Two the Point — Earnings and Economy: Soft Landing Path Holds

Recent earnings season highlights reveal resilience amidst emerging challenges, supported by broader economic data indicating a path toward a soft landing. Key insights include:

Key Insights:

• Q3 Earnings Growth: Currently at 4%, down from 8.5% in early July, indicating stable but pressured margins.
• Sector Trends: Technology and Communications remain the top contributors to earnings growth, while Health Care contributions have been adjusted downward as reports come in.
• Top 10 S&P 500 Companies: Constituting 36% of the index’s market cap, yet their net income contribution is trailing by about 10%, a gap that often narrows over time.
• September Retail Sales: Increased 0.4% month-over-month, with the retail control group up 0.7%, demonstrating consumer resilience backed by robust job growth and wage increases.
• Atlanta Fed’s Q3 GDP Forecast: Revised up to 3.4%, underscoring solid economic momentum despite election-related uncertainties.
• Manufacturing and Housing: U.S. industrial production fell -0.3% month-over-month in September, while single-unit permits rose slightly, suggesting a mixed outlook for rate-sensitive sectors.
• China Stimulus Focus: Primarily targeting infrastructure rather than consumer spending, raising questions about broader growth impacts.