S&P 500 News: Bill Ackman closes 30-year US Treasury short, stocks boomerang up, then down
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UPGRADE- S&P 500 goes down, then up, then down on Monday.
- US Treasuries sell off at longer tenures after Bill Ackman closes his 30-year short bet.
- Meta, Microsoft, Alphabet, Coca-Cola, Amazon, Ford and Intel all report earnings this week.
- Thursday sees Preliminary Q3 US GDP reported, economists expect a jump to 4.2%.
- On Friday, Annualized Core Personal Consumption Expenditures for September is expected to fall to 3.7%.
The S&P 500 index performed a boomerang session on Monday following last week’s disastrous -2.39% nosedive. The index covering the 500 largest US stocks shot lower at the open, then rose above 0.4% before backtracking to close down -0.17%.
The positive news on Monday was hedge fund titan Bill Ackman of Pershing Square announcing that he had closed his short bet against 30-year US Treasuries. The market took this as a signal that the bond slump may be over, and Treasury yields receded from their recent 16 year highs. “There is too much risk in the world to remain short bonds at current long-term rates,” Ackman wrote on X, formerly Twitter.
Since yields tend to move inversely to US equity prices, indices largely moved higher. The Dow Jones was the main outlier, remaining underwater for most of the session, while the NASDAQ Composite jumped 0.6% before closing up 0.27%. However, news from JPMorgan that Apple’s (AAPL) product lead times for its iPhones were falling due to slowing demand led to a late session sell-off.
Investors have a lot to look forward to this week as the peak of earnings season is here. Dozens of well-known names will deliver their third-quarter results, which should spur rallies in certain names, possibly providing a tailwind to the S&P 500. In addition, economists are expecting a major rise in annualized GDP for the third quarter, the preliminary reading of which arrives on Thursday. Then on Friday comes the Federal Reserve’s favorite inflation indicator – Core Personal Consumption Expenditures (PCE) for September.
S&P 500 News: Earnings galore
There are almost too many companies reporting this week to pay close attention. While Monday is rather weak, on Tuesday the deluge begins. That day has all of these stocks releasing results: 3M (MMM), Ares Capital (ARCC), Alphabet (GOOGL), Archer-Daniels-Midland (ADM), Nextera Energy (NEE), Dow (DOW), Quest Diagnostics (DGX), Verizon (VZ) General Motors (GM), Microsoft (MSFT), Kimberly-Clark (KMB), Spotify (SPOT), Visa (V), Texas Instruments (TXN), Snap (SNAP), Illinois Tool Works (ITW), Coca-Cola (KO).
Tuesday’s onslaught is so large that a number of major companies weren’t listed in the above paragraph. If any of the mega-cap firms experience large misses, expect the S&P 500 to tank in tandem.
Nearly 160 S&P 500 companies are slated to report this week, and thus far those that have already reported are following a general theme: earnings are beating consensus far more often than revenue.
Here are the expectations for some of the most-followed stocks reporting this week:
- Alphabet: $1.45 in earnings per share (EPS) on revenue of $75.81 billion. Analysts at Citi say to expect 11.3% YoY search revenue growth and 7.5% YoY ad revenue growth at YouTube.
- Microsoft: $2.65 on EPS with $54.55 billion in revenue. Analysts are heavily bullish on the quarter.
- Amazon: $0.59 cents in adjusted EPS on revenue of $141.6 billion. That amounts to 11.4% revenue growth, and analysts are bullish on the Q4 outlook.
- Visa: $2.54 in adjusted EPS on $8.55 billion. Analysts are a bit mixed on Q3 earnings, but the majority of revisions have been higher not lower.
- Meta Platforms: $3.61 in adjusted EPS on revenue of $33.45 billion. Meta has been one of the best performing mega-cap stocks of the year, and analysts are nearly unanimous in forecasting another major beat for Q3.
PCE, GDP are the week’s primary economic indicators
On Thursday, Preliminary GDP data for Q3 arrives. Economists have been largely optimistic for the third quarter, with the consensus being that the quarter would double at an annualized rate compared to Q2. Consensus for Q3 calls for 4.2% annualized economic growth in the US compared with the second quarter’s 2.1% reading.
On the inflation front, there is now heavy certainty that the Fed will maintain rates unchanged at both the November and December meetings. This is, of course, the “higher for longer” mantra. The only thing that might swing sentiment at this point is the Fed’s favorite gauge of inflation, the Core PCE data.
On Friday, we’ll see if inflation drops again (the long-term trend) or rises slightly as it did in August. Consensus expects Core PCE to fall from 3.9% to 3.7% at an annualized rate, while monthly Core PCE is expected to fall from 0.4% to 0.3%.
