EARNINGS DRIVE MARKET

The week kicked off with the Dow Jones Industrials and S&P 500 index setting record highs as the financial markets carried over the previous week’s price momentum.⁴

Stocks continued to climb on a string of forecast-beating earnings results. With about half of the S&P 500 constituent companies having reported earnings, more than 80% of them have beaten Wall Street analysts’ consensus estimates. Based on these results, earnings for all S&P 500 companies are expected to come in approximately 39% above the third quarter of last year. (Forecasts are based on assumptions, and may not materialize.) Stocks overcame disappointing earnings from two mega-cap tech names on Friday to maintain the week’s solid gains.⁵

GDP GROWTH SLOWS

While businesses managed to post strong earnings in the third quarter, the first look at economic growth came in below consensus estimates. The Gross Domestic Product (GDP) grew at a 2.0% annualized rate in the third quarter, a slowdown from the two previous quarters, each of which posted annualized growth rates in excess of 6%.⁶

The spread of the Delta variant and backlogs in the supply chain were two major factors dragging on economic activity.