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Gaps Reported in Earnings, Spending; Exxon, Chevron Beat in Q3

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Friday, October 29, 2021

It’s the last trading day for the month of October, which marks a nice rebound from a troubled September on the markets. Routine record high closes on the indexes around Labor Day gave way to speculation about weaker employment and supply-chain news. By the beginning of October, signs of progress in a new infrastructure spending bill passing Congress — which has yet to happen, by the way — and better-than-expected Q3 reports have paved the way back to those record-high closes.

Leading the way among major indexes was the tech-heavy Nasdaq, +6.45% in the past month, even as two of its biggest FAANG* components — Apple (AAPL - Free Report) and Amazon (AMZN - Free Report) — posted disappointed quarterly reports yesterday afternoon. Following that is the broader S&P 500, +5.44% on the month, then the Dow at +3.9% and the small-cap Russell 2000 +3.27%. All are welcome advances for the first third of calendar Q4.

Ahead of the opening bell today, we see new Personal Income and Consumer Spending metrics, which point to an imbalance we may see on the horizon: while Americans are still purchasing goods and services at a steady clip, income is drifting downward. Nominal personal income for September came in at -1.0%, worse than the -0.4% expected and the +0.2% we saw in August, and seemingly calibrating from July’s nice +1.1%. Real disposable income for the month reached just -1.6%, much worse than the -0.2% reported for the last full month of summer.

On the other side of the coin, new consumer spending matched the consensus estimate +0.6%, and down slightly from +1.0% reported in August. Meanwhile, Core Inflation stayed consistent and manageable at +0.2%, the same as expected and down 10 basis points from the previous month. What we might take away from this morning’s numbers on these metrics is that wage hikes look to have frozen for a time, even as prices are rising. Likely this would pinch margins for the average U.S. household, but it may be too early in the process to feel it too deeply yet.

An infrastructure passage that would bring tens of thousands of new jobs into the economy is widely expected to bring positive change to overall U.S. income data. Whether that comes soon or not until the new year perhaps may create a widening maw in the economy resembling “stagflation,” or it may be the right-on-time remedy the markets are currently anticipating.

* With Facebook no longer called Facebook and Google no longer Google, does the FAANG moniker even apply anymore?

Two Zacks Rank #1 (Strong Buy)-rated Integrated Oil Supermajors reported earnings ahead of today’s opening bell. Both reported earnings and sales beats for the quarter, with some of the gaudiest numbers seen at any oil company for quite some time.

ExxonMobil (XOM - Free Report) beat bottom-line estimates by a penny to $1.58 per share, far better than the rough patch a year ago, -$0.18 per share — and the highest earnings result the company has posted in years. Revenues in the quarter came in at $73.79 billion, a positive surprise of +0.66%. Exxon also announced forthcoming stock repurchases in 2022. Shares are up more than +1% on the news, and a whopping +56% year to date. For more on XOM’s earnings, click here.

Chevron (CVX - Free Report) beat estimates by even bigger margins this morning: earnings of $2.96 per share on sales of $44.7 billion took out the $2.21 per share and $42.5 billion, respectively, in the Zacks consensus. It represents top-line growth of more than +82%. The company also reports a record-high $6 billion in cash and cash equivalents. Chevron is +1.6% in today’s pre-market, +36% year to date. For more on CVX’s earnings, click here.

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