The broad-based Russell 3000 index is another US bourse that’s surged to new highs this week on optimism around the Gulf of Hormuz and a strong reporting season. However, as we saw overnight, equities remain highly sensitive to developments in the US-Iran negotiations. It will be difficult for markets to build on recent gains until there is greater certainty on the geopolitical front and oil prices begin to ease.
US earnings were mixed overnight, although the market continued to reward companies delivering strong guidance. ConocoPhillips, Occidental Petroleum and Albemarle all beat expectations, benefiting from higher commodity prices, while Sempra lifted full-year guidance and Burger King delivered another strong quarter of US sales growth. The market also welcomed upbeat results from Insight Enterprises, Clover Health, Geo Group and Versant Media, highlighting that earnings momentum remains healthy across parts of the energy, infrastructure and technology sectors.
On the downside, companies that disappointed were punished. Warner Bros. Discovery (-11%) missed expectations as the loss of NBA rights and a weak film slate weighed on revenue, while Fiserv slumped (-10%) after cutting full-year guidance. At the same time, UWM Holdings (-27%), Papa John’s (-7%), Peloton (-12%), Fluence Energy (-13%) and Six Flags (-7.5%) all fell sharply following weaker results or softer outlooks.
Overall, the earnings season continues to reinforce a familiar theme: investors are rewarding companies that can deliver earnings upgrades while showing little tolerance for guidance cuts or signs of weakening consumer demand, with the latter often being hit harder than the beats rewarded.
- We can see the Russell 3000 trading through 4500 before Christmas as headwinds diminish for US stocks.
