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Neocloud and chip ETFs jumped this week, while Yardeni says revenue beats have narrowed even as forward margins reach a record.
After the Federal Reserve kept interest rates unchanged on Wednesday, attention swung to tech earnings and tech earnings and AI rebound, the report said. Stocks showed little reaction to the decision and to Chairman Kevin Warsh’s press conference, where he reiterated he doesn’t believe in forward guidance, “absent a crisis.”
Margins firm while revenue beats narrow
On earnings quality, economist Ed Yardeni said S&P 500 revenues are 1.7% ahead of consensus versus an average 3.8% beat in the second quarter; 1.7% against 3.8% is a 2.1 percentage-point smaller beat. He added that earnings have topped estimates by 6.5%, down from more than 8% in the first and second quarters, and that as of October 23 the index’s forward profit margin forecast stands at a record 16.8%. For the S&P 493 collectively, he put the forward margin at 14.6%.
Busy reporting week and AI-linked bounce
With 163 S&P 500 companies set to report results in what the report calls the busiest week, Art Hogan of B. Riley Wealth said, “The market is focusing on earnings, and thus far the scorecard looks very good.” The report also cites figures that 36% of the S&P 500 by count and 44% by market cap report in a single week. Results from Microsoft and Alphabet were described as mixed, with investors reacting favorably to Microsoft while Alphabet slipped after-hours on prospects for higher 2027 capex. Amazon reports Thursday.
Tech-facing ETFs rebounded, the report said, with the Roundhill Neocloud ETF up more than 16% this week and the iShares Semiconductor ETF up more than 7%. That revival followed South Korea’s SK Hynix posting record quarterly profit and Anthropic filing an S-1 on Monday to go public, according to the report.
Some strategists remain constructive on equities and see value in fixed income at higher yields. “While more Fed hikes remain in store in the coming months, we think the current backdrop remains favorable,” said Ulrike Hoffmann-Burchardi, global head of equities at UBS Chief Investment Office, in a note cited by the report.
For the policy path, the report said fed funds futures continue to price in a quarter-point increase at the December 9 Fed meeting, which would put the target range at 4.00% to 4.25%. Near term, the next catalyst is Amazon’s earnings on Thursday; beyond that, the next dated policy event is the December meeting.
Source: CNBC.
This article was written with AI assistance and reviewed by an editor.
This content is for informational purposes only and does not constitute financial advice.
🧠 HafidWatch Take
The strong earnings reports and recent tech sector rebounds suggest that market optimism is currently well-supported, but this positive momentum may hinge on upcoming results from major companies like Amazon. While higher Fed rates are expected to persist, the combination of solid corporate performance and attractive fixed income yields could continue to sustain investor confidence in the near term. However, any disappointing earnings surprises or shifts in Fed policy could quickly alter this outlook.
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