted by mixed results from some very closely watched mega tech companies which had a high bar to clear.

The tech party kicked off with results from Alphabet on Tuesday which reported better-than-expected results on the top and bottom line. The company confirmed that their bet on AI was paying off, while its cloud business saw a 35% increase YoY and Youtube ad revenues were up due to the impending US presidential election.[1]

Things began to fizzle from there when Meta and Microsoft reported on Wednesday. While they both beat top and bottom-line expectations, it was slowing user growth that disappointed Meta[2] investors while soft revenue guidance hurt Microsoft's stock[3].

By Thursday investors seemed disenchanted with Apple's mostly strong results, punishing the stock for net income that fell YoY. Disappointing net income results were due to a one-time tax charge of $10.2B that the company paid to resolve a 2016 case that challenged how they handled taxes in Ireland.[4] But the week ended as it began, with impressive results from the last of the Magnificent 7 to report for the week. Amazon handily beat earnings and sales estimates, while CEO Andy Jassy echoed the sentiment of many other tech companies this week, that AI bets were starting to pay off.[5] Closely watched metrics such as Amazon Web Services and advertising revenues also popped on a YoY basis.[6] That pleased investors who took the stock up 6% after the call.

There were also some promising results from consumer-facing industries such as fast and fast-casual restaurants. McDonald's reported a rebound in sales thanks to value meals after a weaker Q2 result, and was able to reverse negative same store sales in the US.[7] Shake Shack also reported improved sales and announced plans for expansion.[8] But it wasn't all good news from the fast casual space. Chipotle, who had been performing well this year, missed Wall Street revenue estimates.[9]

With over 70% of the S&P 500 reported thus far, the YoY growth rate stands at 5.1%, the fifth consecutive quarter of growth, and an increase from 3.6% last week.[10]

Solid Economic Data Continues to Support the Soft Landing Scenario

Economic data reported last week came up roses, and continued to support the soft landing narrative in the US. Consumer Confidence for October surged to its highest level since March 2021.[11] Private job creation as measured by ADP came in at 233,000 for October, much higher than the 113,000 estimate and the highest level since July 2023.[12] And the first (of three) Q3 reading for US GDP came in at 2.8%, a solid number despite missing expectations of 3.1%.[13]

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