In John Wick, Keanu Reeves plays a former hit man who gets back in the game after mobsters kill his dog. Not only is that among the more plausible reasons I’ve heard recently for someone go on a killing spree, you also get to hear Keanu utter the line, “Yeah, I’m thinking I’m back” in that way only Keanu can. John Wick’s reviews have been surprisingly good, with Rotten Tomatoes rating it 86% fresh. Rolling Stones’ Peter Travers calls it “the kind of fired-up, ferocious B-movie fun some of us can’t get enough of,” while the Village Voice’s Stephanie Zacharek says “Reeves is wonderful here, a marvel of physicality and stern determination.” Then there’s the fact that John Wick was directed by Chad Stahelski and David Leitch, two “mad genius stuntmen,” in their directorial debut. BoxOfficeMojo.com predicts that John Wick will take in $12.5 million this weekend, good enough for fourth place at the box office.
Lionsgate Watching the way the market traded this week, you could almost imagine the Bulls muttering “yeah, I’m thinking I’m back” to the Bears who had beaten it down during the previous four weeks. The S&P 500 climbed 4.1% to 1,964.58 this week, its largest weekly gain since January 2013, and is now down just 0.4% in October, while the Dow Jones Industrial Average gained 2.6% to 16,805.41, its largest weekly advance since December 2013. The Nasdaq Composite soared 5.3% to 4,483.72, its biggest jump since December 2011, and the small-company Russell 2000 finished up 3.4% at 1,118.82, it largest weekly rally since December 2013.
Why the massive rally? Chalk it up to solid earnings from some bellwether companies. Caterpillar (CAT), for instance, gained 4.6% this week after reporting surprisingly good results, while 3M (MMM) rose 8.1% following its own beat, and Microsoft (MSFT) advanced 5.7% this week after beating earnings and reporting that it was finally making a profit on its Surface tablet. Apple (AAPL), the biggest company in the S&P 500 and the Nasdaq Composite, rose 7.7% after the tech giant beat the Street’s earnings and revenue forecasts, and offered above-consensus guidance.
Wolfe Research’s Chris Senyek and team don’t think earning have been good enough to offset bigger worries:
We view 3Q earnings reports thus far as being in-line with trends seen in recent quarters. We primarily attribute the spike in volatility and the recent sharp selloff and rebound to elevated macro uncertainties, including the extent and timing of Fed tightening, the potential for global growth disappointments, and next steps for the ECB. Looking ahead, we maintain a cautious outlook near-term, as we believe that (1) the Fed remains steadfast on a path of tightening; (2) ECB and BOJ asset purchases are unlikely offset Fed actions; and (3) consensus GDP and earnings expectations remain too high looking into 2015. We expect the market to shift to a regime of higher volatility going forward given significant macro uncertainty
Citigroup’s Tobias Levkovich remains optimistic:
Despite the positive quarterly earnings strength so far, the crucial 2015 earnings outlooks are still missing. While the data has been encouraging, with sales and EPS topping reduced estimates, the 2015 view remains unclear with few management teams providing much in terms of forward looking annual statements. The more detailed guidance typically occurs in January and provides the conviction that portfolio managers need to overcome any Fed-induced headwinds.
Uncertainty remains as a few bellwethers have missed earnings and the belief in 2015 is still relatively fuzzy for most market participants. Earnings historically have had the most impact on stock prices and many domestic lead indicators argue compellingly for profit expansion next year. But, doubts persist about the potential for asynchronous growth, especially when one easily can misinterpret data to impose confirmation bias to a desired more cautious narrative.
In other words, follow the money.
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