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Dow Jones, Nasdaq, S&P 500 weekly preview: Tech earnings underway, Tesla in focus

Published 10/21/2024, 07:32 PM
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Investing.com -- Both the S&P 500 and Dow Jones Industrial Average hit new all-time highs on Friday, capping six consecutive weeks of gains.

The S&P 500 rose 0.40%, closing at 5,864.67, while the Dow added 36.86 points, or 0.09%, to settle at 43,275.91. The Nasdaq Composite, buoyed by Netflix's (NASDAQ:NFLX) strong post-earnings performance, increased by 0.63% to finish at 18,489.55.

All three indexes notched their sixth straight week in the green. For the S&P 500 and Dow, this marked their longest winning streak of 2024, with weekly gains of 0.85% and 0.96%, respectively. The Nasdaq also advanced 0.80% for the week.

For this week, investor attention will primarily be centered on new economic data and several big earnings reports.

According to UBS strategists, this week’s claims data is expected to remain volatile, while the upcoming flash S&P and Markit PMIs are anticipated to offer an initial glimpse into October’s economic activity.

Moreover, economists expect September’s durable goods report to “show softness,” UBS notes. “This data could also provide insights into the potential impact of Boeing's (NYSE:BA) production halt,” the bank added.

In addition, Federal Reserve’s Beige Book will provide updates from various regional districts, potentially addressing the impact of recent hurricanes, which could be highlighted in next Tuesday's Richmond surveys.

Several Fed officials are also scheduled to speak this week, offering potential insights into how recent economic data has shaped their views.

Earnings season for tech sector underway, Tesla to report

More than 70 S&P 500 companies have released their results so far this earnings season, with 75% surpassing expectations, according to FactSet.

Netflix stock saw an 11% surge on Friday after exceeding Wall Street’s estimates for both earnings and revenue in the third quarter. The company also reported a 35% rise in ad-tier memberships compared to the previous quarter.

Meanwhile, Procter & Gamble (NYSE:PG) posted earnings above forecasts, though its revenue came in below expectations.

Looking ahead to this week, the spotlight will be on several key earnings reports, with Tesla Inc (NASDAQ:TSLA)'s being the most anticipated.

Barclays analysts believe the focus for the electric vehicle (EV) giant will turn back to fundamentals, though they also raise outstanding questions on the volume outlook and margin recovery path.

For Q3, they expect Tesla to beat earnings estimates driven by “margin improvement, operating expenses reductions, and potentially also from solid regulatory credit revenue.”

“More broadly, after a run of sharply negative revisions to earnings estimates, Tesla estimates have largely stabilized,” they said.

Overall, Barclays’s team thinks Tesla’s Q3 results could be a near-term catalyst for the stock, particularly after the sell-off following the Robotaxi day.

The outlook beyond Q3 remains more uncertain, they added.

Other major companies that will report earnings this week include General Motors Company (NYSE:GM), Verizon (NYSE:VZ), AT&T (NYSE:T), Coca-Cola (NYSE:KO), Boeing, IBM (NYSE:IBM), and ServiceNow (NYSE:NOW), among others.

What analysts are saying about US stocks

Deutsche Bank: “The recent rally has been incredibly strong, but it's likely to run into increasing headwinds from here. The S&P 500 is on track for back-to-back annual gains above +20%, which is something we haven't seen since 1997-98, so generating further returns on that scale appears difficult looking at history. Credit spreads are also around their tightest in several years, so this is a market that's in a fairly buoyant state right now. Yet despite this headline strength, we also know that investors have been pretty nervous lately, as seen with the market turmoil in early August. So if there was another negative growth surprise, or a geopolitical shock of some kind, it's not difficult to picture another selloff.”

Wedbush: “We are expecting a robust 3Q tech earnings season kicking off this week as overall
solid enterprise spending, digital advertising rebound, and the AI Revolution will drive tech stocks higher into year-end in our view.”

“We believe the stage is set for tech stocks to see another 20% move higher in 2025 with this tech bull market just hitting its next phase led by the AI Revolution.”

Goldman Sachs: “We estimate the S&P 500 will deliver an annualized nominal total return of 3% during the next 10 years and roughly 1% on a real basis. Annualized nominal returns between -1% and +7% represents a range of likely outcomes around our baseline forecast and reflects the uncertainty inherent in forecasting the future.”

“We expect the return structure of the stock market will broaden in the future.”

RBC Capital Markets: “We’re seeing some good signs for the rotation trade out of Mega Cap Growth names so far. The rate of upward EPS estimate revisions continues to favor the biggest market cap names in the S&P 500, but to a lesser degree than what’s been seen in recent months.”

Morgan Stanley: “EPS beats are being rewarded more significantly relative to the prior 4 quarters. This is important because the 3Q consensus EPS estimate was down notably in the 3 months leading up to earnings season (-4%) driven by cyclical industries. In other words, the bar has been lowered into earnings season for cyclical pockets in particular, and stocks are being rewarded for clearing that lowered bar.”

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