Monday Tee Up: Here Comes Tesla The flood of earnings continues this week, while the U.S. presidential election and the next Fed rate meeting draw nearer. Last week, the Dow Jones Industrial Average was higher by 1.0%, while the S&P 500 and the Nasdaq both gained 0.8%. For the year, the DJIA is higher by 15%, while the S&P 500 and the Nasdaq have both gained 23%. The earnings calendar is packed this week, with companies reporting from a wide range of sectors. On Tuesday, General Electric, General Motors, Lockheed Martin, 3M, Philip Morris, Texas Instruments, and Verizon all report. On Wednesday, Tesla, IBM, AT&T, Coca-Cola, and Boeing. On Thursday, Honeywell, UPS, American Airlines, Southwest Airlines, and Northrop Grumman. And on Friday, Colgate-Palmolive. So far, 71 of the S&P 500 companies (14%) have reported. Earnings are coming in 4% higher than in the prior-year quarter. That follows a strong 13% rise in earnings for 2Q. We expect 5%-7% growth in earnings this quarter. For full year, we forecast high single-digit growth, so roughly a 7%-9% gain. For 3Q, we expect Information Technology, Communication Services, and Healthcare to be the sectors that shine. On the economic calendar, Wednesday features Existing Home Sales and the Fed Beige Book. Thursday brings New Home Sales, while Friday includes Durable Goods and Consumer Sentiment. Argus Chief Economist Chris Graja is highlighting Durable Goods orders as his 'Call of the Week.' Chris expects September Durable Goods to fall 4.5% year over year, this based on a tough year-ago comparison. Durable Goods orders, which include the huge-ticket civilian aircraft and defense categories, are probably the most volatile of the 40 or so economic indicators we forecast and will have increasing importance to our outlook in the coming months. In the 2Q GDP report, the Equipment category jumped 9.8% and added one half point to the economy's 3% growth. Equipment could be a strong performer again in 3Q based on the Atlanta Fed's GDP Nowcast. We also analyze shipments of nondefense capital goods excluding aircrafts, this for a less-volatile look at core trends in manufacturing. We expect more modest growth in 4Q and in 2025. Last week, Retail Sales came in higher than expected at 0.4% for September compared to expectations of 0.3%, and 0.1% the month before. Removing gas sales (which were down sharply as the price of gas declined) and car sales (which were flat), overall Retail Sales were even higher, rising 0.7%. Food remains a category on which people are spending a disproportionate amount of money. Both Food and Beverage Stores and Food Services and Drinking Places were up 1%, though both were much lower than a year ago. Mortgage rates jumped again and are now at 6.44% for the average 30-year fixed-rate mortgage. Gas prices rose three cents to $3.17 per gallon for the average price of regular gas. The Atlanta Fed GDPNow indicator is forecasting for 3Q and calls for expansion of 3.4%. At Argus, we recently raised our 3Q growth forecast and expect 3.0% this quarter, up from our prior forecast of 1.6%. The Cleveland Fed CPINow indicator for October is at 2.6%. Looking ahead, next week is jammed-packed with economic reports, including the October jobs report, inflation indicator PCE, and GDP. As well, there will be another rush of earnings reports. The next Fed rate decisions come on November 7 and December 18. For November, odds are at 90% for a 25-basis-point (bps) rate cut, according to the CME FedWatch tool.

Cleveland-based KeyCorp is one of the largest bank-based financial services companies in the U.S., with about 1,000 branches in 15 states and assets of $187 billion. The company also operates a national consumer bank and a national corporate bank.

Value stocks -- a market segment that includes high-yield stocks - is the place to achieve income. The recent yield on the iShares Russell 1000 Value Index ETF was 1.8%, compared to the 0.4% current yield on the iShares Russell 1000 Growth Index ETF. Growth stocks have a history of outperforming value stocks, but value has had its day. Value outperformed growth stocks in 2022. That's a recent rarity, as for more than a decade, the performance record favored growth. Since 2010, the Russell 1000 Growth Index has climbed more than 575%, compared to an advance of almost 200% for the Russell 1000 Value Index. In 10 of the past 13 years, growth stocks have topped value stocks. That hasn't always been the case. In the 2000-2010 decade, including the Great Recession, value stocks were better performers than growth stocks, advancing an admittedly low 8% (but still better than growth, which declined 15% during the decade). Value investors trace their roots to the famous "Security Analysis" textbook, written by Ben Graham, an economics professor at Columbia University. Warren Buffett was one of his students. Why the recent deviation in performance? Several reasons, including changes in the make-up of the economy, growth in intangible assets, and the current level of interest rates. The tide turned back in 2022, at least for a while, as the rollout of COVID-19 vaccines gave a lift to some of the cyclical companies (energy and regional banks) that had lagged in recent years. For our list this week, we have screened our coverage universe for stocks that are BUY-rated by Argus Research analysts, have an Argus Financial Strength Rating of at least Medium, and have a yield of 3.0% or higher. These stocks are also featured in our High-Yield Theme Model Portfolio.

Small- and mid-cap stocks (SMID), despite bursts of outperformance, have underperformed large-caps year to date - as they have over the past five years. But they may be in a better position to generate market-beating returns going forward. SMID companies tend to focus on domestic markets, so their businesses could be less disrupted by the fallout from unrest in the Middle East, the Russian invasion of Ukraine, issues in China, or other geopolitical developments. As well, the prices of SMID stocks generally are lower than the prices of large-caps. SMID stocks can be risky, but despite those risks, diversified investors look to have exposure to small- and mid-caps based on the long-term performance record. We estimate that 20% of the U.S. stock market's capitalization is comprised of SMID stocks.