The S&P 500 consensus earnings growth number of 3% for the third quarter is not something to write home about, especially after double-digit earnings growth in the second quarter. The soft number is partly due to a tougher comparison. In Q2 2024, earnings had an easier comparison with a 3.3% drop in earnings in the prior-year quarter (Q2 2023 vs. Q2 2022). For the third quarter now being reported, the comparison gets tougher as earnings growth in Q3 2023 was over 5% (vs. Q2 2022).

The October 13 rally that ended the bear market at a low of 3,577.03 began with the S&P 500 selling off in the morning only to rally dramatically higher into the market close. The CPI report earlier in the day showed headline inflation at 8.2% on a year-over-year basis, but Core CPI ─ not including food and fuel prices ─ beat the consensus estimate at 6.6%. The S&P 500 closed at 3,669.91 and the bull market had commenced.

Federal Reserve (Fed) Chair Jerome Powell said last month’s decision to cut the fed funds target rate by a half percentage point was due to a “recalibrating” policy, as the Fed follows its dual mandate regarding inflation and growth.