VIDEO: Here's Our Game Plan for the Week Ahead

In today’s Daily Rundown Video, Chris Versace details what the TheStreet Pro Portfolio will be focusing on this week with more S&P 500 companies reporting and multiple Fed speakers.

He also walks through which portfolio companies are reporting this week and why we’ll be paying attention to quarterly results from SAP SAP, Construction Road Partners ROAD, and Quest Diagnostics DGX.

Transcript

CHRIS VERSACE: Hey, folks, Chris Versace here. Monday, October 21st. Hard to believe we're actually three weeks into the last quarter of the year, but we are coming off a good week for the markets, but also a very good week for the portfolio, another one of out-performance relative to our benchmark. We dissected the stocks that were really working for us last week in Friday's roundup. So I would encourage you, if you haven't read it, please take the time and do so.

With that, let's pivot and talk about the week ahead. Typically, we have a lot going on each and every week between fresh economic data points, increasingly paying attention to what Fed speakers are saying about the economy and rate cuts. And of course, we're in the thick of the September quarter earnings season.

So with that, let's start with earnings. There are roughly 112 S&P 500 basket companies reporting this week, up significantly compared to the last few weeks. So things are going to start to get a little frenetic. There's going to be a lot more data points that we want to pay attention to as it relates to the portfolio. And of course, we will continue to do that, sharing our thoughts and insights with you, making any moves that we might have to do.

As it relates to those 112 and what they might tell us, remember that the pace of earnings growth for the S&P 500 in the second half of the year has really been coming down over the last several months. However, as we saw late last week with the Atlanta Fed GDPNow model, the rolling GDP forecast, the September quarter has been far stronger than what a lot of people had thought it might have been. In early August, the GDP model was saying about 2% for GDP. And we saw that again in early September.

But then we've got a lot of favorable data points putting the rolling GDP forecast for the September quarter at 3.4% at the end of last week. And we've only got a few data points left for the month of September. So I would be very surprised if we see a demonstrative downward revision from here.

But what does this tell us? It tells us that the economy has, again, been performing better than we previously thought. That could mean that those negative earnings revisions for the second half of the year might have been a little excessive. So we're going to have to pay very close attention not only to what the competitors, customers, and suppliers for our holdings have to say. We're going to want to pay very close attention to the aggregate earnings reported by the S&P 500 basket.

Now, at the end of this week, just over 1/3 of that basket will have reported. So we'll start to get a sense, but it really won't be until the end of next week when more than half of that basket has reported that we really start to get a very good sense as to what earnings prospects are for the second half of the year for the market. And remember, when we look about earnings growth for the S&P 500, that is one of our benchmarks because we like to focus on companies for the portfolio that have superior earnings growth. That means faster than the S&P 500, both on a year-over-year basis and on a rolling multiple quarter basis as well. So we'll continue to pay attention to all of that and sharing our thoughts with you as well as we navigate this sea of reports and what they tell us.

Now, the other side of that, though, is a stronger economy could slow the pace of Fed rate cuts. Well, why? Well, think of it this way. To the extent the Fed is cutting monetary policy, it could throw a little bit of gas on the economy. And that potentially could risk the rebound in inflation, or at least the economy getting overheated, as they say.

As we look at it today, the consensus forecast reported by the CME FedWatch tool has the Fed funds rate going down to 350 to 375 by June, June of 2025. Today, 475 to 500 is where it sits. So that's a lot of rate cuts that the market is expecting. And it is possible that the market is once again out over its skis. So we're going to have to pay very close attention to not only the economic data, but also the language that the sea of Fed heads will have to say this week and next week.

This week, especially because the one big data point that we're going to get this week is the October flash PMI. This is the first real hard look at the manufacturing and services economy during the month of October. And the new order data will kind of tell us what does it look like October might look like.

So we're going to want to be careful to parse this data very carefully. We'll want to pay attention to the half a dozen Fed heads that are speaking, assessing their comments from last week, but also, what they are after the Fed Beige Book comes this week and after that flash October PMI. So with all that, with an eye towards the economy and rate cuts, but earnings, like I said, is going to be very big, 112 S&P 500 companies and of course, a slew of others at the same time outside the market basket.

But for us, what are the earnings that we will be focusing on this week? Well, we have Lockheed Martin reporting. We are going to want to pay very close attention to what they may or may not say about their multi-year delivery forecast. That is the catalyst we're looking for in order to revisit our Lockheed Martin price target. We will also be looking for confirmation on what Lockheed Martin has to say via the earnings from Northrop and General Dynamics.

We have ServiceNow reporting this week as well. This has been a very, very strong performer for the portfolio. Expectations could be a little high if we do see a decent pullback in the stock, because remember, expectations are high. That means quarterly results and guidance have to be pristine.

Should ServiceNow deliver something that the market may not be loving it, so to speak, and it gives us an opportunity to pick up more shares, we would like that because AI adoption in the enterprise is continuing. AI gives some price lift to ServiceNow, so we would love to pick up more shares of that.

Early this week, we might get some insight when SAP reports. We'll be digging into that SAP earnings and guidance as well. We also have United Rentals reporting. Two cues that we want to pay attention to here Construction Road Partners and HEES Equipment. Construction Road Partners, they are just that-- construction roads. But also with HEES, they are a very smaller regional equipment rental company. So we want to pay attention to those two reports.

We do expect to see a very positive outlook from United Rentals over the medium to longer term. Near term, we're going to want to pay attention to the comments they have about any impact regarding hurricane Helene and hurricane Milton. And we'll be thinking about those as they relate to not only Waste Management but also Vulcan Materials in the portfolio.

Also this week, we have Labcorp. Setting the stage for that will be earnings earlier in the week from Quest Diagnostics. And then on Thursday, it looks like we have earnings from Amazon.

So it's going to be a busy week. I would encourage you to please check your emails, check your alerts. We want to make sure you're getting our latest thoughts, whether it's on other earnings reports and the insights that we're getting from them, the economic data we're paying attention to, or Fed comments, all of which could come together and influence how the market behaves this week. Also, too, why do we want you to check your alerts? Because if we make any moves with the portfolio, like we did last week, for example, we want to make sure you are getting them in a timely fashion and moving with us.

So folks, please be sure to check your alerts. It's going to be a busy week, but we'll be with you here all week long to guide you through it. Thanks for watching.

More Pro Portfolio:

At the time of publication, TheStreet Pro Portfolio had no positions in any securities mentioned.