Wall Street extended its weekly winning streak to six in a row. Earnings drove the stock market higher — can they do it again in the week ahead? The S & P 500 and the Dow both closed Friday at new record highs and turned in their best weeks of the year. But on a percentage basis, up more than 0.6%, it was the tech-heavy Nasdaq that drove the action Friday after Netflix stock’s 11% post-earnings gain. The Nasdaq finished less than 1% away from its July all-time highs. All that buying last week almost landed the market back in overbought territory as of Friday’s close, according to the S & P Short Range Oscillator , just as earnings season gets ready to kick into high gear. Jim Cramer on Friday noted the enthusiasm and what looks like a “nirvana moment” for investors as the decline in oil and solid retail sales this past week point to an economy with moderating inflation and resilient growth. But he acknowledged that timing is key because our portfolio discipline mandates that we consider lightening up our stock exposure in an overbought market. We’re not there yet but still close. As the market was tilting overbought, we called up two companies from our Bullpen stocks-to-watch list during Wednesday’s October Monthly meeting. We started positions in BlackRock and CrowdStrike . On Monday, we bought more shares of Modelo and Corona brewer Constellation Brands . On Tuesday morning, we added to our Advanced Micro Devices position during the first leg of a chip stock sell-off. That afternoon, the second shoe dropped on Dutch semiconductor equipment maker ASML ‘s disappointing results, and the whole sector sank further. What a difference two days can make, though, as strong results and commentary from Taiwan Semiconductor Manufacturing Company on Thursday boosted the chip group. Club name Nvidia gained more than 2% on the week and closed Friday just under Monday’s record. AMD and Broadcom, however, finished the week lower. In fact, AMD was our worst-performing stock for the entire week, losing more than 7% following the prior week’s 1.8% slide. One area of the market on fire was financials. Morgan Stanley on Tuesday delivered better-than-expected headline results along with strong results in other firmwide key performance indicators. The stock finished the week at a record high. Morgan Stanley was our best Club stock of the week, soaring more than 9.5%. Abbott Laboratories was our other portfolio name to report last week, delivering a beat and raise. The stock gained nearly 3% on the week. Energy was the worst sector of the week for the market as oil prices sank. U.S. oil benchmark West Texas Intermediate crude dropped 2% on Friday, finishing the week under $70 per barrel. For the week, its worst in more than a year, WTI dropped 8.4% as supply concerns over slower China economic growth and record U.S. oil production overshadowed the simmering tensions in the Mideast. In the week ahead, housing numbers are the main draw on the economic front. But really, it’s all about earnings with more than 100 of the S & P 500 companies reporting, including Club health and life sciences company Danaher on Tuesday and industrials Dover and Honeywell on Thursday. Earnings Danaher : We’re encouraged heading into the quarter after German bioprocessing peer Sartorius said its customers are on the verge of completing their inventory destocking and its orders, which have been the headwind all year for both Sartorius and Danaher, were up 9% sequentially. As a result of the Sartorius update, expectations are somewhat elevated for Danaher — so, we expect to hear good things because management has made a concerted effort to keep guidance conservative. In addition to the headline numbers, management commentary on the bioprocessing end market is likely to determine the stock price action following Tuesday’s release. As of Friday afternoon, LSEG’s analysts’ consensus estimates for Danaher are third-quarter sales of $5.59 billion and earnings per share (EPS) of $1.57. Honeywell : We just got an update from management on its plans to streamline the business when the company announced plans to spin off its advanced materials division . In addition to the quarterly results, we’re interested to hear