S&P 500 FAQs
What is the S&P 500?
The S&P 500 is a widely followed stock price index which measures the performance of 500 publicly owned companies, and is seen as a broad measure of the US stock market. Each company’s influence on the computation of the index is weighted based on market capitalization. This is calculated by multiplying the number of publicly traded shares of the company by the share price. The S&P 500 index has achieved impressive returns – $1.00 invested in 1970 would have yielded a return of almost $192.00 in 2022. The average annual return since its inception in 1957 has been 11.9%.
How are companies chosen to be included in the S&P 500?
Companies are selected by committee, unlike some other indexes where they are included based on set rules. Still, they must meet certain eligibility criteria, the most important of which is market capitalization, which must be greater than or equal to $12.7 billion. Other criteria include liquidity, domicile, public float, sector, financial viability, length of time publicly traded, and representation of the industries in the economy of the United States. The nine largest companies in the index account for 27.8% of the market capitalization of the index.
How can I trade the S&P 500?
There are a number of ways to trade the S&P 500. Most retail brokers and spread betting platforms allow traders to use Contracts for Difference (CFD) to place bets on the direction of the price. In addition, that can buy into Index, Mutual and Exchange Traded Funds (ETF) that track the price of the S&P 500. The most liquid of the ETFs is State Street Corporation’s SPY. The Chicago Mercantile Exchange (CME) offers futures contracts in the index and the Chicago Board of Options (CMOE) offers options as well as ETFs, inverse ETFs and leveraged ETFs.
What factors drive the S&P 500?
Many different factors drive the S&P 500 but mainly it is the aggregate performance of the component companies revealed in their quarterly and annual company earnings reports. US and global macroeconomic data also contributes as it impacts on investor sentiment, which if positive drives gains. The level of interest rates, set by the Federal Reserve (Fed), also influences the S&P 500 as it affects the cost of credit, on which many corporations are heavily reliant. Therefore, inflation can be a major driver as well as other metrics which impact the Fed decisions.
Earnings of the week
Monday, October 23 - Cleveland-Cliffs (CLF), Whirlpool (WHR), Bank of Hawaii (BOH)
Tuesday, October 24 - 3M (MMM), Ares Capital (ARCC), Alphabet (GOOGL), Archer-Daniels-Midland (ADM), Nextera Energy (NEE), Dow (DOW), Quest Diagnostics (DGX), Verizon (VZ) General Motors (GM), Microsoft (MSFT), Kimberly-Clark (KMB), Spotify (SPOT), Visa (V), Texas Instruments (TXN), Snap (SNAP), Illinois Tool Works (ITW), Coca-Cola (KO)
Wednesday, October 25 - Boeing (BA), Meta Platforms (META), T Mobile (TMUS), General Dynamics (GD), ServiceNow (NOW), International Business Machines (IBM), ThermoFisher Scientific (TFO), O’Reilly Automotive, KLA Corporation (KLAC)
Thursday, October 26 - Amazon (AMZN), United Parcel Service (UPS), Enphase Energy (ENPH), Hershey (HSY), Intel (INTC), Ford (F), Merck (MRK), Tractor Supply (TSCO), Chipotle (CMG), Altria (MO)
Friday, October 27 - Abbvie (ABBV), ExxonMobil (XOM), AutoNation (AN), Colgate-Palmolive (CL), Charter Communications (CHTR)
What they said about the market – Piper Sandler
Reiterating its end of year expectation for the S&P 500, last Thursday equity analysts at Piper Sandler said to ignore the market’s recent weakness, adding that they are sticking to their guns that the index will close out 2023 at 4,825. Based on breadth indicators, the firm says that the market is likely to incur “more than a relief rally”.
“As long as the SPX remains above 4,200 support, we suspect it is just a matter of time before bulls take firmer control of equities.”
S&P 500 forecast
If you liked the Piper Sandler quote above, you’ll love how close the S&P 500 is getting to breaking through 4,200 at the start of this week. In fact, it did in Monday’s session momentarily. The index opened lower and traveled the whole way down to 4,189 before rebounding into the early afternoon, marking a high at 4,255. From there the index shed more weight and closed at 4,217.
The close came below support near 4,220, which mostly pushed up the index at the beginning of October. Additionally, the boomerang session had the index close below the 200-day moving average for its second session in a row. Both of these signs tell us that there is more downside in store – probably much more. The last time the S&P 500 closed below the 200-day SMA was March 17 of this year, but that was at a time when the index was attempting to break above the barrier.
It is best to trust the gut on this one. If the index broke below the 4,200 barrier on Monday, then it is probably going to continue its downward trajectory. The worry is that there isn’t much support until 4,050 – another 4% lower.
