On October 11, the Dow Jones Industrial Average jumped—widely reported as—by more than 500 points. This amazing comeback followed a huge drop the prior day. Traders are bullish coming into this week of mega-cap technology earnings. This bounce comes on the heels of budgetary uncertainty in federal government shutdown musical chairs coming to an end.
On October 10, the Dow dropped almost 900 points. This severe decline was largely driven by increasing anxiety over the developing trade war between the U.S and China. As another example, President Donald Trump promised almost exclusively punitive increases on tariffs on Chinese imports. This move has only piled on to the market’s uncertainty. After China drastically restricted exports of its rare earth minerals, used for high-tech electronics manufacturing, this action has proven to be even more controversial with investors.
Even with these headwinds, the so-called “Magnificent Seven” stocks—Meta, Amazon, Tesla, Nvidia, Microsoft, Alphabet, and Apple—have been powerful forces at shaping market macro trends. Together, these four companies have represented 40% of the S&P 500’s increase in value this year. Today and this week will mark the start of a flurry of third-quarter earnings reports from other tech giants. Such reports would provide vital information about their fiscal condition and potential for future economic growth.
“Investors will be looking for more clarity on how spending on artificial intelligence is leading to profitability,” said Rick Gardner, highlighting the importance of these upcoming earnings announcements.
So far this quarter, more than four out of five S&P 500 companies to report earnings have beaten analysts’ forecasts. The source of this mind-blowing statistic is data made available by FactSet. All of this has combined to provide a decidedly rosy picture among Wall Street traders. They wish to be optimistic that robust corporate performance will persist.
Adding to that optimism is the expected conclusion to a harmful 20 day federal government shutdown. As talks continue with a focus on a resolution, economic forecasters agree that predictability in the business of government will add to growing market confidence.