Markets Could Rally On Earnings Upside in The Week Ahead

US Market Indices ended a wild week of trading on a somber note despite Thursday’s historic turnaround rally. Annual inflation came in at 8.2% on Thursday, leading to a surge in the10-year rate last 4% while also resulting in a huge selloff across tech stocks.

Markets Could Rally On Earnings Upside in The Week Ahead

For the week, the Dow ended with gains of 1.15%, but the S&P 500 and Nasdaq ended in negative territory, posting losses of 1.55% and 3.11%, respectively. The week ahead is packed with economic data, including the continuation of earnings season and housing market updates for the month.

Earnings Season Continues

Next week is one of the busiest regarding financial earnings being reported. Earnings season moves into full swing as companies including AT&T, Bank of America, Goldman Sachs, Johnson & Johnson, Netflix, Tesla, and Verizon report quarterly results. Financial results are expected to be mixed with winners across banking, energy, and financials offset by technology and consumer discretionary stocks.

So far, only 41 companies have issued positive guidance ahead of reportingcompared to 65 that have reported negative guidance. However, companies that have reported earnings have remained resilient, with70% beating earnings expectations, paving the way for a positive surprise.

Housing Market Update

The week ahead is packed with key market data, including housing market sentiment, new permits issued, and existing home sales. On Tuesday, the National Association of Home Builders (NAHB) will track the sentiment across home builders. Sentiment has plummeted in recent monthsas a result of falling demand.

US Housing Permits, Source:YCharts

This will be followed by data for new permits issued and existing home sales on Wednesday and Thursday, respectively. New home Peronist is expected to fall from 1.58 million in August to 1.48 million in September, while existing home sales are further projected to decline to 4.7 million from4.8 million in the previous month.

Existing Home Sales, Source:TradingEconomics

Housing demand has declined in recent months due to fears of recession and rising mortgage rates. The 30-year fixed rate has blown past 7%, doubling the 3% rates seen earlier in the year, making homes unaffordable for most.

S&P 500 Chart

S&P 500 Chart, Source:TradingViewBottom Line

In recent weeks, markets have continued to drop due to higher inflation and a weakening economy. Key corporate earnings and housing market updates will clearly depict where indices could be headed next.

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