Disney leads a calm week of earnings

key takeaway

• Higher earnings boost stock
• Positive economic data supports smooth landing
• Disney’s remaining earnings grab the headlines this week

The stock market soared last week due to strong earnings, with the S&P 500 increasing nearly 6% and the Nasdaq Composite rising over 6.5%. Bond prices also rose, resulting in lower yields. On Friday, the 10-year yield closed at 4.55% after reaching 5% the previous week. The Federal Reserve’s decision at the end of the week, combined with weaker-than-expected economic data, gave investors a reason to be optimistic as the year comes to a close.

According to FactSet, earnings in the S&P 500 have increased by 3.7% for the quarter as of Friday. This marks the first quarterly increase since 3Q 2022. Revenue is also projected to grow at 2.3% with the communications and consumer discretionary sectors performing the best. Companies such as Google
GOOG
, Amazon
AMZN
, Netflix
nflx
, and Meta saw the largest increase of 42%. Meanwhile, companies like McDonald’s, Starbucks
SBUX
, Airbnb, and Marriott International contributed to a 41% boost in consumer discretionary income. The stronger-than-expected earnings indicate a robust economy, while other indicators suggest that inflation may be under control, supporting the possibility of a “soft landing,” although some have questioned its feasibility.

The previous week was filled with economic data and decisions on interest rates by the Federal Reserve. On Wednesday, the Fed announced that they would keep interest rates unchanged. On Friday, the employment report for October came in lower than expected, which may be a result of higher interest rates slowing down the pace of economic growth.

This week will have limited economic data, but there will be statements from several Federal Reserve members, including Chairman Powell on Tuesday. This will be his first public address since the release of Friday’s employment report, and it will be interesting to hear his perspective on the recession in relation to future rate decisions.

Regarding earnings this week, notable companies reporting include DR Horton, Uber
uber
, and Disney. I’m particularly interested in DR Horton’s insights on the housing market. Additionally, I’m curious about Disney, whose stock reached a high of $203 earlier this year but has since dropped to $85. This morning, Dish Network
Cooking
reported earnings that exceeded expectations but also announced the resignation of their CEO, causing the stock to decline nearly 7% in premarket trading.

Some other stocks making news this morning include Tesla
TSLA
, which unveiled plans to introduce a new, more affordable car priced at 25 thousand euros, as part of its efforts to expand its market share internationally. Shell PLC shares are up 1.5% in premarket trading after the company announced a $6.5 billion stock buyback program. Finally, WeWork shares have been temporarily halted as the company is expected to file for bankruptcy.

As we enter the week, the markets are feeling somewhat relieved following the recent earnings announcements and the Federal Reserve’s decision. The VIX closed below 15 on Friday and is slightly higher in premarket trading this morning. Bond prices are down 0.5% in premarket trading after last week’s impressive rally. Finally, oil prices are up just over 1% in premarket trading. While potential areas of volatility are now in the past, I remain cautious during periods of low volatility and complacency. Nonetheless, it cannot be denied that last week was favorable for investors, as both the S&P 500 and Nasdaq Composite are now above their 21-, 50-, and 200-day moving averages. Hopefully, they will remain strong throughout the holiday season. As always, it is important to stick to your investment strategy and long-term plans.

TastyTrade, Inc. Comments for educational purposes only. This material does not constitute trading or investment advice or a recommendation, nor does it imply that any investment product or strategy is suitable for any individual.