The S&P 500 reduce its weekly loss to less than 0.1% and bounce back on Friday. The Dow Jones Industrial Average closed with a decrease of 1.2% weekly. As the shutdown took hold both indexes practiced some sessions of heavy selling and managed to bounce back.
Carmine Grigoli who is chief investment strategist at Mizuho Securities said that Investors have knowledge that shutdowns in past have resulted to motivate bounce back that provide them opportunities to buy. He said a shutdown that lasts more than 10 days would result pullback about 5%. He said that this trend has been sent to investors as well as portfolio managers.
This situation result JPMorgan Chase & Co (NYSE:JPM) +1.41% and Wells Fargo & Co (NYSE:WFC) +0.73%. Analysts have cut their earnings prediction for J.P. Morgan, Citigroup Inc (NYSE:C) +1.53% ,Morgan Stanley (NYSE:MS) +0.52% , and Goldman Sachs Group Inc (NYSE:GS) -0.19% for the last one month. J.P. Morgan start earnings season while Yum Brands, Alcoa, Wells Fargo are planning to report in the next week.
Analysts anticipate that S&P 500 earnings will grow 3% in the third quarter of the year. According to FactSet financial sector will lead this while energy firms sheathing other sectors. Analysts forecast growth in revenue by 2.6% for the third quarter. This is also a decrease because analysts forecasts 3% on 30 June.
FactSet also noted that out of 500 companies in S&P 90 companies had issued negative trend in earnings advice. On the other hand, 19 companies had issued positive guidance. Head of U.S. equity strategy at Barclays Barry Knapp offered a more positive viewpoint. He said that earnings growth in the third quarter of last year expected to hit its low point that is 0% year-on-year.
He said that leading signs of domestic and international earnings growth like ISM and global manufacturing PMIs are improving all through the quarter. He said that analysts are expecting a growth thatch they are watching this closely.
Mizuho’s Grigoli said that the focus of investors will be on activities outside the U.S. as they expect a stronger recovery in Europe. He said that the key is what we hearing from Europe and overseas as well.
Chief analyst at Danske Bank in Copenhagen Allan von Mehren said that the deviation between soft and hard U.S. economic data is generating a positive background for stocks.
He experienced that indicators such as the Institute for Supply Management’s readings for the manufacturing and service sectors show a continued growth. On the other hand other indicator like sales show a decline in September.
However, it’s important that growth will be speed up due to leading indicators that remain positive. But, government shutdown is dangerous and problematic.