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US stocks opened higher Friday morning and looked primed for their second straight winning week after President Trump confirmed an upcoming meeting with Chinese President Xi, alleviating trade tensions between the two nations.
Adding to the bullish case, market participants have reacted positively to the latest round of third-quarter earnings reports. Overall, the start to the third-quarter earnings season has been very positive. We’re seeing broad beats across the board, from automaker GM to beverage giant Coca-Cola. For the 99 S&P 500 companies that have reported Q3 results, total earnings are up 13.7% from the same period last year on 8.2% higher revenues, with nearly 87% beating EPS estimates.
We’ve seen optimistic comments throughout the week from government officials, including Treasury Secretary Scott Bessent who indicated the US and China would hold trade talks in Malaysia. The news came after Bessent met virtually with Vice Premier He Lifeng last week, a discussion that the Chinese state media described as a “constructive” exchange of views.
President Trump went on to list the top three issues on his agenda – rare earths, stopping the flow of fentanyl, and soybeans. He seems to have backed off his “100% tariff” threat on China, calling the number “unsustainable.” He’s set to meet with Xi next Thursday.
Regarding his first objective, Trump and Australian Prime Minister Anthony Albanese signed the framework of a critical minerals deal this week that seeks to bolster US access to rare earth resources.
Stocks Look Set for Year-End Rally
The volatility (VIX) index surged last week, but has plunged off its highs and is now about 40% lower than the intraday peak last Friday. This is a bullish development and exactly what we want to see as the month of October comes to a close.
Image Source: StockCharts
The VIX dropped 36% over the first two days from its peak. Similar 2-day drops (spanning 6 instances over the past 12 years) saw the S&P 500 higher each time over the course of the next month, with an average return of 3.4%. Looking out 6 months later in each case, the S&P 500 was also higher every time with an 11% average return.
From a seasonal perspective, it appears the month of October is playing out in typical fashion in terms of its performance during post-election years. And besides the fact that Thanksgiving is upon us, we should all be extra grateful that the month of November has been the best month in terms of performance over the past decade.
CPI Comes in Cool
The long-awaited Consumer Price Index (CPI) numbers from September showed inflation came in lower-than-expected last month. The Bureau of Labor Statistics reported the CPI rose 3.0% year-over-year, slightly below expectations of 3.1%.
Core inflation, which excludes volatile food and energy components, also rose 3.0% on an annual basis and was below the median projection. On a monthly basis, core prices increased 0.2%, easing from the 0.3% gain we saw back in August.
The government shutdown continues for the time being and is now the second-longest federal work stoppage in US history. Yet sentiment is improving that the shutdown could end very soon.
Another 25-basis point rate cut is all but assured next week, with investors pricing in a roughly 97% probability that the Fed proceeds as planned.
Stocks to Watch
The artificial intelligence theme remains front and center as many technology stocks are soaring into the final quarter of the year. Leading chipmaker Advanced Micro Devices (AMD - Free Report) hit a new all-time high this morning and was up more than 5% in early trading. A fresh partnership with Open AI propelled AMD shares fmore than 50% over the past month.
Image Source: StockCharts
Another leading stock is AI infrastructure provider Vertiv Holdings (VRT - Free Report) , which reported third-quarter earnings earlier this week of $1.24 per share. The figure represented a 24% positive surprise versus consensus estimates. Revenues of $2.68 billion surpassed projections by 3.6%. Vertiv executive chairman Dave Cote remarked, “The digital age is just beginning.”
Image Source: StockCharts
Final Thoughts
There’ve been plenty of chances for stocks to pull back.
The fact that the march continues without much of a hiccup tells us to keep an open mind about further upside into year-end. As the saying goes, respect the trend until the end when it bends.
Make sure to take advantage of all that Zacks has to offer as the third-quarter earnings season continues to heat up.
Disclosure: Vertiv is a current holding in the Zacks Headline Trader portfolio.
