Stock Market To Break Record Highs As Companies Continue Earnings Beat This Week

Wall Street this week teeters on the brink of new records as the resilient and still strong U.S. economy somehow defies the uncertainties of president Donald Trump's turbulent trade war and a palpably slowing world economy.

Both the benchmark S&P 500 that reflects the state of the overall U.S. economy, and the Dow Jones Industrial Average start the trading week a scant 1 percent below their all-time highs. On the other hand, the NASDAQ Composite is just 2 percent away from a new record.

Analysts note the historic all-time highs for the S&P 500 and the Dow hinge on the earnings results of 120 S&P 500 companies set to be revealed this week. Also set to affect the market's mood this week will be the following key indicators to be released Thursday: weekly jobless claims; durable goods orders for September; new home sales for September; manufacturing PMI (October flash); and services PMI (October flash). To report before the bell on Monday will be Halliburton, SAP, Lenox International and PetMed Express.

On the downside, analysts expect third quarter earnings to drop by about 4.6 percent, according to financial data firm FactSet Research Systems Inc.

All three indices are riding on the momentum generated last week after most of the reporting firms revealed better-than-expected results. More than 14 percent of S&P 500 companies have reported until Friday. Of these firms, 81 percent posted earnings that beat analyst expectations, said FactSet.

Investor sentiment also took heart from apparent progress in the U.S.-China trade negotiations and probably upbeat signals from the Brexit drama in the United Kingdom.

“You’ve got the potential for a combination of things that drive us to new highs,” said Art Hogan, chief market strategist at National Securities, a full-service investment banking and asset management firm based in New York City.

“At the same time you’re getting better micro data in the earnings, you’re getting better news on the macro hurdles facing us.”

Among the heavy hitters poised to report this week are Caterpillar, Boeing, Amazon, Intel, McDonald’s and Chipotle Mexican Grill.

Analysts also said records are being set because companies are being rated on a very low bar this earnings season.

“Earnings can be a positive catalyst to the extent that expectations are pretty low,” notedDan Russo, chief market strategist at Chaikin Analytics, a stock market research and analytics firm. “The bar has been lowered to the point where companies can jump over it.”

Preliminary figures on consumer sentiment showed a slight improvement in October compared to September. The final consumer sentiment data is to be issued on Friday.

“If corporate earnings show signs of resilience, especially by the U.S. consumer, then a run to new highs is by no means out of the question,” said Tom Essaye, founder of stock market analysis firm, Sevens Report Research, in a note to clients.