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Investors Prepare for October's Busiest Week in Stocks

With one-third of the S&P 500 reporting earnings this week, and coronavirus cases rising, this week either marks a massive rise or a fall.

Credit | World Economic Forum

This upcoming week, the last of October, possibly marks one of the most volatile stock weeks this year. Everyone’s got stimulus hopes on their mind, and Congress signing on financial aid has subtracted some of the importance from this week’s earnings.

In fact, according to FactSet analyst John Butters, 186 companies, or around 1/3 of the S&P 500 is reporting earnings this week.

That has come second place recently, behind the hopes for stimulus, ruining some opportune timing for some companies. While that’s not investors’ faults for focusing on possible trillion dollar deals, this week’s going to be really important.

Four of the five FAANG stocks are reporting this week, Facebook, Apple, Amazon, and Google, with Netflix having reported last week. All of them are reporting earnings this Thursday, likely to get share prices adjusted on Friday.

According to MarketWatch, analyst Jim McAllister said “Given the fact they [FAANG] represent over 16 percent of the S&P 500 [by market value], their results could very well have a big impact on the market,” marking a make or break situation.

As of now, S&P 500 earnings have shown a decline of 16.5% on average for the third quarter, with 27% of those companies having reported so far. If that ends up being the final average, this quarter will mark the second highest earnings decline since the 2nd quarter of 2009, which has a 26.9% decline.

 

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Looking at the S&P 500 at the individual sector level, energy leads the decline, with an average -123.6% growth.

While most of this news is negative, there is one hopeful point: earnings surprises.

This year, 84% of companies have reported earnings estimate beats, which is higher than 2008’s surprise percentage. This means that most companies have actually performed better than analyst expect, even with COVID related downfalls.

That sort of positivity carries with bulls into the next year, with many expecting upwards of a 50% earnings growth, helping to equalize the losses this year.

Stocks Approaching Buy Points

Tesla might reach a buy point this year, with a $466 buy point, while aggressive investors may push the stock at $445.63, according to IBD. If the stock doesn’t reach a buy point, and falls beneath the 10 week line however, some selling might be useful to help guarantee gains.

How did last week end?

The Dow Jones Industrial Average finished with a total weekly decline of 1%, the S&P 500 closed the week 0.5% lower, and the Nasdaq Composite ended down 1.1%.

The small-cap index Russell 2000 closed 0.4% higher, and several funds and ETF ended the week higher as well.

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