S&P 500 third-quarter earnings per share are expected to grow 33% year over year, unchanged from the second quarter; cloud revenue continues to accelerate, but growth in capital spending and AI infrastructure earnings is facing a slowdown.
Earnings season is still in its early stages. Jefferies expects adjusted earnings growth for S&P 500 companies outside the Magnificent Seven to reach 32.1%, above the seven’s 21.4%; the seven are still expected to lead in revenue growth.
The proportion of S&P 500 companies beating earnings expectations rose to 83%, but capital expenditure and cash-flow pressures at some AI giants triggered a sell-off. Barclays sees potential opportunities in technology-stock valuations and their historical performance after midterm elections.
Bank of America expects US nonfarm payrolls to rise by 75 thousand in October and maintains its forecast for two more rate hikes; beyond the midterms, expectations differ for earnings from Apple, AMD and Arista.
BofA believes no single event is likely to resolve AI and macroeconomic uncertainty. Its US equity screening framework emphasizes cash-backed growth, diversification within equities, and distinguishing low-valuation opportunities from value traps.
The additions offer exposure to aircraft engine capacity expansion, bond issuance and growth in Canadian wireless services; Boeing’s delayed cash flow and reduced growth expectations for T-Mobile were reasons for their removal.
JPMorgan expects volatility-targeting strategies to remain under pressure to reduce positions. A tech index rebalance in December could change dividend and volatility pricing, while third-quarter earnings reported so far have beaten expectations by less than the recent average.
US technology stocks and the equal-weight index diverged in October. Goldman Sachs added Amphenol to its November Conviction List, expecting its copper cable and fiber-optic businesses to benefit from data center construction, while flagging risks to growth, margins and acquisition execution.
Wells Fargo sees opportunities in hyperscalers and infrastructure software following a reset in market sentiment, but sentiment toward healthcare has become overheated; the US midterm elections and corporate financing needs will influence the market’s next moves.
Through the end of September, US consumer discretionary stocks had fallen 9% for the year, while earnings expectations for the next 12 months had risen. Bernstein sees allocation opportunities in lower valuations, but high oil prices and cost pressures are affecting subsectors in different ways.
Citi believes Republicans holding the Senate could push US stocks higher through year-end; a larger Democratic majority could lead markets to price in the risk of higher corporate taxes in 2028 earlier. Local elections could also affect the pace of data-center construction.
Companies representing a quarter of the S&P 500’s market capitalization have reported third-quarter results. Barclays is optimistic about earnings for the full reporting season, but year-on-year EPS growth has slowed from the previous quarter in financials, industrials and consumer staples.
JPMorgan tracking shows retail inflows fell to $3.3 billion from 22 October to October 28. Investors continued to buy tech stocks but took limited positions ahead of earnings; a sharp fall in Brazilian equities attracted unusually strong dip buying.
The S&P 500 index has risen 1% so far in the fourth quarter and is near its all-time high. Citi sees a path higher by year-end, but its 8100-point target now looks aggressive. Earnings breadth, interest rate expectations, AI capital spending and the midterm elections will all affect the extent of any gains.
Goldman Sachs expects one more rate hike in this cycle, fewer than the roughly three priced in by markets. Historically, stocks have often stumbled briefly after the first hike, but improving inflation, growth concerns and prolonged tightening produce different asset performances.
Semiconductors led gains for a second consecutive trading day, as Anthropic revenue indicators and financing news eased recent pressure; earnings from Seagate and NXP, however, show that investors now demand results above market consensus.
BofA expects the Federal Reserve may raise interest rates by 25 basis points and is optimistic about the earnings outlook for Alphabet and Microsoft. Alongside cloud growth, AI capital spending and pressure on cash flow are also key considerations.
JPMorgan believes investment signals from AI financing are supporting US equities. The repricing of Brazilian assets remains confined to the local market for now, but crowded positions could transmit the shock to other markets through risk-management mechanisms. The Federal Reserve meeting and developments in the Middle East will also influence markets.
Wells Fargo believes investor sentiment has become excessively pessimistic, but slowing earnings growth and weak liquidity will limit any rebound. In AI, it favors large cloud providers and infrastructure software, and expects semiconductor stocks to reach progressively lower highs.
A Bank of America model shows that shorts in intermediate- and long-term US Treasuries have been substantially covered, while S&P 500 futures are only about 0.5% from the first CTA sell trigger. Over the coming week, systematic strategies could net sell 48 billion US dollars of global equities even if markets are flat.
