Markets ended the week higher as investors focused on third quarter earnings, particularly in the continued absence of government data due to the ongoing shutdown. Oil rose over 5% on Thursday following news that the US sanctioned two of Russia’s largest oil companies, Rosneft and Lukoil, which analysts estimate account for roughly half of the country’s oil production. The hope is the sanctions will lead Russia to reconsider its war in Ukraine. The actual impact of the sanctions will rely on effective enforcement and likely won’t be known for at least several months.
After moving steadily higher over the course of the year due in part to concerns about higher inflation and the weaker dollar, on Tuesday, gold experienced its largest one-day absolute dollar decline on record and largest one day percentage decline (5.7%) since 2011. Analysts attributed the selling to a rebound in the dollar and profit taking following recent strength.
This week, all eyes will be on the Fed as it holds its October FOMC meeting. Markets are treating a 0.25% rate cut as a foregone conclusion, pricing in a 97% chance for a cut. Despite the current lack of employment data, the September inflation report was mild enough to allow the Fed to proceed with a cut.
Through Friday, 29% of S&P 500 companies had reported third quarter earnings of which 87% have beaten their consensus estimate. According to industry group FactSet, consolidated S&P 500 earnings growth for the quarter is expected to 9.2%, better than the 7.9% estimate on September 30.
