Fear gripped markets by the throat Wednesday. Fear of rising interest rates,  combined with a fear that earnings are slowing, wiped away all of the 2018 gains for both the DJIA and the S&P 500. Only the Nasdaq remained in positive territory for the year. But, after an almost  4.5% loss Wednesday, the most by any of the major averages, those gains may be short lived. Investors had pinned their hopes for a swift market recovery this week on earnings. But with UPS (UPS) missing on revenue, and AT&T (T) missing on earnings, along with Texas Instruments (TXN), markets began to wonder if earnings misses might become the norm for the quarter. With a slew of large companies reporting over the next few days, earnings news will be the driver behind either a relief rally or further damage in the markets.   

 

With earnings this week so far being subpar, investors are hoping the trio of Amazon (AMZN), Alphabet (GOOGL) and Intel (INTC) can stem the bleeding when they report after the close  Thursday. Together, Amazon and Alphabet make up about 50% of the FAANG market cap. Analysts may focus on Amazon’s growth in its cloud business over retail numbers. Microsoft (MSFT) has been running hard to catch Amazon Web Services (AWS) and investors will be interested in how the cloud business is progressing. Analysts expect GOOGL earnings to rise about 34% year-over-year. Investors are eager to hear an update on Waymo, the company’s autonomous vehicle unit, and when the company anticipates it will be able to monetize the new tech.

 

Thursday’s economic calendar includes durable goods, international trade, jobless claims, pending home sales, and the Kansas City Fed Manufacturing Index. While trending up, durable goods orders have been choppy this year. Analysts expect a slight pullback of -1.5% for September. After falling in both July and August, new home sales are expected to come in flat in September. An unexpected decline, which may be likely given rising mortgage rates, will not be a favorable development. Friday is a relatively light day for economic news, but we will get GDP and consumer sentiment. GDP is expected to come in at 3.3% after the red hot 4.2% reported last quarter.

 

Wrapping up an extremely busy earnings week on Friday are Colgate-Palmolive (CL) and Phillips 66 (PSX). Colgate has held up well in the market selloff as investors are running to consumer goods companies amid the market turmoil. The stock was actually up almost 2% on Wednesday. Analysts will be looking for stable numbers and no surprises on Friday. Phillips 66 is another story. The stock has been pummeled, along with the energy sector, losing over 9% in just the past week. Given the energy sector losses the last few weeks, analysts will be eager to hear what the company predicts for the oil and gas market headed into year end.

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