The Australian sharemarket closed 1.3% higher last week, thanks to positive earnings reports and increasing commodity prices. The ASX 200 started the week off positive, touching a new high on Monday, before cooling off in the middle of the week, and then pushing higher again on Friday to a new record close. The Energy (4.3%) sector once again was the standout, as the Russia-Ukraine conflict continues to rise, causing oil prices to add 4.1%. Oil and gas giants benefitted, as Woodside Energy and Ampol increased 4.5% and 4.9% respectively.
US sharemarkets bounced back last week, as upbeat earnings reports helped the market, which saw the S&P 500 jump 1.7% and the NASDAQ add 1.5%. The market was also focused on earnings reports last week, with all the attention on chipmaker NVIDIA (1.9%), which reported its latest quarterly earnings on Thursday. The company beat earnings estimates for the fifth consecutive quarter, however, underwhelmed investors on its guidance for the following quarter. Elsewhere, Walmart reported quarterly sales growth in the US of 5.3% and a 12.4% increase in net international sales, which saw the share price climb 6.6% over the week. Economic data was relatively positive, with initial jobless claims declining for the third straight week, while manufacturing data hit its largest level since April 2022.
European sharemarkets ended their losing streak last week, closing higher for the first time in five weeks, as selling pressures eased thanks to hopes of further rate cuts and the possibility of a ceasefire between Russia and Ukraine. Investors turned to more defensive sectors such as Health Care (3.1%) and Financial Services (2.5%), along with the traditional gold (6.0%) safe haven asset. While tensions continued to rise, analysts believe a negotiated settlement remains likely between newly elected US President Donald Trump and Putin, which helped to ease recent selling pressures. In addition, economic data highlighted continued weakness in the Eurozone, with business activity contracting to a 10-month low of 48.1. As a result, bond yields fell, as the market is now pricing in a 50% chance of a 50-basis point cut in December and a total of 150 basis points of rate cuts throughout 2025.
Taking a breather from the US election, which has dominated market news, we thought to check back with company earnings season as it wraps up. What started very strong has panned out to be a more historically normal September quarter earnings season. Though, considering the stellar run of the S&P 500, the current levels it has achieved, and the risks of a recession and higher interest rates, average is perhaps a welcome comfort to some.
So far, around 95% of the companies in the S&P 500 have reported 3Q 2024 earnings results. According to FactSet, 75% of companies reported earnings above estimates, below the 5-year average of 77% and in-line with the 10-year average of 75%.
From a sector level perspective, US companies from the Communication Services, Consumer Discretionary and Health Care sectors reported some of the most positive earnings surprises. Winners from these sectors included Paramount Global, News Corporation, Alphabet, Meta, Amazon, Pfizer and Tesla. On the other hand, negative surprises were concentrated around the Information Technology and Materials sectors, with notable misses coming from Apple, Intel and Albemarle.
Highlights from the Cutcher & Neale International Model Portfolio this earnings season included the following holdings:
Overall, the September 2024 earnings season was solid and marks the fifth consecutive quarter of year-over-year earnings growth for the S&P 500. Growing talk of equity markets being overvalued perhaps underestimates this ongoing strong earnings growth. After all, it is company earnings that drive share prices in the long-run.
Locally, investors will turn their attention to the monthly consumer price indicator due on Wednesday, which is expected to decline 0.4%, followed by a speech from Governor Bullock on Thursday and private sector credit on Friday.
Overseas, we will get an insight into the Fed’s latest policy decision, in their meeting minutes released on Tuesday. Additionally, there is a slew of economic data due out of the US, including new home sales, consumer confidence, GDP and the Fed’s preferred CPI measure, the core PCE price index. US sharemarkets will also be closed on Thursday for Thanksgiving.