Week of October 24, 2022

Stock prices rallied last week as corporate earnings gave investors a hope of better things to come, capped off with a major rally on Friday.  On the day, the Dow gained 748 points, or 2.5%, while the S&P 500 added almost 87 points, or 2.4%.  The technology-heavy NASDAQ surged 244 points, or 2.3%.  Although investors saw a considerable volatility last week, the three major indexes scored their biggest weekly percentage gains since June.  On the week, the Dow and S&P 500 rose 4.9% and 4.7%, respectively, while the NASDAQ added 5.2% as investors came off the sidelines to buy tech stocks that have beaten down this year.

“Earnings expectations, if you strip out the energy sector, they went from about positive 6% back in July for this quarter’s earnings, all the way down to… negative 3%,” MBO Wealth Management Chief Investment Strategist Yung-Yu Ma told Yahoo Finance Live on Friday.  “And so, once you lower the bar that much, it does set up an environment where its easier to beat earnings, a lot easier to have relief rallies.”

The upcoming week is the busiest of the third-quarter earnings season, with 165 S&P 500 companies, including 12 Dow companies reporting.  That includes earnings from big tech companies Alphabet, Amazon, Apple, Meta and Microsoft.

Treasury yields retreated after a relentless climb last week that saw the 10-year Treasury note temporarily hit a 14-year high at above 4.3%.  On Friday, the Wall Street Journal reported that some Federal Reserve officials were concerned with the pace of the interest rate hikes ahead of their November 1 – 2 meeting.  It is widely believed that the Fed will raise short-term lending rates 0.75% at that meeting, and possibly another 0.75% at their meeting in December.