S&P 500 daily chart
- S&P 500 goes down, then up, then down on Monday.
- US Treasuries sell off at longer tenures after Bill Ackman closes his 30-year short bet.
- Meta, Microsoft, Alphabet, Coca-Cola, Amazon, Ford and Intel all report earnings this week.
- Thursday sees Preliminary Q3 US GDP reported, economists expect a jump to 4.2%.
- On Friday, Annualized Core Personal Consumption Expenditures for September is expected to fall to 3.7%.
The S&P 500 index performed a boomerang session on Monday following last week’s disastrous -2.39% nosedive. The index covering the 500 largest US stocks shot lower at the open, then rose above 0.4% before backtracking to close down -0.17%.
The positive news on Monday was hedge fund titan Bill Ackman of Pershing Square announcing that he had closed his short bet against 30-year US Treasuries. The market took this as a signal that the bond slump may be over, and Treasury yields receded from their recent 16 year highs. “There is too much risk in the world to remain short bonds at current long-term rates,” Ackman wrote on X, formerly Twitter.
Since yields tend to move inversely to US equity prices, indices largely moved higher. The Dow Jones was the main outlier, remaining underwater for most of the session, while the NASDAQ Composite jumped 0.6% before closing up 0.27%. However, news from JPMorgan that Apple’s (AAPL) product lead times for its iPhones were falling due to slowing demand led to a late session sell-off.
Investors have a lot to look forward to this week as the peak of earnings season is here. Dozens of well-known names will deliver their third-quarter results, which should spur rallies in certain names, possibly providing a tailwind to the S&P 500. In addition, economists are expecting a major rise in annualized GDP for the third quarter, the preliminary reading of which arrives on Thursday. Then on Friday comes the Federal Reserve’s favorite inflation indicator – Core Personal Consumption Expenditures (PCE) for September.
S&P 500 News: Earnings galore
There are almost too many companies reporting this week to pay close attention. While Monday is rather weak, on Tuesday the deluge begins. That day has all of these stocks releasing results: 3M (MMM), Ares Capital (ARCC), Alphabet (GOOGL), Archer-Daniels-Midland (ADM), Nextera Energy (NEE), Dow (DOW), Quest Diagnostics (DGX), Verizon (VZ) General Motors (GM), Microsoft (MSFT), Kimberly-Clark (KMB), Spotify (SPOT), Visa (V), Texas Instruments (TXN), Snap (SNAP), Illinois Tool Works (ITW), Coca-Cola (KO).
Tuesday’s onslaught is so large that a number of major companies weren’t listed in the above paragraph. If any of the mega-cap firms experience large misses, expect the S&P 500 to tank in tandem.
Nearly 160 S&P 500 companies are slated to report this week, and thus far those that have already reported are following a general theme: earnings are beating consensus far more often than revenue.
Here are the expectations for some of the most-followed stocks reporting this week:
- Alphabet: $1.45 in earnings per share (EPS) on revenue of $75.81 billion. Analysts at Citi say to expect 11.3% YoY search revenue growth and 7.5% YoY ad revenue growth at YouTube.
- Microsoft: $2.65 on EPS with $54.55 billion in revenue. Analysts are heavily bullish on the quarter.
- Amazon: $0.59 cents in adjusted EPS on revenue of $141.6 billion. That amounts to 11.4% revenue growth, and analysts are bullish on the Q4 outlook.
- Visa: $2.54 in adjusted EPS on $8.55 billion. Analysts are a bit mixed on Q3 earnings, but the majority of revisions have been higher not lower.
- Meta Platforms: $3.61 in adjusted EPS on revenue of $33.45 billion. Meta has been one of the best performing mega-cap stocks of the year, and analysts are nearly unanimous in forecasting another major beat for Q3.
PCE, GDP are the week’s primary economic indicators
On Thursday, Preliminary GDP data for Q3 arrives. Economists have been largely optimistic for the third quarter, with the consensus being that the quarter would double at an annualized rate compared to Q2. Consensus for Q3 calls for 4.2% annualized economic growth in the US compared with the second quarter’s 2.1% reading.
On the inflation front, there is now heavy certainty that the Fed will maintain rates unchanged at both the November and December meetings. This is, of course, the “higher for longer” mantra. The only thing that might swing sentiment at this point is the Fed’s favorite gauge of inflation, the Core PCE data.
On Friday, we’ll see if inflation drops again (the long-term trend) or rises slightly as it did in August. Consensus expects Core PCE to fall from 3.9% to 3.7% at an annualized rate, while monthly Core PCE is expected to fall from 0.4% to 0.3%.
S&P 500 FAQs
What is the S&P 500?
