Support for the U.S. Equity Market

October 24, 2014

In this week’s Chart of the Week, we look at the recent volatility of the U.S. equity market. Since the fourth quarter began, the S&P 500 index (green line in chart) fell as much as 4%, but has recently rebounded, thus bringing its YTD gains to approximately 6%. Issues such as Ebola, ISIS, the Ukrainian Crisis, and a possible recession in the Eurozone have all contributed to the pullback.

However, it is worth noting that U.S. companies traded on the S&P 500 index are reporting strong third quarter earnings. So far this month, a total of 293 companies have released third quarter earnings that can be compared to Wall Street estimates. An overwhelming majority, 218, either met or beat Wall Street earnings per share estimates. As the chart illustrates, the continued good news from U.S. corporate earnings has positively contributed to the S&P’s recent rebound. Any continued volatility should be watched closely for prolonged effects on portfolios, but continued strong U.S. corporate earnings should calm investors’ worries about an elongated retreat for the U.S. equity market.