The major indexes are set to finish lower this week due to a mix of the prolonged government shutdown and jitters over tech valuations. The S&P 500 is set to finish the week 2.5% lower, while the tech sell-off is affecting the Nasdaq composite, which is on track to finish down 4.5% on the week. As we approach the back half of earnings season, stocks have posted a record-high rate of earnings beats. This week also marks the longest government shutdown, with Friday reaching the 38th day.
In corporate news, as we enter the second half of earnings season, 83% of S&P 500 companies have beaten earnings estimates. This places the quarter on track to be the highest rate of earnings beats since the second quarter of 2021. The sectors doing the heaviest lifting in boosting quarterly earnings have been the technology and financial sectors. One retailer that made headlines this week was Lululemon, which announced a new partnership with the NFL to release apparel for all 32 teams. The collection is set to launch this week and will include both men’s and women’s apparel and accessories. After a few years of slower growth, the yoga apparel brand has its sights set on pushing into the professional sports industry. Last year, Lululemon struck deals with the NHL and key athletes on the PGA Tour, ATP Tour, and in F1 racing.
In anticipation of the Holiday season, American shoppers are forecast for the first time to spend over $1 trillion in November and December, representing growth of about 1.4% from last year. As retail spending overall is growing, a few fast-casual restaurant companies, such as Chipotle, Cava, and Sweetgreen, have lowered their full-year outlooks due to younger people spending less. The three chains cited spending from the 25 to 35 age group visiting their stores less, most likely due to unemployment levels, higher living costs, and the resumption of student loan repayments. Sweetgreen’s finance chief stated that its 25- to 35-year-old segment, which makes up 30% of the overall customer base, experienced a 15% sales decrease. Although this consumer segment has decreased, Chipotle and Cava still posted annual sales growth of 7.5% and 20%, respectively.
In economic news, this week marks the longest government shutdown in US history, leading to key reports that will remain unreleased. The shutdown means another missed job report on Friday, making it two consecutive job report delays. Other data that was not released this week due to the shutdown included the October jobs report, the PCE index, and a few Bureau of Labor Statistics reports. Had the US jobs report been released, economists surveyed by Dow Jones expected a decline of 60,000 jobs and an increase in the unemployment rate to 4.5%. However, private labor data is available to shed some light. Private payroll processor ADP announced that the economy added just 42,000 private jobs in October, while workforce intelligence firm Revelio Labs reported a loss of 9,100 jobs. Consumer sentiment was announced on Friday, with a reading of 50.3 in November, a 6% decline from last month. This is the lowest in the last three years and is most likely due to fears that the shutdown will affect the economy and consumers’ personal finances.
In closing, I turn to the Mediterranean world of 2,000 years ago. It was here that Roman emperors used the S-shaped, clandestine tunnel to enter the Southern foundations of the Colosseum amphitheater. The tunnel, known as the Commodus tunnel, was added sometime between the first and second centuries for the emperor's safety. The tunnel was once adorned with marble, stucco, and frescoes depicting scenes of gladiator games. In the last year, the Colosseum’s restoration crew worked hard to preserve as much as possible, and this attraction has now been opened to the public. The one mystery remaining for historians and archaeologists is where the tunnel into the Colosseum begins, as it is currently blocked off with earth. A new excavation is set for next year to try and trace the tunnel’s routes further to the gladiator barracks. For now, visitors to the Colosseum can enjoy a route once reserved exclusively for the emperors of Rome.
Ryan Motsinger