The S&P 500 is a widely followed stock price index which measures the performance of 500 publicly owned companies, and is seen as a broad measure of the US stock market. Each company’s influence on the computation of the index is weighted based on market capitalization. This is calculated by multiplying the number of publicly traded shares of the company by the share price. The S&P 500 index has achieved impressive returns – $1.00 invested in 1970 would have yielded a return of almost $192.00 in 2022. The average annual return since its inception in 1957 has been 11.9%.
How are companies chosen to be included in the S&P 500?
Companies are selected by committee, unlike some other indexes where they are included based on set rules. Still, they must meet certain eligibility criteria, the most important of which is market capitalization, which must be greater than or equal to $12.7 billion. Other criteria include liquidity, domicile, public float, sector, financial viability, length of time publicly traded, and representation of the industries in the economy of the United States. The nine largest companies in the index account for 27.8% of the market capitalization of the index.
How can I trade the S&P 500?
There are a number of ways to trade the S&P 500. Most retail brokers and spread betting platforms allow traders to use Contracts for Difference (CFD) to place bets on the direction of the price. In addition, that can buy into Index, Mutual and Exchange Traded Funds (ETF) that track the price of the S&P 500. The most liquid of the ETFs is State Street Corporation’s SPY. The Chicago Mercantile Exchange (CME) offers futures contracts in the index and the Chicago Board of Options (CMOE) offers options as well as ETFs, inverse ETFs and leveraged ETFs.
What factors drive the S&P 500?
Many different factors drive the S&P 500 but mainly it is the aggregate performance of the component companies revealed in their quarterly and annual company earnings reports. US and global macroeconomic data also contributes as it impacts on investor sentiment, which if positive drives gains. The level of interest rates, set by the Federal Reserve (Fed), also influences the S&P 500 as it affects the cost of credit, on which many corporations are heavily reliant. Therefore, inflation can be a major driver as well as other metrics which impact the Fed decisions.
Earnings of the week
Monday, October 23 - Cleveland-Cliffs (CLF), Whirlpool (WHR), Bank of Hawaii (BOH)
Tuesday, October 24 - 3M (MMM), Ares Capital (ARCC), Alphabet (GOOGL), Archer-Daniels-Midland (ADM), Nextera Energy (NEE), Dow (DOW), Quest Diagnostics (DGX), Verizon (VZ) General Motors (GM), Microsoft (MSFT), Kimberly-Clark (KMB), Spotify (SPOT), Visa (V), Texas Instruments (TXN), Snap (SNAP), Illinois Tool Works (ITW), Coca-Cola (KO)
Wednesday, October 25 - Boeing (BA), Meta Platforms (META), T Mobile (TMUS), General Dynamics (GD), ServiceNow (NOW), International Business Machines (IBM), ThermoFisher Scientific (TFO), O’Reilly Automotive, KLA Corporation (KLAC)
Thursday, October 26 - Amazon (AMZN), United Parcel Service (UPS), Enphase Energy (ENPH), Hershey (HSY), Intel (INTC), Ford (F), Merck (MRK), Tractor Supply (TSCO), Chipotle (CMG), Altria (MO)
Friday, October 27 - Abbvie (ABBV), ExxonMobil (XOM), AutoNation (AN), Colgate-Palmolive (CL), Charter Communications (CHTR)
What they said about the market – Piper Sandler
Reiterating its end of year expectation for the S&P 500, last Thursday equity analysts at Piper Sandler said to ignore the market’s recent weakness, adding that they are sticking to their guns that the index will close out 2023 at 4,825. Based on breadth indicators, the firm says that the market is likely to incur “more than a relief rally”.
“As long as the SPX remains above 4,200 support, we suspect it is just a matter of time before bulls take firmer control of equities.”
S&P 500 forecast
If you liked the Piper Sandler quote above, you’ll love how close the S&P 500 is getting to breaking through 4,200 at the start of this week. In fact, it did in Monday’s session momentarily. The index opened lower and traveled the whole way down to 4,189 before rebounding into the early afternoon, marking a high at 4,255. From there the index shed more weight and closed at 4,217.
The close came below support near 4,220, which mostly pushed up the index at the beginning of October. Additionally, the boomerang session had the index close below the 200-day moving average for its second session in a row. Both of these signs tell us that there is more downside in store – probably much more. The last time the S&P 500 closed below the 200-day SMA was March 17 of this year, but that was at a time when the index was attempting to break above the barrier.
It is best to trust the gut on this one. If the index broke below the 4,200 barrier on Monday, then it is probably going to continue its downward trajectory. The worry is that there isn’t much support until 4,050 – another 4% lower.
S&P 500 daily chart
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