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Year-End Rally Odds Increase: Stocks to Watch
US stocks opened higher Friday morning and looked primed for their second straight winning week after President Trump confirmed an upcoming meeting with Chinese President Xi, alleviating trade tensions between the two nations.
Adding to the bullish case, market participants have reacted positively to the latest round of third-quarter earnings reports. Overall, the start to the third-quarter earnings season has been very positive. We’re seeing broad beats across the board, from automaker GM to beverage giant Coca-Cola. For the 99 S&P 500 companies that have reported Q3 results, total earnings are up 13.7% from the same period last year on 8.2% higher revenues, with nearly 87% beating EPS estimates.
We’ve seen optimistic comments throughout the week from government officials, including Treasury Secretary Scott Bessent who indicated the US and China would hold trade talks in Malaysia. The news came after Bessent met virtually with Vice Premier He Lifeng last week, a discussion that the Chinese state media described as a “constructive” exchange of views.
President Trump went on to list the top three issues on his agenda – rare earths, stopping the flow of fentanyl, and soybeans. He seems to have backed off his “100% tariff” threat on China, calling the number “unsustainable.” He’s set to meet with Xi next Thursday.
Regarding his first objective, Trump and Australian Prime Minister Anthony Albanese signed the framework of a critical minerals deal this week that seeks to bolster US access to rare earth resources.
Stocks Look Set for Year-End Rally
The volatility (VIX) index surged last week, but has plunged off its highs and is now about 40% lower than the intraday peak last Friday. This is a bullish development and exactly what we want to see as the month of October comes to a close.
Image Source: StockCharts
The VIX dropped 36% over the first two days from its peak. Similar 2-day drops (spanning 6 instances over the past 12 years) saw the S&P 500 higher each time over the course of the next month, with an average return of 3.4%. Looking out 6 months later in each case, the S&P 500 was also higher every time with an 11% average return.
From a seasonal perspective, it appears the month of October is playing out in typical fashion in terms of its performance during post-election years. And besides the fact that Thanksgiving is upon us, we should all be extra grateful that the month of November has been the best month in terms of performance over the past decade.
CPI Comes in Cool
The long-awaited Consumer Price Index (CPI) numbers from September showed inflation came in lower-than-expected last month. The Bureau of Labor Statistics reported the CPI rose 3.0% year-over-year, slightly below expectations of 3.1%.
Core inflation, which excludes volatile food and energy components, also rose 3.0% on an annual basis and was below the median projection. On a monthly basis, core prices increased 0.2%, easing from the 0.3% gain we saw back in August.
The government shutdown continues for the time being and is now the second-longest federal work stoppage in US history. Yet sentiment is improving that the shutdown could end very soon.
Another 25-basis point rate cut is all but assured next week, with investors pricing in a roughly 97% probability that the Fed proceeds as planned.
Stocks to Watch
The artificial intelligence theme remains front and center as many technology stocks are soaring into the final quarter of the year. Leading chipmaker Advanced Micro Devices (AMD - Free Report) hit a new all-time high this morning and was up more than 5% in early trading. A fresh partnership with Open AI propelled AMD shares fmore than 50% over the past month.
Image Source: StockCharts
Another leading stock is AI infrastructure provider Vertiv Holdings (VRT - Free Report) , which reported third-quarter earnings earlier this week of $1.24 per share. The figure represented a 24% positive surprise versus consensus estimates. Revenues of $2.68 billion surpassed projections by 3.6%. Vertiv executive chairman Dave Cote remarked, “The digital age is just beginning.”
Image Source: StockCharts
Final Thoughts
There’ve been plenty of chances for stocks to pull back.
The fact that the march continues without much of a hiccup tells us to keep an open mind about further upside into year-end. As the saying goes, respect the trend until the end when it bends.
Make sure to take advantage of all that Zacks has to offer as the third-quarter earnings season continues to heat up.
Disclosure: Vertiv is a current holding in the Zacks Headline Trader portfolio.