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The Dow, S&P 500 and Nasdaq all rose Friday and finished the week higher, despite rising Treasury yields, higher oil prices and a fresh decline in consumer sentiment. Investors are looking to the coming earnings season, while next week’s inflation data may offer another test for markets.
U.S. stocks closed higher Friday, with the Dow Jones Industrial Average up 0.8%, the S&P 500 up 0.6% and the Nasdaq Composite up 0.6%, as investors looked ahead to a new corporate earnings season. The gains came despite rising Treasury yields, higher oil prices and falling consumer sentiment, and all three indexes also finished the week higher.
The Dow ended at 51,654, the S&P 500 at 7,811 and the Nasdaq at 27,366, according to the Kiplinger report. The day’s advance reflected a positive market close, but did not remove the pressures investors were weighing. The two-year Treasury yield rose 3.3 basis points to 4.793%, while the 10-year yield gained 1.1 basis points to 5.244%.
Oil also moved higher: front-month West Texas Intermediate crude futures rose 0.4% to settle at $91.85 a barrel. The report said higher energy costs were expected to keep price pressures elevated. Investors are due to receive another inflation reading next week, with the report identifying the September Consumer Price Index as scheduled for Wednesday morning.
The University of Michigan’s preliminary Consumer Sentiment Index fell 3.7% month over month to 46.3 in October, its second-lowest reading on record, according to the source. Meanwhile, earnings season is set to begin in the coming days. Bob Edwards, chief investment officer at Edwards Asset Management, said analysts expected third-quarter S&P 500 earnings growth to approach 30% year over year. That is an expectation cited by Edwards, not a reported result for the season.
Earnings Face a Tough Market Backdrop
Friday’s rise shows that investors were willing to buy shares even as bond yields and oil prices increased and a consumer-confidence measure weakened. Those factors matter because they can shape expectations for borrowing costs, company expenses and household spending. The positive close, however, does not establish that those concerns have passed or that stocks will keep rising.
The next earnings reports may help investors judge how companies are coping with costs and whether demand is holding up. Edwards argued that investors could be paying too much attention to yields and geopolitical uncertainty while overlooking corporate earnings strength. That is his assessment; the earnings season’s results are not yet known. The week’s market gains set the stage for those reports but do not confirm the forecast for near-30% earnings growth.
Consumer sentiment adds a separate signal about how households view the economy. The preliminary survey reading was notably weak, while the source report also cited concerns about the cost of living. The survey alone does not establish how much consumers will spend or predict economic output, but it gives investors another data point to weigh alongside company results and inflation figures.
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The Reports Ahead of Markets
The market session arrived just before a busy stretch for investors. According to the report, earnings season would get underway the following week, with several large companies and financial firms scheduled to report. Analysts’ earnings expectations are forecasts rather than confirmed outcomes; actual results, company guidance and reactions from investors could differ.
The inflation backdrop is also relevant to the week’s gains. The report linked higher energy costs with the prospect of continuing price pressure and pointed to the September CPI release as the next key update. Treasury yields had resumed moving higher on Friday, but the reported changes were daily moves in the two- and 10-year yields, not evidence on their own of why yields rose or where they will go next.
Individual company news also shaped trading. AT&T fell 9.8%, T-Mobile US declined 13.3% and Verizon dropped 8.8% after SpaceX said Thursday it was buying a nationwide portfolio of low-band spectrum licenses. The report said the move could bring SpaceX closer to building its Starlink Mobile business. UBS Global Research analyst John Hodulik described the purchase as a tangible step toward building a mobile network, while calling the telecom sell-off a “knee-jerk reaction” given the likely lengthy buildout. American Tower and Crown Castle rose 9.3% and 15.6%, respectively.
Delta Air Lines offered another company-specific example of cost pressure. It reported earnings of $1.72 per share, below analysts’ $1.76 estimate, after fuel costs came in $500 million more than expected. Delta cut its full-year forecast to reflect higher fuel costs, even as revenue rose 21% year over year to $20.2 billion. Those results concern one airline and should not be treated as a measure of all companies’ performance.
““Frustration over cost-of-living continues to mount, as consumers across the political spectrum believe that the trajectory of the economy has weakened since the beginning of the year.””
— Joanne Hsu, director of the University of Michigan’s Surveys of Consumers
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Earnings and Inflation Still Pending
The Friday close confirms that the three major indexes gained that day and across the week, but the source report does not provide enough detail to determine how much of the rise was driven by earnings expectations or other factors. It also does not establish whether higher yields and oil prices will continue, or how they may affect future market performance.
Key information was still pending: the September CPI report and upcoming company results had not yet been released in the report’s account. The expected earnings growth rate was a forecast, and actual results could diverge. The preliminary sentiment index records survey responses; it does not by itself establish future spending, economic growth or election outcomes.
The longer-term effect of SpaceX’s spectrum purchase on established wireless carriers also remained uncertain. Hodulik said building a mobile network could take a long time. The report did not specify the purchase’s terms, a buildout timetable or how the companies would respond.
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CPI and Corporate Results Ahead
Investors will next weigh the September CPI release and the first reports of the new earnings season, both scheduled for the following week in the source report. The inflation data will update the picture of price pressures, while company results and guidance will show how businesses are performing and handling expenses such as fuel.
Those releases may change market expectations, but their effect on stocks is not yet known. Investors will also be watching whether the earnings outlook cited by Edwards is borne out by reported results and whether consumer concerns appear in company commentary. The report provides no later market reaction or updated figures.
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Key Questions
How did the major U.S. stock indexes finish Friday?
The Dow rose 0.8% to 51,654, the S&P 500 gained 0.6% to 7,811, and the Nasdaq added 0.6% to 27,366. All three also closed higher for the week.
What pressures were investors watching?
The report cited rising Treasury yields, a rise in WTI crude to $91.85 a barrel and a decline in October consumer sentiment. Those pressures did not prevent the indexes from closing higher Friday.
What was the October consumer sentiment reading?
The University of Michigan’s preliminary Consumer Sentiment Index fell 3.7% from September to 46.3. The report described it as the second-lowest reading on record.
What market updates were expected the following week?
The report pointed to the September CPI release and the start of corporate earnings season. Both were upcoming at the time of the report; their results were not yet available.
Source: rss
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