The Nasdaq and S&P 500 marked a notable recovery this past week, reversing the downturn triggered by concerns surrounding tariffs from China. Both indexes found substantial support at their 21-day exponential moving averages, with the S&P 500 dipping sufficiently to rebound from its 10-week moving average.
CFRA analytics points to historical trends suggesting that any future declines in the S&P 500 this year are likely to be minimal. Since June 27, when the index moved out of a four-month consolidation phase, it has gained over 9%, a typical rebound pattern following corrections of 10% to 20% since 1945. Notably, no significant early-year corrections have historically been followed by another decline exceeding 10% within the same year.
As the third full week of October approaches, earnings reports from major companies such as Netflix and Tesla are set to dominate market attention. Additionally, this week is significant for defense and aerospace sectors, as well as the mining and steelmaking industries. Analysts anticipate important inflation data will be released despite the ongoing government shutdown.
The current market rally is near record highs, although recent fluctuations have made new investments challenging. Several leading stocks are hovering near buy points, including Alnylam Pharmaceuticals, Guardant Health, Walmart, FTAI Aviation, and Cloudflare. Alnylam, a profitable biotechnology firm, has recently entered a buy zone following strong early signals. Guardant, specializing in cancer diagnostics, momentarily reached its buy point but experienced a pullback. Walmart benefitted from an AI boost this past week, providing significant support at its 10-week average. Meanwhile, both FTAI Aviation and Cloudflare are positioned favorably, establishing solid bases after recent advances.
Turning to individual stocks, Tesla is poised to report its third-quarter earnings on Wednesday, and investors are keenly awaiting comments from CEO Elon Musk regarding the anticipated rollout of robotaxis and insights into vehicle production and sales expectations for Q4. Analyst forecasts suggest a 26% drop in third-quarter earnings per share to 54 cents, while sales are expected to rise by about 4%. However, estimates from the Sharp consensus indicate slightly improved earnings at 55 cents per share and revenue of $27.12 billion, driven by record vehicle deliveries and strong energy deployment, providing a potential for the company to exceed forecasts.
Also on the horizon is Netflix’s earnings report, set for late Tuesday. Analysts will scrutinize the platform’s progress in expanding its advertising-supported service, a critical growth avenue. They anticipate earnings of $6.96 per share and sales of $11.51 billion, reflecting year-over-year increases.
In the defense and aerospace sector, a variety of earnings are expected from leading companies this week, including Lockheed Martin, GE Aerospace, and Northrop Grumman. Analysts predict a mix of earnings declines alongside revenue growth for several firms. The market will be attentive to comments regarding geopolitical tensions and legislative issues that may affect defense contractors.
A significant week for the mining and metals sector kicks off with Cleveland-Cliffs, expecting topline growth of 7% and a reduction in losses compared to previous quarters. Other notable earnings include Alcoa, Freeport-McMoRan, and Newmont, with expectations for mixed results as the sector navigates various challenges.
Additional earnings reports include Quest Diagnostics and Valmont Industries, both anticipated to show growth. GE Vernova is also expected to disclose improved quarterly results, while United Rentals anticipates steady growth driven by rental demand.
With a busy earnings calendar ahead, market participants are closely monitoring these developments for insights into the broader economic landscape and individual stock performance.
