Dear Sheryl,
The third-quarter earnings season kicked off with a bang today. A few big-name banks, including Goldman Sachs (GS) and Morgan Stanley (MS), revealed better-than-expected results before the stock market opened today. And that ignited a stunning rally on Wall Street. As I write this, the S&P 500 and Dow are both up nearly 2% this afternoon. Technology and small-cap stocks also broke out of their recent ruts, with the Nasdaq and Russell 2000 soaring 2.5%. And that rising tide is lifting nearly all boats, especially the fundamentally superior stocks in our Buy List. Today’s sharp rebound comes as a welcome relief after last week’s volatility. However, it isn’t surprising that a strong start to earnings season sparked the rebound. If you listened to last week’s Special Market Podcasts and read our October 12 Weekly Update, then you know I’ve been expecting a stunning third-quarter earnings season. And I’ve been waiting for wave-after-wave of positive earnings and sales to drive the broader indices and our stocks higher. The reality is that the underlying earnings environment remains strong. According to FactSet, the S&P 500 should post an annual earnings rate of 19.1% and 7.3% annual sales growth for the third quarter. Already, our Growth Investor stocks have gotten off to a strong start. Today, we had three companies report earnings—all three beat analysts’ earnings estimates. You can view the latest results in the Earnings Center here. Now, W.W. Grainger (GWW) did pull back due to a sales miss, but I expect that the stock will bounce in the coming days. To read my complete commentary on this earnings report, as well as the announcements from The Progressive Company (PGR) and UnitedHealth Group (UNH), visit the Updates Center. I should also add that the 10-year Treasury dipped slightly today to 3.156%. As I noted last week, we needed to see a drop in Treasury yields, as it would allow Wall Street to refocus on earnings and signal that a flight to quality is getting underway. Clearly, that’s finally happening. And, that’s good news for the stock market going forward. Folks, we’re officially in my favorite time of year, and I couldn’t be more excited to see what our Buy List stocks have in store for us in the coming weeks. On Thursday, we have three earnings announcements. On Friday, we round out the week with a report from Mobile Mini (MINI). Next week, the earnings announcements will be fast and furious—we have 22 companies posting their latest quarter results! I’ll provide updates on each of our Buy List companies’ announcements in the Earnings Center, as well as in upcoming Weekly Updates. And I’ll be monitoring each of our stocks closely. If any don’t react positively to their earnings reports or grow too hot to handle, I’ll be in touch with any updates to my current advice. In the meantime, let’s all breathe a sigh of relief that the third-quarter earnings season is underway and that the short sellers are in hiding. Personally, I’m expecting another quarter of impressive earnings results to drop kick and drive our stocks higher. Let’s enjoy the ride, and if there are any other major market swings, I’ll be in touch through a Flash Alert or in Friday’s Weekly Update. Sincerely, Louis Navellier
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