Thursday marks the busiest day of the earnings season, with 46 companies from the S&P 500 reporting their quarterly results. It’s the major talking point in the stock market today, with some of the most exciting reports being released.
So far, the indices have held up pretty well to the varying reports. The SPDR S&P 500 ETF (NYSEARCA:SPY) rallied 0.18%, the SPDR Dow Jones Industrial Average (NYSEARCA:DIA) fell 0.11% and the PowerShares QQQ ETF (NASDAQ:QQQ) ripped 0.97%.
Will that remain the case going into the rest of October and into early November? That’s what investors are trying to figure out as they endure fierce rotation into and out of certain industries and sectors.
Fed on Watch
Investors’ eyes are drifting away from the Federal Reserve as they focus on the deluge of quarterly results between Wednesday and Thursday. There are plenty of big names set to report next week too. Still, many seem to have put the Fed on the back burner, even though it’s set to make another rate decision.
One group not taking their eye off the ball? Goldman Sachs analysts. They expect the Fed to cut rates by 25 basis points, as well as change some of their wording in their statement.
The market is currently pricing in a 93.5% probability of a rate cut next Wednesday. That’s down from 94.1% on a day ago, but up 910 basis points from a week ago, and up notably from 64.1% a month ago.
An important meeting to remember? December. In 2018, that meeting nearly marked the bottom of the fourth-quarter correction and marked a big turning point in the Fed’s policy stance. Currently, the market is pricing in a 67.8% chance of rates being reduced by 25 basis from current levels. Essentially, pricing in a hike this month and no change in December.
There is a current probability of 27.6% that the Fed cuts another 25 basis points though. We’ll see how that figure plays out in the ensuing months.
Earnings Steal the Show
After the close, we’re going to hear from Amazon (NASDAQ:AMZN), Visa (NYSE:V), Intel (NASDAQ:INTC), Gilead Sciences (NASDAQ:GILD) and others. That’s going to touch on everything from e-commerce to consumer spending to chip demand to biotech.
No wonder investors are focused on earnings and not on the Fed. That doesn’t even include who we heard from last night and this morning.
Sellers weren’t able to hold down Microsoft (NASDAQ:MSFT) after the company delivered a top- and bottom-line beat. Earnings of $1.38 per share easily topped expectations by 14 cents, while revenue of $33.1 billion grew 13.7% year-over-year and smashed expectations by $860 million.
It leaves Microsoft just a touch behind Apple (NASDAQ:AAPL) in the market capitalization battle, as the behemoths stand at $1.076 trillion and $1.098 trillion, respectively. While there were some concerns about the company’s cloud growth, the stock is sitting on the cusp of a possible breakout.
Globally speaking, 3M (NYSE:MMM) gave investors a look at what’s going on around the world. The company reported a “messy” quarter in the words of JPMorgan analyst Stephen Tusa. You likely recall him as the analyst that absolutely nailed the General Electric (NYSE:GE) trade.
In any regard, “messy” may be putting it kindly. MMM beat on earnings, but revenue of $8 billion sank 1.9% year-over-year and missed analysts’ expectations by more than $200 million. Management also slashed its Q4 and full-year outlook for both sales and earnings.
Margins contracted in healthcare, while demand in China slumped big time. Transportation and electronics, and safety and industrial sales all took a hit too. Those with worries about the macroeconomic outlook aren’t going to find much comfort in this report.
Who Else Made Waves?
Twitter (NYSE:TWTR) shares were hammered to the tune of 20.8%. The company missed on earnings and revenue estimates, and reported advertising weakness. The one silver lining is that long-term support isn’t far off. The bad news? Well, it’s still below current levels.
Tesla (NASDAQ:TSLA) took a torch to the $TSLAQ crowd when it reported a surprise profit. Earnings easily topped expectations, although revenue did come in ahead of expectations. Positive talk surrounding free cash flow, the Model Y, solar, the Tesla Semi and the Gigafactory 3 in Shanghai all helped spur shares higher by 17.6% to $299.68
Now, can Tesla stock get above $300 and stay there? And can the business and management maintain momentum?