S&P 500; US Indexes Fundamental Weekly Forecast – Expect Earnings to Continue to Rise at Solid Pace

The major U.S. stock indexes finished higher last week, hitting record highs for the sixth straight week. The catalysts behind the rally were rising company earnings and easing political uncertainty as the Senate passed a 2018 budget resolution, opening the door to tax reform.

For the week, the benchmark S&P 500 Index settled at 2575.21 up 0.9%. For the year, the index is up 15.0%. The blue chip Dow Jones Industrial Average finished at 23328.63, up 2.0%. It’s up 18.0% in 2018. The tech-based NASDAQ Composite ended the week at 6625.93, up 0.4%. It’s up a whopping 23.1% this year.

Forecast

This week investors will continue to react to company earnings reports. Over the next two-weeks, in fact, investors will get the opportunity to react to the bulk of earnings for this quarter.

Nearly 20% of companies in the S&P 500 Index have reported earnings for the third quarter so far. Earnings growth is nearly 2% and 76% of the companies have reported results above consensus estimates.

This week, we expect earnings to continue to rise at a solid pace. However, investors should still be prepared for volatility in individual stocks.

Traders will also have the opportunity to react to a number of U.S. economic reports this week including Durable Goods, Weekly Unemployment Claims and Advance GDP.

Core Durable Goods Orders are expected to come in at 0.5%. The previous report is expected to be revised upward to 0.5%. Weekly Unemployment Claims are expected to come in at 236K, up slightly from the previously reported 222K. Quarterly Advance GDP is expected to come in at 2.7%, down from the previously reported 3.1%.

Minor reports include Durable Goods Orders, New Home Sales, Pending Home Sales and Revised University of Michigan Consumer Sentiment.

Another factor that could influence the direction of the market is President Trump’s appointment of the next Fed Chair. However, recent speculation hasn’t caused much of a reaction in the markets.

Additionally, on October 26, the European Central Bank meets to decide monetary policy. Its decision could trigger a volatile reaction in the financial markets if there is a surprise announcement.