The good times are continuing on Wall Street, as the S & P 500 closed Friday at a record high, buoyed by strong quarterly results from major financial firms like Wells Fargo. The index posted its fifth positive week in a row, advancing 1.1%, while the Dow Jones Industrial Average also rose 1.2% in the week to close at an all-time high. The tech-heavy Nasdaq Composite gained 1.1% and is now just 1.6% below its July peak. The upcoming third-quarter earnings season will feature major U.S. banks, health-care heavyweights, and industrial and tech players. Jim Cramer cautions investors to focus on earnings reports and company outlooks, rather than getting caught up in every economic report.
Despite the consumer price index for September coming in slightly hotter than expected, inflation is broadly trending down. The CPI showed an annual inflation rate of 2.4%, slightly above consensus but below the 2.5% figure seen in August. In addition, the producer price index was unchanged month over month, when a 0.1% gain had been expected. As the market returned to record levels, the focus remained on earnings opportunities rather than economic data. Trading remained steady, with Procter & Gamble being the only trade of the week. Defensive stocks like Procter & Gamble were not considered ideal for the portfolio in the current economic climate with the Federal Reserve easing and a strong economy.
Strong earnings reports from Wells Fargo and JPMorgan further reinforced the positive sentiment in the markets. Shares of both banks surged on Friday, with Wells up 5.6% and JPMorgan up 4.4%, helping the financial sector lead the S & P 500 for the week. The tech sector led the way with a 2.5% gain, followed by industrials and financials at 2.1% and 1.8%, respectively. Utilities and communication services were the main laggards for the week, with losses of 2.6% and 1.4%, respectively. Looking ahead, influential companies like UnitedHealth and Goldman Sachs are set to report in the coming days, providing further insights into market trends.
In the week ahead, several notable companies like Morgan Stanley and Abbott Laboratories are scheduled to report earnings. Morgan Stanley will focus on its recovery in investment banking, which has been a key theme in previous quarters. The hope is that the trend continues in the current quarter, following positive results from JPMorgan’s investment banking segment. Shares of Morgan Stanley have been strong recently, with the stock up more than 14% over the past month. Abbott Labs is also expected to provide updates on its legal issues, particularly regarding its premature infant formula. Strong fundamentals have been overshadowed by legal challenges, but support from U.S. health agencies may provide a positive outlook for the company.
Looking at the week ahead, a number of significant companies are set to report earnings, including Charles Schwab, Walgreens Boots Alliance, UnitedHealth, Citigroup, Bank of America, Johnson & Johnson, and Goldman Sachs. After the bell, companies like United Airlines, Interactive Brokers, and JB Hunt will also report quarterly results. As the earnings season continues, investors will be closely watching for insights into market trends and potential opportunities for growth. Key economic data releases throughout the week will also provide further context on the overall health of the U.S. economy. Overall, the market remains optimistic as companies prepare to share their latest financial results.
