S&P 500; US Indexes Fundamental Weekly Forecast – Another Big Earnings Week On-tap

The major U.S. large-cap stock indexes reached record levels for the seventh week in row. These gains were mostly related to robust earnings. Last week was the first week of the busiest week for earnings in the quarter.

In the cash market, the benchmark S&P 500 Index settled at 2581.07, up 0.2%. It is up 15.3% for the year. The blue chip Dow Jones Industrial Average finished at 23434.19, up 0.5%. In 2017, it is up 18.6%. The tech-based NASDAQ Composted closed the week at 6700.32, up 1.1%. It has gained 24.5% this year.

The highlight of the week came on Friday when the tech-heavy NASDAQ Composite and the NASDAQ-100 Indexes rose 2.2 percent and 2.0 percent, respectively, to hit record highs.

Leading the indexes higher were shares of Amazon, Microsoft and Google-parent Alphabet; their stocks rose 13.2 percent, 6.4 percent and 4.3 percent respectively.

Forecast

Earnings are expected to continue to rise the remainder of the year so we expect the major stock indexes to be underpinned. However, we also anticipate volatility from individual stocks.

Last week, more than 35% of the companies in the S&P 500 reported earnings for the third quarter. This week will also feature a multitude of reports. Stock valuations are well-above their long-term average so they are vulnerable to periodic corrections as investors take profits and reshuffle their portfolios to avoid risk.

Investors also continue to face exposure to external events such as North Korea, President Trump’s selection for Fed Chair, Tax reform and now possible indictments from the Mueller investigation.

With the stock market on hyper-drive, it’s easy to get caught up emotionally when you making money hand-over-fist, however, it’s always good to remember that you are as good as your last trade so try to keep ego out of the equation. Keep in mind that it’s not your buy order or chart pattern driving the market. All you can really do is control the risk which is most important.

On November 1, the Fed is going to release its Federal Open Market Committee statement. It is expected to leave interest rates a<1.25%. The language in the statement is expected to be hawkish and indicate the central bank will raise rates in December.

On November 3, all eyes will be on the U.S. Non-Farm Payrolls report. The headline number is expected to show the economy added 311K jobs in October. Average Hourly Earnings are expected to drop from 0.5% in September to 0.2%. The Unemployment Rate is expected to remain unchanged at 4.2%.