The U.S. Continues Its Leadership
For the week, the Russell 3000 Index rose 0.4%, as Growth (+1.6%) outpaced Value (‑0.9%). Outside of the United States (U.S.), the MSCI All‑Country World Index ex-USA fell 0.4%, as emerging markets (-1.3%) fully offset the positive return of developed markets (+0.8%).
On the Macro Front
The first estimate of third quarter U.S. gross domestic product (GDP) came in at an annual rate of 2.8%, modestly ahead of expectations but below the second quarter’s growth of 3.0%. Growth in GDP was driven by increases in consumer spending (in both goods and services), exports, and federal spending (primarily attributed to defense spending).
The Eurozone reported its preliminary third quarter GDP rose 0.9%, modestly ahead of expectations and above the 0.6% increase for the second quarter. This incorporated increases in GDP for France of 0.4%, 0.2% for Germany, 0.8% for Spain, but a decline of 0.03% for Italy.
Another gauge of regional economic viability is the S&P Global Purchasing Managers’ Index (PMI) series. Its first estimate, or “flash reports,” for October were released this week. The U.S. Composite Output Index rose to 54.3, which was a two‑month high, “driven solely by the service sector,” as “manufacturing output contracted for a third month running.”
Within the Eurozone, the PMI Composite Index remained in contraction at 49.7, in line with September’s 49.6 as, “business activity in the euro area ticked lower for the second month running, with the marginal decline broadly in line with that seen in September.”
U.S. pending homes sales for September rose 7.4%, materially exceeding expectations for a 3.2% rise and August’s rise of 0.6%. According to the National Association of Realtors, “[c]ontract signings rose across all regions of the country as buyers took advantage of the combination of lower mortgage rates in late summer and more inventory choices.”
Earnings Season Abounds
According to London Stock Exchange Institutional Brokers’ Estimate System (LSEG I/B/E/S), 257 companies within the S&P 500 have reported third‑quarter earnings. Of these, 77.4% having beat estimates, exhibiting a 7.2% beat rate with reported year‑over‑year (YOY) earnings growth of 10.0%. When factoring in companies yet‑to‑report, the projected YOY growth rate is 6.0%.
For the Russell 2000, 202 of 1,844 companies have reported with 61.9% exceeding estimates with a beat rate of 4.1% resulting in a reported YOY contraction of 0.2% in earnings. When factoring in companies yet‑to‑report, the projected YOY growth rate is 38.3%.
Regarding MSCI EAFE, 143 of 452 companies have reported, exhibiting a beat rate of 7.1% with average reported YOY earnings growth of 10.2%. When factoring in companies yet‑to‑report, the projected YOY growth rate is 7.1%.
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Sources: BTC Capital Management, FactSet Research Systems Inc., MSCI Inc., LSEG Group, FTSE Russell (an LSEG Group company), S&P Global, National Association of Realtors, U.S. Bureau of Economic Analysis, European Commission.
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