management’s observations on demand for the short-cycle parts of its business, which tend to be higher margins and a swing factor. As of Friday afternoon, LSEG estimates put Honeywell sales at $9.9 billion in the third quarter and EPS at $2.50. Dover : The key to the quarter is organic bookings. Order momentum has picked up in recent quarters thanks to growth in thermal connectors and heat exchangers used in data centers; biopharma components; and CO2 systems for refrigeration. We are also interested in hearing whether management provides any updates on its portfolio evolution. Last quarter, executives highlighted the divestiture of its business that makes garbage trucks and acquisitions in clean energy. As of Friday afternoon, LSEG estimates for Dover’s third quarter are sales of $2.09 billion and EPS of $2.33. Economy It will be a pretty light week of economic data. However, there are two major updates on the state of the housing market, with September’s existing home sales out on Wednesday and September’s new home sales out on Thursday. Housing is a key watch item for investors and the Federal Reserve because it represents a large, unavoidable cost for most Americans, and it’s proven to be a sticky source of inflation. Last week, September housing starts were slightly better than expected, though they were down month over month. Ultimately, we’re unlikely to see a sustained material improvement in the housing market until bond yields come down, which will help pull mortgage rates lower and, in turn, make monthly payments more affordable. The 10-year Treasury yield , which influences mortgage rates, has remained firm despite the Fed’s jumbo 50-basis point interest rate cut last month. The market odds are for a 25-basis-point cut next month and another 25 in December. As the Fed eases, we do expect mortgages to eventually drop and housing to pick up — that dynamic is core to our investment thesis in Stanley Black & Decker , Home Depot and Best Buy . Increases in housing formation mean people will need to buy more power tools, home improvement supplies, and big-ticket appliances and flat-screen televisions. Week ahead Monday, Oct. 21 After the bell earnings: SAP (SAP), Nucor (NUE), Logitech (LOGI) Tuesday, Oct. 22 Before the bell: Danaher (DHR), Verizon (VZ), General Motors (GM), Freeport-McMoRan (FCX), RTX (RTX), 3M (MMM), GE Aerospace (GE), Lockheed Martin (LMT), Quest Diagnostics (DGX), Fiserv (FI), Philip Morris (PM), Kimberly-Clark (KMB), Norfolk Southern (NSC), PulteGroup (PHM), Polaris (PII) After the bell: Enphase Energy (ENPH), Seagate Technology (STX), Baker Hughes (BKR), Texas Instruments (TXN), Canadian National Railway Company (CNI) Wednesday, Oct. 23 10 a.m. ET: Existing Home Sales Before the bell: Vertiv (VRT), Boeing (BA), AT & T (T), Coca-Cola (KO), GE Vernova (GEV), Thermo Fisher Scientific (TMO), Boston Scientific (BSX), General Dynamics (GD), Hilton (HLT) After the bell: Tesla (TSLA), Lam Research (LRCX), International Business Machines (IBM), Newmont Mining (NEM), ServiceNow (NOW), Viking Therapeutics (VKTX), Las Vegas Sands (LVS), T-Mobile (TMUS), Vista Energy (VIST), Mattel (MAT), O’Reilly Automotive (ORLY), Whirlpool (WHR) Thursday, Oct. 24 8:30 a.m. ET: Initial Jobless Claims 8:30 a.m. ET: New Home Sales Before the bell: Honeywell (HON), Dover (DOV), American Airlines (AAL), United Parcel Service (UPS), Southwest Airlines (LUV), Nasdaq (NDAQ), Tractor Supply Company (TSCO), Carrier Global (CARR), Dow Chemical (DOW), Harley-Davidson (HOG), Union Pacific (UNP), Valero Energy (VLO), Hasbro (HAS), Northrop Grumman (NOC), Ryder System (R) After the bell: DexCom (DXCM), Deckers Brands (DECK), Skechers (SKX), Boyd Gaming (BYD), Edwards Lifesciences (EW), Western Digital (WDC), Boston Beer Company (SAM), Texas Roadhouse (TXRH), Vale (VALE), Capital One Financial (COF) Friday, Oct. 25 Before the bell: New York Community Bancorp (NYCB), Colgate-Palmolive (CL), Newell Brands (NWL), AutoNation (AN) (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) 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Wall Street extended its weekly winning streak to six in a row. Earnings drove the stock market higher — can they do it again in the week ahead?
