MarketLens
Market Overview
The S&P 500 and NASDAQ have posted six consecutive weeks of gains, led by strong Q3 earnings.
Leading the way are positive reports from top banks like Goldman Sachs, Morgan Stanley, JPMorgan Chase, and Bank of America, sparking greater optimism among economists for a potential soft landing in the U.S. economy.
U.S. households now hold 48% of their financial assets in equities, a record high since the early 2000s, according to the Federal Reserve and Goldman Sachs, while cash allocations stand at just 15%.
Economic Insights You Need to Know
Earnings from major banks, including Goldman Sachs, Morgan Stanley, Citigroup, and Bank of America, suggest a favorable outlook for the U.S. economy. Dive deeper into the U.S. Business News section to explore the details.
Despite the S&P 500’s 60% return over the past two years, executive stock buybacks are at a 13-year low. Notably, a lack of insider buying can imply that companies lack confidence in their future performance. However, this year companies like Apple, Meta, Lululemon, BlackRock, and others have bought back significant portions of their stock. The chart below shows S&P 500 performance since 2011 and the corresponding rate at which S&P 500 executives are buying back company stock. Ultimately, S&P 500 companies could already be over-allocated regarding stock buy-backs, so the slowdown may not imply doubts about future performances for these top companies.
Additionally, investors are optimistic about an economic soft landing, with the gap between corporate bond yields and US treasuries narrowing to its lowest in almost 20 years.
Stock of the Week: Netflix
Netflix had a record-breaking quarter, reporting $2.4 billion in profit and adding 5.1 million new subscribers. Revenues jumped 15% to over $10 billion, pushing the stock up 10% on Friday. With 283 million total subscribers and growing user engagement (averaging two hours daily), Netflix projects strong future growth, driven by its original content and anticipated ad revenue doubling by 2025.
U.S. Business News
Tech giants Amazon, and Google have followed Microsoft in investing in nuclear energy to power their AI data centers, joining their ongoing investments in solar and wind energy. AI and crypto-related electricity demands are expected to double by 2026.
Major banks including Goldman Sachs, Bank of America, Morgan Stanley, and Citigroup reported earnings this week.
Goldman Sachs surpassed Wall Street estimates, powered by its investment banking business which was up 20%.
Bank of America’s profits declined in Q3 but not as much as analysts were predicting. BoA’s net interest income was down 3% in Q3.
Morgan Stanley’s investment banking business is up 56% compared to last year and saw a 16% increase in revenue and a 32% rise in profit in Q3.
Citigroup also endured a decline in Q3 profits but not as much as analysts were expecting.
Investment banking fees at Goldman Sachs, Bank of America, Citigroup, and JPMorgan Chase totaled a combined $6.5 billion for Q3, up 27% from last Q3 of 2023 and a slight increase from Q2 2024. These top bank executives have optimism that the Fed’s rate cuts will continue to increase future deals. Overall, the KBW Bank Index, which tracks the performance of leading banks is up about 55.76% since the start of 2024.
The U.S. government has proposed new restrictions on exports of AI chips manufactured by AMD and NVIDIA to China, with concerns about backdoor acquisitions through countries like Iraq and Iran. Chinese vendors have been seeking to find these AI chips by going to other countries including Taiwan, India, and Singapore.
TSMC’s strong Q3 earnings dispelled fears of an AI chip slowdown, which sparked from a poor earnings report from ASML earlier in the week. TSMC saw revenue up 39% and profit up 54% (just over $10 B) in Q3.
Bitcoin surged past $67,000 for the first time since July of 2024. Bitcoin is less than 10% away from its all-time high of $73,000.
Tesla’s Full Self Driving feature is under investigation by the National Highway Traffic Safety Administration, a U.S. federal automotive safety regulator. After a series of crashes occurring where FSD was used, the NHTSA will be testing the safety and performance of this feature in situations where road visibility is reduced due to fog, sun glare, and dust. In the past, Tesla has had to recall over 360,000 vehicles that contained the FSD software because of safety risks found by the NHTSA.
Apple shares were up over 2% Friday after positive reports of its iPhone 16 sales in China. iPhone 16 sales in China were up 20% in the first three weeks of its release compared to iPhone 15 sales in China last year. The current most valuable company in the world is set to report earnings later this month.
Walgreens reported Q3 earnings, outperforming Wall Street forecasts, yet will be closing approximately 1,200 stores across the U.S. over the next three years. Walgreens reports that only a quarter of its 8,700 stores across the U.S. are profitable. The stock is down over 65% since the start of 2024.
Overseas Update
Israel executed a significant military attack this week, killing Hamas' top leader Yahya Sinwar, a year after Hamas’ initial attacks. Though tensions remain high, this could open doors to potential de-escalation negotiations.
The Chinese housing ministry announced that China will aim to broaden its real estate "whitelist" and increase bank lending for unfinished projects to 4 trillion yuan, equivalent to $561.8 billion, by year-end. So far, 2.23 trillion yuan in loans have been approved, with plans to almost double this by the end of 2024. The “whitelist,” launched in January, lets city governments recommend projects for faster lending to ensure completion and delivery to buyers.
The European Central Bank cut interest rates by 25 basis points this week and expects to see inflation reach the 2% mark sooner than predicted.
News in Sports
MLB
The NL and AL Championship Series continue this weekend in a best-of-seven format, with the Dodgers leading the Mets 3-1, and the Yankees leading the Guardians 2-1.
NFL
Thursday Night Football: The Denver Broncos secured a 33-10 win against the New Orleans Saints.
Sunday Night Football: The Pittsburg Steelers host the New York Jets
Monday Night Football: The Baltimore Ravens face off against the Tampa Bay Buccaneers, while the Arizona Cardinals will host the Los Angeles Chargers.
NCAA Football
SEC: No. 1 Texas vs. No. 5 Georgia, No. 7 Alabama vs. No. 11 Tennessee
Big-10: No. 22 Illinois vs. No. 24 Michigan
ACC: No. 6 Miami vs. Louisville
Big-12: No. 9 Iowa State vs. UCF
Stay with us for more insights next week.
Disclaimer: This is not financial advice or a recommendation for any investment. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.
Ashlyn Haringa