S&P 500 News: Bill Ackman closes 30-year US Treasury short, stocks boomerang up, then down

• 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%.