A positive start to a new earnings season and late-week hopes for a near-term easing in Fed rate hikes lifted investors’ spirits and powered stocks to gains for the week.
The Standard & Poor’s 500 advanced 4.74%, while the Dow Jones Industrial Average jumped 4.89%. The Nasdaq Composite index added 5.22% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, gained 1.66%.1,2,3
Earnings, Fed Spark Rally
The stock market narrative shifted last week from Fed interest rate hikes (a persistent drag on investor sentiment) to corporate earnings, which boosted investor enthusiasm with better-than-expected results. Stocks surged in the first two days of trading on the strength of positive earnings surprises, aided by a modest pullback in bond yields and news that the U.K. was scrapping its tax cut plans.
Mid-week, stocks surrendered some gains on a stronger U.S. dollar and rising bond yields. But on Friday, comments by a Fed official that hinted at a possible relaxation in Fed rate hikes sent stocks soaring to close out a good week.
Better Than Expected
Investors were approaching the new earnings season with a fair amount of trepidation amid an environment of higher interest rates and a slowing economy. The concern has been that poor earnings may drag stock prices lower from current levels.
Early earnings results have provided investors with mostly positive surprises. With 88 companies comprising the S&P 500 index reporting, 75% reported profits above analysts’ expectations, well above the 66% long-term average.4
I talked about this last quarter. Traders worry that inflation and rising rates will slow spending. Those things are hurting all of us people who have to buy things and sometimes have to borrow money. Yet companies are able to raise prices and many have positive earnings surprises.
The irony is that one of these quarters earnings will be down, but that will likely be a signal that the Fed will soon stop raising rates, and so the market may consider it to be "good" news.
This Week: Key Economic Data
Monday: Purchasing Managers’ Index (PMI) Composite.
Tuesday: Consumer Confidence.
Wednesday: New Home Sales.
Thursday: Jobless Claims. Durable Goods Sales. Gross Domestic Product (GDP).
Source: Econoday, October 21, 2022
This Week: Companies Reporting Earnings
Tuesday: Microsoft Corporation (MSFT), General Electric Company (GE), Visa, Inc. (V), Alphabet, Inc. (GOOGL), General Motors Company (GM), The CocaCola Company (KO), Archer Daniels Midland Company (ADM), 3M Company (MMM), Texas Instruments, Inc. (TXN), United Parcel Service, Inc. (UPS), KimberlyClark Corporation (KMB).
Wednesday: The Boeing Company (BA), Ford Motor Company (F), Bristol Myers Squibb Company (BMY), ServiceNow, Inc. (NOW), General Dynamics Corporation (GD), Norfolk Southern Corporation (NSC).
Thursday: Apple, Inc. (AAPL), Amazon.com, Inc. (AMZN), Intel Corporation (INTC), Mastercard, Inc. (MA), Caterpillar, Inc. (CAT), Merck & Co., Inc. (MRK), McDonald’s Corporation (MCD), Northrop Grumman Corporation (NOC), Comcast Corporation (CMCSA), Southwest Airlines Company (LUV).
Friday: AbbVie, Inc. (ABBV), Exxon Mobil Corporation (XOM), Chevron Corporations (CVX), ColgatePalmolive Company (CL).
Source: Zacks, October 21, 2022
"Judge each day not by the harvest you reap but by the seeds you plant."
– Robert Louis Stevenson
What to Know About Excise Tax as a Business Owner
Federal and state excise taxes are for specific goods, services, and activities, such as fuel, tobacco, alcohol, airline tickets, and more.
If your business is subject to excise tax, you must file a Form 720, Quarterly Excise Tax Return, to report the tax. You must also file this form every quarter. The due dates as of 2022 are April 30 for Q1, July 31 for Q2, October 31 for Q3, and January 31 for Q4.
You can electronically file Form 720. Each industry may have its forms (ex: Form 2290, Heavy Highway Vehicle Use Tax).
* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.
Tip adapted from IRS.gov5
You can’t have fall without pumpkins, and this pumpkin bread recipe is the perfect way to enjoy the seasonal fruit.
Tip adapted from Once Upon a Chef6
They can run side by side for thousands of miles; they are made of steel. While they constantly touch the ground, they seldom meet or touch each other. What are they?
Last week’s riddle: They are sometimes stomped on, yet they can also be very tasty and sweet. What are they? Answer: Grapes.
Sally Lightfoot Crab, Grapsus grapsus, one of the most common crabs in the U.S.
Footnotes and Sources
2. The Wall Street Journal, October 21, 2022
3. The Wall Street Journal, October 21, 2022
4. Refinitiv, October 20, 2022
5. IRS.gov, August 1, 2022
6. Once Upon a Chef, August 4, 2022
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The market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results.
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Weekly Market Insights: Wall Street Flips the Script & Enjoys a Rally.
October 24, 2022